BY TED WANGMost entrepreneurs view board meetings as somewhere between a total waste of time and mildly annoying. Outside board members are often similarly frustrated that they are unable to get the information and analysis they desire from these meetings. This shouldn’t be the case. Board meetings should be valuable for both management and outside board members. How can you make that happen?
Last year, I spent more than 600 hours in board meetings and have developed theories on how to make them more productive. For simplicity, I’ve created a series of “do’s” and “don’ts” for both management and board members.
Tell a story with the board deck. A well-designed board deck should communicate how the company is doing and the core issues facing the company. The most common mistake I see are decks that are simply data dumps, a bunch of information without any analysis or coherence. For most companies the deck should be 12 to 15 slides. For complete financial statements or other more granular information, that can be put in an appendix that is distributed to the board members and discussed if requested.
- Send out the deck well in advance of the board meeting. You want your board members to read it beforehand, but it’s not reasonable to expect that if you provide it the evening before a meeting.
- Note variations from your plan and reasons why. It’s not uncommon to miss goals. The most important issue to explore is why you missed. With lower than expected sales, there are a numerous causes: Is your sales team not that good? Are you not investing enough in marketing? Is your product not solving a painful enough problem for customers? Is your product poorly designed or engineered?
- Keep the meeting on schedule. This can be difficult and you can’t be too rigid, but most board members have calendared an end time to your meeting. If a section runs over, you will have less time to cover other sections. Don’t be afraid say, “This is a good discussion, but we need to keep the meeting on time. We can follow up on this later.” This can be particularly useful if the discussion has devolved.
- Keep a list of follow-up items for yourself (and the board members). Distribute the list afterwards so everyone is clear on next steps, then report on the status of those items at the next meeting.
- Hide bad news. A board meeting is not a pep rally. If news is bad it will likely get worse. Far better to start discussing “issues” before they become problems or, worse, crises.
- Put information on slides you don’t want to discuss. If you put it on a slide, you should expect that board members might have questions about it.
- Have every VP present at every meeting. You want to give your team members airtime with the board, but it is better to rotate them because there is typically not enough board level information to justify a report from each VP.
- Put the key points about the meeting in the first slide. It starts a conversation on the most important issues without any context. Once that conversation starts, it’s difficult to stop it and creates a disjointed conversation that makes the remaining material seem irrelevant.
- Argue every point. There’s nothing wrong with healthy debate. It is a sign of a high functioning board. Ultimately, though, the CEO is charged with running the company. S/he will have to decide what course to chart. Better to listen to the feedback than fight over every point.
Outside board member dos
- Read the deck beforehand. It will permit you formulate questions beforehand to help sharpen the conversation.
- Challenge assumptions. The best board meeting questions introduce a new point of view. If sales are slower than projected has management considered whether they are investing adequately in marketing? A different perspective can be extremely valuable to entrepreneurs who are busy fighting in the trenches every day.
- Share industry benchmarks or best practices from other companies. It his very helpful to compare a problem the company is facing to a problem that has been encountered before. Surfacing past successes and failures is particularly useful.
- Keep your powder dry. Undoubtedly you have a lot of good suggestions to help the company, but management will not execute on all of them. The best board members pick two or three important points and focus their comments on those items.
Outside board member don’ts
- Rely on your own experience with the company’s product as a focus group of one. Suggestions about the product based on your own use case are likely not helpful. There are more statistically significant ways of acquiring user feedback.
- Repeat yourself. I often hear board members say, “I hate to repeat myself.” There’s no need for self-loathing. If you’ve made your point, everyone around the table has probably heard it. Perhaps a single reiteration is in order if you feel quite strongly, but beyond that, you are being a bore.
- Ask obvious questions. It just wastes time and tries people’s patience. For example, if the CEO says, “We’re trying to recruit this candidate but he really wants a high salary” a board member shouldn’t chime in with ”Did you try and sell him on the value of our options?” Assume that management has considered the most apparent tactics.
- Ask questions because you’re curious. There are busy people in the room who may not share your thirst for this particular bit of knowledge. If there’s something you would like to learn more about, write your question down and ask the CEO later.
