How do you pick a board member and what should the composition be?
While most of the time a board member will be an investor, you have to view them as a source of advice and counsel first, money should be second. Most people have it backwards and think that you should take the money first, add the investor to the board, and then worry about all else later.
This is usually a recipe for disaster and irritation in the long run. When thinking about the composition, it is important to understand that you essentially have three different types of people on your board: executives, investors, and independent members. You may not be able to necessarily choose your investors, but the other two are completely within your control and you should exercise that control in a thoughtful and tactical manner. If you are able to select your board member, you should try and round out your board with people who have a different skill sets from you. Much like seeking out members of your team who complement your skills, the same can be said for your board members. Nevertheless, the universal truth to bringing something onto your team is to make sure that personal characteristics are aligned, the person is motivated, and has the skills and knowledge.
As Gary Swart from oDesk said, “personal characteristics are things you can’t change. You can teach a chicken to climb a tree, but you’re better off getting a squirrel in the first place.”
What is the ideal number of board members?
There is no hard and fast rule for this, it really depends on what you need and how productive the members are to the company. The general consensus from the panel seemed to be five to seven, but keeping in mind that your board composition does not have to fall within those numbers. You could have two, you could have 10, as long as all members are contributing in a productive and efficient manner, the numbers really depend on what you’re comfortable with. Having said that, too many board members can make it tough for decision making and getting things done, whereas having too few, can also leave you with limited perspective. “Early in the company’s career, smaller is better” says Dan Levin from Box. “Every time you need to get something done, you’re going to need to get everybody to sign a piece of paper. It’s harder to get a large group of people together.”
Advisors and observers, should you have them?
Advisors are those who are there to mentor and help guide you as you develop, grow your company, and beyond. These people are not necessarily your board members and don’t always hold a board seat, but they act as additional individuals who are advocates of your company and either have the experience or network to take your company to the next level. An observer is someone who is an additive to the room, but doesn’t generally sit on a committee or have voting rights. There may be instances where there certain venture funds have the right to designate an observer, but they’re rarely exercised. Observers can be great if they have limited involvement in board meeting conversations, but have value that they can bring to the table. Again, much like how many members you should have on your board, there is no definite number as to the number of advisors or observers you should have. As long as quality is there, the quantity is up to you and what you feel most comfortable with.
What should be presented at a board meeting?
A few days in advance of your board meeting, you should be sending your decks to those who are participating. A week is usually ideal. It is best that all parties receive the information they will be reviewing, prior to the board meeting so that you can make the best use of time. Many entrepreneurs think that the deck they present needs to be comprehensive and immaculate, when in reality, it shouldn’t be. This should be the easiest material to produce because the information you include, should already be logged and updated on a regular basis. You shouldn’t need to re-create anything. As Dan said, your operations review is where things get created because that’s where you run the business. You should essentially be providing your board members with your operations review along with a few other additional pieces of information such as your financials, current key issues or strategies, followed by an administrative updates.
Given all this, keep in mind that the board is not there to run your meetings or your company. That is the job of the CEO. At the end of the day, if you are deferring to your board for major decisions, something is wrong. These are just some helpful tips as you think about putting together your board. You can clickhere to see the full video of our panel event, or here for a one-on-one interview with Gary Swart, and here for the interview with Sharon Wienbar.