Why start ups should have a good Board from the start

The role of a “Board of Directors” (BoD) as a key component of a good corporate governance system is often misunderstood and a number of entrepreneurs think it’s a gimmick for big companies. Corporate governance itself is a vague concept for those who launched a business and are dealing day and night with operational issues. However, entrepreneurs should be more than concerned with the quality of their Board.

The BoD’s responsibilities are numerous. It includes: (1) defining business strategy, (2) naming the management team, (3) controlling execution, (4) deciding on major investments, (5) choosing the best financing structure, (6) checking on strategic KPI’s including financial inidcators. But what is misunderstood is the role that directors play outside board meetings. They can bring a specific expertise, a unique network, a wisdom forged by experience and a sense of responsibility linked to the function itself.

On the other side, entrepreneurs, business launchers are obsessed by a number of very down to earth issues: raising capital money, finding the first customers, getting a team on board, etc. Once the project is on rail, they go from one operational problem to the next, they face stress and tight schedules, they don’t have enough time to care about strategy. If success is coming early, they need to cope with growth. If it’s slow to happen, they need to adapt and reconfigure quite fast. For most of them, thinking of holding boards meetings with people asking strange questions is out of scope ! Well, they’re wrong !

It is when they are overwhelmed by operational problems that entrepreneurs need a good BoD ! The board will oblige them to raise the head above the daily shit. The board will oblige them to think about key elements of a successful strategy. Why did the performance overscored or underscored the business plan ? Why is this “wonderful manager” performing under expectations ? Why is the cash running so fast ? Why, why, why ? A good board will raise issues that entrepreneurs like to hide to themselves. In a determined but benevolent manner.3db68d5.jpg

Now the question is: what is a “good board” ? It’s never easy to find the right answer but I can at least give some advice.

First, choose a good chairperson: someone who will care for your success, someone senior who can manage meetings adequately (not too long, nor to short, with a effective agenda), someone who has “a strong voice”.

Then, enlarge the board to outsiders. We call them “independent directors” because they have no (or negligeable) financial stake in the company and they’re not part of families of the company’s shareholders. So you’re sure they have no conflict of interest and can have a free judgement.

Finally, look at competencies and personalities. Finding board members who can bring an expertise that nobody has in the business yet is great. Having someone with a cool and wise judgement is always good. A personality liking to play devil’s advocate is also bringing value.

One of my Harvard fellow classmate who was quite successful in business creation told me once: “I hate to prepare these boards meetings. I’m pissed off by reports and paper work. But each time I leave the board table, I feel better to have met these great professionals. Without them, i would never have so much success”.

So, my dear readers, if you’re an entrepreneur and you think of making your business a big business, go for a great board from the start. You’re great, right ? So, remember: “First class people hire first class people. Second class people hire third class people” .

Be top class ! Be inspired !

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s