Board Management:
The care and feeding of a board is as much art as science. I have seen functional boards and extremely dysfunctional boards. Here are my key takeaways:
1) Open Communications Is King
Too often, CEO’s try to manage their board by managing the flow of information going to the board. He/she makes it clear to managers that only positive information is to be shared. When bad news occurs, he/she puts a positive spin on it or suppresses it. They comment that this setback is really a positive development since it allows the company to address or work on a known issue. Or, the new entry of a major competitor is not a big deal. Board members aren’t stupid. They know when the spin machine is going and they know when something bad has happened. They will only begin to doubt the entrepreneur’s judgment or trustworthiness. Will the entrepreneur identify potentially lethal developments and take appropriate action or will let the board know about it once it is too late.
2) Stay Ahead of the News
Boards much prefer to have a CEO that proactively identifies issues, lays out why it is critical and what needs to be done. This is especially important if it is bad news. Get the good and the bad news out early and often. Anticipate questions, criticisms or issues and acknowledge those that are appropriate. Show clear action steps and show that you have identified the issues early so that a) the company has time to respond and b) the board can give feedback or assist
3) Seek Input and Advice
CEO’s can either view the board as a value-added partner in building the company or as an entity to be managed and presented to. Communications is one way. Feedback is not sought nor incorporated into actions. Either the entrepreneur has picked the wrong board members or is failing to take full advantage of its resources. Too often, a CEO feels a need to show strength and self-sufficiency. Asking for help or advice shows weakness. This could not be further from the truth. It is hard to form a true relationship with your board if you only talk to them…kinda like a marriage. This advice is often most useful when it is counter to existing beliefs.
4) Maintain Cohesiveness
Some CEO’s use divisions on the board to advance their agendas. They feel empowered by the fact that they can go to either the Hatfield’s or the McCoy’s depending on any given issue and determine whose opinion is closest to his/hers. I have seen several situations where it is clear the CEO is having side meetings and agendas with one faction of the board and then relies on that faction to push through the dirty work. He/she then has side meetings with the other faction on another item in order to have that issue championed. In the end, neither side trusts the CEO nor the other faction. They seek to find situations where they can get leverage over the others and you end up with a civil war. Some CEO’s can make this work, but most eventually piss off one of the factions and his/her tenure is cut short.
5) Share the Limelight
Make certain that you include your key managers in board presentations. Let the board get to know your key lieutinents. This will give them a better appreciation for the depth of the team and can also help you assess the strengths/weaknesses of different members. Board members have often seen a wide variety of management situations and can provide great insight from past successes and failures.
In summary, managing the board is mostly about exercising common sense. Assume that everything is transparent and that hiding, manipulating or spinning it will, in the end, not work. Be straight forward, pro-active and honest in your dealings with the board. If you feel that you have things you have to hide from the board, you have failed to form an appropriate relationship with it. Lastly, don’t just dump news on them. Tell them why it is or is not important, the implications for the business and the options available to the firm. Bring them into the loop.
Next, board of advisors…