In about an hour I am going to 1871 to sit down with the Excelerate Labs companies to talk about some of the lessons I have learned about how to manage your board. I thought I would try and boil down the advice to five big points and also post them here for anyone else to comment on or add their own suggestions.
Just to be clear, I am just an entrepreneur fighting the good fight. I am not a management guru nor do I pretend to have all the answers. And as I always say, at least 50% of my advice could be and probably is dead wrong for you so apply a strong filter to what I say and apply it against your personal situation and operating style.
With that disclaimer aside, here are five ways to manage and optimize your board and optimize their effectiveness.
1. Communicate regularly - Over the last 11 years I have run one public company and one startup. I got in the habit of writing a monthly update and including financial statements and operating metrics as attachments. I have been pretty good about never missing a month and almost never sending the update past the 15th of the following month. That way when it comes time for the board meeting, the investors are up to speed. The sections in the update are traditionally exec summary, financial update, sales, marketing, product and technology. A paragraph for each is fine along with some key metrics. Your sections might be different but it should not take more than 10-15 minutes to read.
2. Tell it like it is - Don't feel like you have to sell your board. Be realistic and transparent. And tone is really important. Explain the risks and the upside. If things are not going well, explain why and tell them what you are doing about it. If things are going well but there are risks they won't continue, tell them that. And be consistent. If you talk about one metric one month when it looks good, but you talk about another metric the next month the board will start to feel like they are not getting the real story. I have had an investor that manages billions of dollars tell me that they know more about what is going on with our company than ones where they have tens or hundreds of millions invested.
3. Don't limit your communication to your board - You might need to do some slight editing but I would recommend you send your monthly board update to all of your investors, your employees and your board of advisors. Lon Chow, one of my investors and board members recommended a book called the Four Obsessions of a Extraordinary Executive. Read it. It is an easy read. Patrick Lencioni teaches business lessons through story telling and I always find his books helpful and thought provoking.
4. Do not present to your board! - prepare a 10-20 page deck summarizing the last quarter and send it at least a week in advance. But tell them you plan to focus on one or two key questions in the meeting that you will give them in advance. The deck is for them to read before the meeting A successful board meeting is not you presenting and your board listening. A successful meeting is when they have challenged you and made you think. Don't think of your board as the place you go to get things rubber stamped. (By the way we meet quarterly for three hours. I would never agree to meet monthly but some founders do like the more frequent meetings. I like Fred Wilson's suggestion to have the board meet privately to give the CEO feedback and impressions and takeaways. I have not done that but I think I will start doing it.
5. Include senior management: It is a good best practice to expose members of your team to the board even if it is only for 15 minutes presentations during the meeting or at a lunch or dinner before or after the meeting. I have not done enough of this because I wanted to minimize distractions for them but it is always helpful when I do. The only caveat I will have is that sometimes board members will really get into the weeds with one of your team members. I can tell you from experience that you need to avoid the staff thinking they need to design the product according to what the board member was asking about. This is a delicate balance. You want board members to see how talented and passionate your team members are but you don't want the company to start trying to anticipate what a specific board member will want. Early on with one of our companies, we had a feature named after a board member. In retrospect that is an unhealthy dynamic.
What do you think? Leave questions or comments and we can continue the dialouge.
On April 4, 2013 I am adding a sixth point for a simliar talk I am giving at 1871 this morning.
6. Include financials and KPIs in your monthly updates - And when I say financials I mean something very specific. I want to see trailing twelve months (TTM) broken out by month and rolled up to your main financial categories. Don't give your board a one month snapshot or twelve months rolled up into one column. And don't give your board a P&L with every single account exposed from your chart of accounts. And then follow that in the same consolidated PDF with that months P&L compared to budget. These are both super standard reports in Quickbooks. And then follow with balance sheet and statement of cash flows. And even though it is not standard, I would suggest you make the balance sheet a TTM as well so investors can see your assets and liabilities for each month for the last twelve months. And you should have a one page KPI that shows the TTM for each of your key metrics and ideally compare them to budget. You can merge all these attachments into one PDF or attach the financials separately from the KPIs.