The Purpose of a Board
Startup Boards for CEOs Series: Post 1 of 10
Any series of blog posts about boards should start with the basics. Why have a board in the first place? What do they do? How big should they be? Do you really even need one? Even if you already have one or are sold on the concept, I hope this post helps you think more clearly about how to best use your board to maximum effect.
In Startup CEO, I wrote that the fundamental reason boards exist is that everybody needs a boss. We are all accountable to others for our work in one way or another. Unless you’re the rare startup CEO who owns 100 percent of their own company and doesn’t grant employees any options, you have other shareholders. Even then, you’re still accountable to others, to stakeholders like vendors, employees, and customers. Creating a board of directors is a good reminder that you have a boss—and that you have to play by the rules and maximize value for all shareholders. Accountability is crucial for every person and organization. Think about how well you do with dieting on your own or exercising on your own, and compare those results to dieting with a nutritionist or exercising with a trainer. Or, if you want, think of it this way: no matter how much you loved your favorite class in college, how many papers would you have written if your professor hadn’t assigned them and given them due dates? I’m guessing not very many people would even write one paper without assigned due dates.
While boards are helpful in holding CEOs and others accountable, they can also be strategic tools that every company should take advantage of, and there are a few specific roles that boards excel at. What are the specific roles that boards can play in your startup? Here are four for you to think about.
1. To be a forcing function. A board can help you run your organization by creating a cadence of regular, recurring deadlines. Unless you’re in a business that has significant external deadlines imposed on it by partners or customers, it can be difficult to pick deadlines for projects, drive your team hard to meet those deadlines, and keep those deadlines from slipping. Your team knows that many deadlines are arbitrary anyway, and that can lead to procrastination and excuses. By making a commitment to your board that something will be done by a certain date, you raise the bar and remove much of the arbitrariness from the decision. I have also found boards to be a very helpful tool over the years as a forcing function for quality. Sure, your executives can write scribbled bullet points or a half-baked spreadsheet and articulate their points. However, if they are presenting that same information to a board, they will polish it up, which will force them to think through what they are presenting – and shape a better end product. So, a board can both drive deadlines and quality. That’s a win-win for you!
2. To help in pattern matching. Good board members are really strong at pattern matching and they’re able to see a chain of events or metrics about your business, match it to one or more comparable situations they have seen in the past, then provide advice, context, history. In a lot of cases they’re also able to make a connection to another CEO who had a similar issue and who can be a resource for you. I’ve found this to be true in terms of both strategic issues and operational ones, and while not always spot-on, they can help you steer the ship around icebergs and avoid the damage lurking beneath the surface. As Mark Twain once said, “History does not repeat itself but it does tend to rhyme.”
3. To help you see both the forest and the trees. A good board will help you see the forest for the proverbial trees. You’re close to your business and in the weeds of the day-to-day. Your board isn’t. As a result, board members can sometimes point out things that you completely miss when looking at your operating results, your staff, or your own performance. They may be obvious in hindsight but someone has to give you that rearview mirror.
4. To drive intellectually honest discussion and debate. Finally, provoking, listening to and participating in the discussions and debates at a productive board meeting can be one of the most valuable things you do in a given quarter. Sometimes even great and fearless executive teams are wary of disagreeing with a strong CEO. A great board isn’t. A healthy board discussion will push and challenge you and your team’s assumptions. More than that, individual board members should push and challenge each other.
Boards can have a dramatic impact on a company in these ways and more. In fact, I know a couple of CEOs who didn’t need to have a formal board of directors based on their corporate structure and ownership. They elected to have boards and each one of them considered their board to be a key asset to the business and each felt accountable to the board, which even without the power to fire the CEO was a very powerful force for good inside those companies.
You might not want or think you need a higher level of accountability for yourself, but you, your team, and your company will be far better off if you create a board. You’ll get more done, get better ideas, and increase the effectiveness of you and your company by having a board.
In the next post, I’ll talk about the size and composition of boards.
- Matt Blumberg, January 6, 2021