Bolster
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What to Look for in a Director

Startup Boards for CEOs Series: Post 5 of10

What to Look for in a Director

It’s really hard to find your way from point A to point B without a map or a GPS. Similarly, you’d never hire a senior executive without putting together some kind of job spec or requirements document to guide the process, to get you from point A to point B. Hiring an independent board member is no different, yet I often see CEOs running board searches with nothing more than “I want a more experienced CEO in our industry” as a job description!

The job spec for a board member differs from that of an executive in that you’re not necessarily looking for functional competencies (e.g., “someone who knows how to be a board member” – see my prior post on that so much as you’re looking for the right set of experiences, soft skills, and governance philosophy to meet your company’s needs. This will be a long post, but let me share a few different ways of thinking about criteria for board members.

At Bolster, we’ve developed an in-depth way of helping our CEO clients formulate their director search criteria, and think about board ‘readiness’ in a broader way…and we’ve created a parallel way of profiling our thousands of executive members so we can make accurate and instant matches. The client needs assessment breaks down the job spec into four categories:

  1. Prior board or board-equivalent experience. While sometimes a client may require us to only look for director candidates who have already served on a board, we try to steer them away from that and ask for their perspective on other board-readiness attributes, like regular interaction with a corporate board, or experience with an advisory role, or experience serving on a community or nonprofit board. These broader experiences open up the possibility of identifying potential board members who have a diversity of experiences and are more likely to be diverse themselves. Diverse boards lead to better performance, so we want to caution clients about requiring prior board experience as the only criteria.
  2. Advisory needs/gaps. Here we try to really pin down what the CEO needs in terms of professional experience in this particular director. Are they looking for someone who is a product-market fit guru? A sales guru? Someone who can open doors in a particular industry? Someone with significant experience working with early-stage companies on their finances? The more specific a client can be about their gaps and needs the better our process is at identifying exactly the match that will work for them. Think about your board like a puzzle. What’s the big picture of what you want to get out of your board, and when you look at your current board members…which piece is missing? Think about what you need this year and next, not some theoretical need in the distant future. Do you need someone who can open doors in a critical vertical? Do you need someone who is a key buyer/customer/influencer? Do you need someone who has great depth of experience in complex hardware sales? The more specific you can be on needs and gaps the better chance you’ll find the right person to make a big impact, immediately.
  3. Cultural/experiential attributes. We like to challenge our CEO clients to think about what kind of person will work best in their particular board environment. Does the director need to be particularly financially fluent? Do they need to have the ability to challenge others, the status quo, or widely-held assumptions? Are they looking for a “trophy director” (more on that below), or do they need people who are willing to “roll up their sleeves” and do hands-on operational work with management? Again, the more specific a client can be about cultural and experience attributes, the better chance of finding a director who can make a big impact at the company.
  4. Governance philosophy. This is a widely ignored topic, but one where I feel strongly that philosophical alignment across the board is important. Some board members believe in Reed Hastings’ famous line that “a board’s only role is to hire/fire/compensate the CEO” while others believe that “a board’s role is to engage deeply with a company’s strategy, management team, and operations” (and of course some people are somewhere in between). Similarly, there are directors who believe in the letter of Delaware law that “the responsibility as a director is to only maximize shareholder value” and others who have a broader view that “the responsibility as a director is to maximize the value of all stakeholders” including employees, customers, vendors, and the community and environment at large (and again, those who are somewhere in between). You can argue that there is a “right” or “wrong” place on both of those spectrums…but you can’t argue that alignment isn’t critical as a board.

The Bolster framework was inspired largely by my experience on my own board and serving as an independent director on other boards alongside two of my long-time investors, Brad Feld and Fred Wilson. I’ll share some of the “makings of” the Bolster framework here.

First, in Startup Boards, Brad Feld and Mahendra Ramsinghani have a wonderful table that breaks this topic down into a stage-based view of the role of the board. It’s remarkable how different a startup board needs to look (working actively on product market fit and sales) than a mature company board (monitoring financial performance and strategic plans):

Second, about 10 years ago, a younger version of me wrote out these Top 5 things that make an awesome Board member of what was then probably a $30-50mm revenue company:

  1. They are prepared and keep commitments. They show up to all meetings. They show up on time and don’t leave early. They do their homework. They are fully present and don’t do email during meetings.
  2. They speak their minds. They have no fear of bringing up an uncomfortable topic during a meeting, even if it impacts someone in the room. They do not come up to you after a meeting and tell you what they really think. I had a board member once tell my entire management team that he thought I needed to be better at firing executives more quickly!
  3. They build independent relationships. They get to know each other and see each other outside of your meetings. They get to know individuals on your management team and talk to them on occasion as well. None of this communication goes through you.
  4. They are resource rich. I’ve had some directors who are one-trick or two-trick ponies with their advice. After their third or fourth meeting, they have nothing new to add. board members should be able to pull from years of experience and adapt that experience to your situations on a flexible and dynamic basis.
  5. They are strategically engaged but operationally distant. This may vary by stage of company and the needs of your own team, but I find that even board members who are talented operators have a hard time parachuting into any given situation and being super useful. Getting their operational help requires a lot of regular engagement on a specific issue or area. But they must be strategically engaged and understand the fundamental dynamics and drivers of your business – economics, competition, ecosystem, and the like.

At the same time, I also asked my executive team for their own take on what makes an awesome board member. Here are some quick snippets from them where they didn’t overlap with mine:

  • Ethical and high integrity in their own jobs and lives
  • Comes with an opinion
  • Thinking about what will happen next in the business and getting management to think ahead
  • Calling out your blind spots
  • Remembering to thank you and calling out what’s right
  • Role modeling for your expectations of your own management team – Do your prep, show up, be fully engaged, be brilliant/transparent/critical/constructive and creative. Then get out of our way
  • Offering tough love…Unfettered, constructive guidance – not just what we want to hear
  • Pattern matching: they have an ability to map a situation we have to a problem/solution at other companies that they’ve been involved in – we learn from their experience…but ability and willingness to do more than just pattern matching. To really get into the essence of the issues and help give strategic guidance and suggestions

Finally, Fred Wilson has a great post about Trophy Board Members and why to avoid them here and many other great thoughts in choosing board members in general. Here are a few key points that are additive to the ones in Brad and Mahindra’s, my, and Bolster’s frameworks above:

  • Trophy board members are more concerned about their reputations than your company and will often react badly in times of crisis and challenge, which is exactly when you need your board members at your side more than ever. Trophy board members often miss board meetings, show up unprepared, and frequently don’t take the time and effort to truly understand your business…whatever you do, stay away from trophy board members. They rarely help and often hurt.
  • Avoid putting someone you can control on your board. In tough situations they will have a fiduciary duty to do what’s right and you won’t be able to control them when it matters most to you.
  • Don’t let conflicts get in the way of selecting the ideal board member. Conflicts will be disclosed and can be managed. Many times the people who will understand your business best are conflicted in some way. There are ways to deal with this problem.

If you want to create a board that can make a big impact you should put at least as much time and effort into identifying and recruiting board members as you do a senior executive. That means having more than one criterion, looking beyond the CEO title, and searching for people who bring a diversity of ideas and experiences to the table.

- Matt Blumberg, April 14, 2021