I sit on three boards now so been thinking a lot about the ideal role a board should play for a startup. The CEO and executive team run the company on a day-to-day basis and gain insights that a board never feels nor sees. On the flipside, board members, either venture capitalists or industry veterans, gain insight from pattern recognition and learnings that company executives don’t often have time to study. The CEO and executive team are best suited to provide the micro view, while the non-executive board members are often better positioned to provide the macro perspective. For this to work effectively, there needs to be mutual respect for both perspectives and agreement to meet somewhere in the middle — often easier said than done.
The role of a board also varies based on the strengths of each CEO leading the company. A product-focused CEO may need help from the board on sales strategy, while a sales-focused CEO, may need more help with pricing, product roadmap, etc. There are a few things, however, on which I think every board and executive team need to make it a priority to collaborate. They are, in no particular order:
12-month budget forecast. The 12- month budget forecast should be reviewed and agreed upon at every board meeting. Things change and exceptions are often made, but this forms the basis of a company’s operating plan and cash burn. There’s been a lot of discussion recently about cash burn levels, but if the board has approved them, they shouldn’t come as a surprise to anyone involved with the business.
Sales targets and pipeline development goals. For companies selling a product or service, the board should agree on sales targets and pipeline development goals to measure progress. If clear goals are established, it should be relatively easy to measure whether or not the sales process is on track or in need of adjustment.
Product roadmap and calendar. The board should agree on product priorities and projected dates for completion of new features and offerings. This will help the team measure how the product team is tracking.
Fundraising goals and timeline. Finally, if a company is projecting a loss for the foreseeable future, the board should always be aware of projected funding needs and intended timeline to begin a fundraising process.
In each of the above sections, the CEO should ask questions and solicit feedback from board members. The best board meetings I’ve seen happen when the CEO approaches the meeting with key areas for feedback and intended takeaways. The worst board meetings I’ve experienced (and a suboptimal use of everyone’s time) happen when the CEO and executive team “present the update”, without sufficient window (or interest) for discussion or feedback. This doesn’t serve the company particularly well, and makes the board members feel as if they are there out of obligation rather than to be helpful. One of our CEOs makes it a point to circulate the deck and financials 48 hours in advance along with key topics that are likely to surface at the meeting. Afterwards, he sends an update summarizing outcomes from the meeting providing closure and next steps.
If each of the four topics above are addressed and discussed at every board meeting and the CEO does the necessary prep before and after, I think the board members are serving the business well and the CEO is doing a reasonably good job using his/her board. The mutual respect thing is critical. I’ve seen examples (and heard of many more) where the CEO does their own thing and doesn’t take the board’s advice to heart. This can be a disaster when seas get rough and things don’t go exactly as planned. If mutual respect and protocol haven’t been established early in the companies life, it makes it much harder for the board to bail out a CEO in tough times.