Remember: Never lose sight that everyone attending a board meeting has the same objective – to help make the company successful.
A good way to structure the meeting is to divide it into three parts: progress reporting, strategic discussion and administrative items.
1. Progress Reporting – The objective of the “reporting” section is for management to tell the board how the company is performing. This is the meat of the meeting and is typically divided into three presentations: (a) key performance metrics, (b) functional areas of the company (e.g. marketing, engineering, and product), and (c) company finances.
It is critical for the company to have a plan of record against which performance can be measured. Many entrepreneurs are hesitant to create a board plan for fear that there will be repercussions if plan is missed. Having no plan means that the board will make their own decisions about how the company is performing and this is far worse. For early stage companies, more it is common to miss plan by wide margins and that’s to be expected, but for later stage companies more rigor on both the planning and execution side is expected.
For the functional areas, it’s a best practice to have one or two VPs report per board meeting so that there can be a deep dive into these areas. The CEO can then lead a brief review of the other areas. In these deeper dives: VPs should avoid a laundry list of accomplishments and focus on key issues:
- What are the key objectives for the year (and how are they doing against such objectives)?
- What are they doing differently than their competitors, prior companies or industry norms?
The board meeting is not a super-operating committee review in which tactical decisions are examined. It is a strategic session in which priorities and resource allocation against those priorities is assessed. Presentations should be geared to facilitate such a discussion.
For the financial reporting, as long as the company is burning the cash, the most important financial metric is: When does the company run out of money? It should always be reported. I suggest using awaterfall for cash burn as well as other key metrics. It is also important to establish consistency in both format and data presented. When metrics are changed again and again it makes it very difficult for the outside board members to understand how the company is doing.
Another best practice is a dashboard, which is a single slide that displays trends for a few key metrics. A good dashboard enables the board members to look at progress against these metrics over time and quickly get a sense of the company’s performance.
What is the point of all this reporting? First, it gives the board members a chance to help in a variety of ways:
- offering suggested approaches for problem solving,
- recognizing certain recurring patterns from prior experience,
- challenging key assumptions and
- making introductions to potential customers, partners or new hires
In order to do any of these things effectively board members need to be presented with a clear picture of what’s going on with the company.
Secondly, management is typically heads down fighting one fire after another in the hectic pace of startup life. Having a routine check up from people looking at the business from a higher level can help management identify issues that might be lost in the daily grind. Third, it allows a common understanding of the business that sets the stage for the next part of the meeting, the strategic discussion.
2. Strategic Discussion – Startup companies are continually facing critical strategic issues:
- Is now the time to start ramping up the sales force in order to gain market share?
- Will a partnership with a more established player solidify the company’s market position or will it consume company resources without delivering any real benefit?
- When is the right time to start the fundraising process?
The strategic discussion section of the board meeting provides an opportunity to discuss these important issues with the board. The goal of these conversations is not to arrive at a vote in which the board approves some key decision, but rather to seek input on the issues facing the business so that management can understand and benefit from the board’s collective experiences. Best practice in this area is to discuss one or two of these issues at each meeting as it is difficult to cover more.
3. Administrative Items – Administrative items are the things that the Board actually needs to vote on. I prefer beginning with the administrative section to get it out of the way quickly before people are tired and cranky. For early stage companies the items are typically limited to the approval of options and minutes.
For stock options, it’s important to have all of the relevant information for the board members to make the grants (e.g. fully diluted capitalization, number of shares left in the pool). I have a template slide for options here. When an unusually large option grant or one with a peculiar vesting schedule is coming up for approval, it shouldn’t be presented to the board for the first time in the meeting. It is far better to surface these items well in advance of the meeting to avoid a long debate during the meeting itself. This is a good model for any issue that is coming up for approval: provide adequate information for the board to make the decision and raise issues ahead of time to avoid surprises.
A properly structured board meeting enables management to get the most value from the board and gives the board members the ability to understand and provide assistance to the business. If you follow this structure and the dos and don’ts, you can ensure that nobody is bored at your board meeting.