Source: Firas Raouf, OpenView Partners
One of the turning points in the life of an early stage software company is the creation of a board of directors. Typically, this happens when the company raises its first institutional round of financing. But I see no reason to wait for that event.
When you think about building your board, start with a clear realization of the need. Don’t create a board if you don’t need it. It is more likely that you do need it, but you don’t realize it. So let’s start by discussing why you need a board.
A board of directors is a vehicle through which you can recruit super talented and experienced individuals who can add value by helping you make key decisions and ensure that you are implementing sound corporate governance. Most founders/CEOs think that a board is something that creates a lot of unnecessary work for them, adds little value, and is manned by individuals who will get in the way of running the company. That can be true if you recruit bad board members. But if you recruit great board members, you will get great value.
Recruiting a board starts by you realizing that you should recruit a board the way you would recruit employees. Start by defining your needs. One approach is to examine your skill sets as a founder/CEO (for more on that, read Mr. CEO, Would you Hire Yourself?) Then think about the skill sets you lack and where a mentor could help in the role of a board member (for example, if you’re weak in finance, a former CFO would be a good prospect). Then think about your plans for growing the company and the role of a board member in opening strategic partnership doors, whether for funding or business development.
Next, put together a role description. Again, treat hiring a board member like you would treat hiring a senior executive. Putting the role description down on paper will help you hone in on exactly what you’re looking for, and will ease the recruitment process.
Set clear expectations of the role. When recruiting an employee, it’s pretty obvious that it’s a full-time role. But when recruiting a board member, setting your expectations on the time and energy commitment expected in the role is key. There are many people out there who get on boards, but have no time for it, or don’t prioritize the role high enough. You also need to be realistic in your expectations. For expansion stage software companies, a board member should allocate a minimum of one day a month. Four of those days a year are for board meetings. The rest are to be spent with you diving into your operations, or helping you by opening doors and enabling business.
Get help in recruiting. You probably can’t afford to hire a recruiter. But if you can, hire a recruiter. Again, this is a critical role. Recruiters can help you dramatically widen the scope of your search to find the best candidate. In lieu of a recruiter, see if you can find someone experienced to volunteer to help you. Even if it’s your lawyer or accountant. Basically, you need another set of eyes to help you in the process.
Be highly selective. There is nothing more damaging than having a bad board member (same as hiring a bad employee.) A disengaged board member is a waste of your time and energy. A great board member can bring you great value.
Put your board members to work. Board members should add value. But they will only do it when you ask them. Always be looking for the next project for each and every board member. When you run out of things for them to do, it’s time to let them go.
Know when to let one of your board members go, and don’t wait too long to do it. Board members should bring value to you and your company. If they don’t, fire them, and replace them with those who do. You typically don’t have that option with investor board members (although you may at your next round of financing). But you certainly do when it comes to management board members (a co-founder that has outlived his/her tenure on the board); or independent board members.
Don’t create anything for the board that doesn’t add value to your business. Many founders/CEOs lament board meetings because they think the meetings suck up their time and bring no value. Well, that is a symptom of a bad board. Fix the board first. One you have a good board, make sure that whatever you create for the board (presentations, dashboard, etc.) are things you already are using for your business.
Expose your board to the guts of the business. Board members can only be helpful if they understand your market, your business and your operations. If you feel the urge to hide things from them, you have a bad board. If you don’t think they would understand your business, you have a bad board. Fire them and then hire the right board. And then open up the guts of your business to them. Have your senior managers walk the board through each function. Expose the issues that you struggle with. Then ask them to help you resolve them. If they can’t, fire them, and find members that can.
About Scale Finance
Scale Finance LLC (scalefinance.local) provides professional CFO services, Controller solutions, and support in raising capital, or executing other transactions, to growth companies. The firm specializes in cost-effective financial reporting, budgeting and forecasting, implementing controls, other financial management, etc, and provides strategic help for companies raising growth capital or considering M&A/recapitalization opportunities. Most of the firm’s clients are fast-growing technology, healthcare, business services, consumer, and industrial companies that are at various stages of development from start-up to tens of millions in annual revenue. Scale Finance LLC has offices in Charlotte, the Triangle, the Triad, and Wilmington, a team of more than 25 professionals, and serves more than 85 companies throughout the region.