As a CEO and independent board member, I have had some great boards of directors, and I have had a couple terrible boards. Talking with other CEOs, I hear a similar mixed bag reaction. It made me think about the question of what shapes a CEOs opinion about whether their board of directors (BOD) is bad, neutral, good, or great? There is a similar perspective and question among board members about the CEOs they work with, but that is a topic for a future post.
In early-stage technology companies, corporate boards are typically dominated by investors and founders, with the occasional quasi-independent outsider mixed in. I say quasi because the independent is usually sponsored or strongly recommended by the CEO or a specific investor group. They may be independents who are experts in their field and a natural fit, but somebody on the board was probably their champion and holds a bit more sway with them. None of this is necessarily bad, but it is contextual for how the relationship with the CEO evolves.
There are a few catch phrases I hear when CEOs are complaining about their board:
They don’t understand the business
They don’t know the market and cannot help with strategy
All they focus on are metrics and numbers. They don’t understand running a business
They are a waste of time and board meetings don’t add any value
They are only worried about their investment, not building something great
On the flip side, when CEOs are praising their board, it is more than just the opposite of the negatives. Positive comments tend to focus on the relationship the CEO has with the individuals and the board as a whole. Board member availability, supportiveness, understanding, and advice (when requested) are all common descriptors. When the interpersonal relationship is positive, many of the negative attributes are overlooked. Even if a particular board member does not understand the market or the business well enough to provide guidance, if they are supportive and available and bring other knowledge to the table, the CEO may still form a positive opinion.
In earlier posts, I wrote about the unique position of the CEO as sandwiched between the executive team and the board. There are many topics that are difficult to discuss with the people that work for you, and similarly, there are topics that are challenging to bring to a board member. The board has the responsibility to hire and fire the CEO, and every CEO wants to project confidence and control when interacting with board members. A common phrase is “don’t bring problems, bring solutions.” However, sometimes the CEO just needs help to work through a puzzle where they do not have a confident answer or solution to present to the board. These are the times that truly define the nature of the CEO / board relationship.
Building rapport with each board member and the board as a whole is one of the most important jobs of the CEO. When the CEO adopts an adversarial role with a board member or the board in general, things never go well. You need to understand what makes them tick, what they can bring to the table, and how they operate. If the board is well curated (see my earlier posts), then you have a pretty good idea of which board members can be most helpful with each topic. Some may have operating experience and can help on policy, while others may have finance or M&A experience, or go-to-market skills. Leverage the board to make it an effective ‘weapon’ to help the CEO and the company succeed.
As a CEO, if you find you are already in a situation where you have a negative perspective toward your board, it is past time to do something about it. In negotiating, there is the concept of a BATNA - the best alternative to a negotiated agreement. It means that when you go into a negotiation, you need to know your ultimate fallback result. When attempting to fix a broken board relationship, the ultimate BATNA is the CEO leaves the business or the company is sold. Therefore the first step is to decide just how bad the situation is, and what is your BATNA to rectify it. You may be OK with the status quo, rather than risk your job, but recognize that a broken relationship with the board is never good for the company, and ultimately the board gets to decide if the CEO is more trouble than they are worth.
Here is my suggestion for how to fix the situation:
Step back from the day to day, take a breath, and write down a list of positives and negatives effecting your opinion. Divide the list into things that occur during board meetings, and things that occur between formal meetings. Be specific about each board member and the board as a whole. Often 1:1 behavior out of the board room is quite different from behavior in the board meeting.
Consider your list, and identify what is triggering your opinion and your own behavior. Sometimes, we think we just know how a board member will react to a topic. That triggers us to present in a certain guarded or aggressive way, and we stop listening to how they actually react. This requires a bit of introspection to acknowledge how you may be contributing to the situation.
Next, go on a listening tour. Tell the board members that you want to make the board more effective, and ask for their time to help. Meet with each board member in person, preferably in a social setting like a meal. We all default to timed virtual meetings as the norm, but an in-person meeting conveys your seriousness and opens the door to a more comfortable and open-ended conversation where neither party is racing to get to their next meeting. It is a big commitment, but it is worth it.
Open each meeting by asking the board member what they think of the board and their interaction with you — listen before you speak. Be clear that you are not specifically asking for a performance review; you are asking about your relationship. Acknowledge that there are challenges with the interactions (if possible do not make it a personal attack on the member’s behavior), and ask the board member to share their thoughts and suggestions for what can be done about it. Ask them what they are getting from you that they do not need, and what they are not getting from you that they want. One of my companies was in the habit of producing massive detailed board books, and delivering them the day before the meeting. The meetings were being derailed by members finding minutia throughout the book and consuming valuable board time drilling into operational details that were not board-worthy. The message from the listening tour was to dramatically shrink the book to just what really mattered, and get the book out several days earlier. It changed the entire character of the board meetings by focusing attention on the important topics without distractions. Make sure this a listening tour, not a confrontation, and assume you both want a positive outcome.
Repeat step 3 with every board member. Gather their comments and look for patterns and themes. You may prompt a response by telling a member that in an earlier meeting someone else suggested X, what is their opinion? Compare the collective feedback to your original list to find points of agreement.
Construct a plan to address the issues. Be specific about what you want from each member and from the board as a whole. Also be specific about your contribution to the problems and define what you intend to do about it.
Your plan may need to include a request to reconstitute the board with new or added members, or you may need to tell a member to step up or step off because they are not adding enough value. When financial investors such as VCs and PE firms have contractual rights to hold seats, you may need a conversation with the managing partner if you are convinced that the partner on your board is the problem. I have seen this situation play out twice, and it went surprisingly well. Everybody wants the company to succeed. A warning, keep your BATNA in mind, The result may be that the board decides you are the problem, so be prepared.
Just as a team matures through stages of forming - storming - norming - performing, boards do the same. The company deserves a highly performing board, and it is the CEO’s responsibility to make it so. You cannot just throw up your hands and say ‘my board sucks,’ you owe it to the team and the company to fix it, no matter how hard that may seem.