Business Growth Strategies: Have You Looked At Your Board Composition?
During the last several weeks I focused my writing on the need for the CEOs and/or founders of early or expansion stage software companies to evaluate their management team needs as part of their planning for business growth in 2011.
So far I’ve covered:
- The need for the CEO to take a look in the mirror
- Identifying the next management team member needed to scale the business
- The process to hire a new management team member
This week I would like to discuss the importance of looking at your Board composition as part of your 2011 planning process while you define your growth strategy, build your economic model and push to improve operational execution within the business. At OpenView Partners, a Boston based expansion stage Venture Capital firm, we believe the Board plays an important role in the company’s development.
When we invest growth capital in an expansion stage software company, we typically propose a 5 member board with 2 members from the portfolio company, 2 members from OpenView and 1 outside board director.
Usually during the first year we focus on working with a portfolio company regarding the operational fundamentals and building out the right business processes across all operational areas so the company is prepared to scale in a capital efficient manner. We then work with them to recruit an independent board member to bring added value to the company and its development.
We sit down with the CEO and management teams and discuss what areas would receive a benefit from the addition of an independent board member.
We discuss the company benefit as it relates to:
- Experience in financial operations
- Industry specific experience
- Strategic relations with other players in their market segment
- Business development
- Operational experience in customer service, marketing, sales, product management and development or consulting
Once we determine the area where we can add the most value, we define a profile and begin the search. We ask the company to take the lead and stay involved in the process until both the portfolio company and OpenView agrees upon a suitable candidate. During the recruitment process we make sure the potential independent board members understand a board appointment is not for life and as the companies need change the board must be dynamic and is subject to change as appropriate.
By the way, after we add the first independent member, it is not uncommon for us to recruit another outside director with a different expertise that will benefit the company. This member will replace one of the two OpenView board members to help in the development of the company.
So take a look at your board and ask whether now is the time to add an independent member or perhaps replace a current board member because your company’s needs have changed.
By the way, Firas Raouf, one of my peers, wrote an excellent blog titled “The Board Imperative – A Balanced and Cohesive Board” you may find of interest here.