How to Recruit an Effective Board of Directors
There are a few key turning points in an early stage software company’s life. One of the biggest comes when a company’s management team realizes that it could benefit from some outside expertise to more wisely grow the business.
Enter an outstanding board of directors, which can bring market knowledge, balance, and objective opinion to a company that has numerous big decisions to make as it grows. Typically, the recruitment and creation of that board occurs when a company raises its first institutional round of financing. But I see no reason why companies need to wait for that event.
When founders and expansion stage CEOs begin to think about building their board, they must begin with the realization that they need one. Most expansion-stage companies probably need to recruit a board of directors at some point, but it can take some a little longer to realize it.
So, why might your company need a board?
A board of directors is a vehicle that you can use to recruit super-talented and experienced individuals to help make decisions and bring perspective to your company’s goals. It will also ensure that you implement sound corporate governance.
Some founders and CEOs believe that a board creates unnecessary work for them, adds little value, and is manned by individuals who get in the way of running the business. That can be true if you recruit bad board members. But the opposite can be true if you recruit great ones.
As Tim Connelly writes for Inc.com, the perception and the role of a board of directors within small companies has changed significantly over the years. If assembled smartly, a board of directors can add significant value and act as a council of elders whose knowledge and experience provide necessary guidance for long-term and big picture decisions.
Of course, a great board starts with recruiting great members. In fact, founders and CEOs should treat the board member recruitment process just like if they were hiring a new employee.
How to Recruit a Board of Directors: Key Steps to Ensuring Success23>
Define your needs
One approach is to examine your skill sets as a founder and CEO. Think about the skill sets you lack and where a board member mentor could help. For example, if you’re weak in finance, a former CFO would be a good prospect. Then consider your plans for growing the company and the role a board member could play in opening strategic partnership doors (like funding or business development).
Create a role description
Again, treat hiring a board member like you would treat hiring a senior executive. Putting the role description down on paper will help you hone in on exactly what you’re looking for, which will ease the recruitment process.
Set clear expectations of the role
When recruiting an employee, it’s pretty obvious that it will be a full-time role. But when you’re recruiting a board member, it’s crucial to set expectations on the time and energy commitment that will be expected. Consulting firm McGladrey provides five steps to help frame the expectations of your board members.
There are numerous people who join boards, but have no time for it or fail to make the role a high priority. At the same time, you need to have realistic expectations. For early stage software companies, a board member should allocate a minimum of one day a month. Every year, four of those days will be for quarterly board meetings and the rest are to be spent diving into your operations or helping you open doors and enable business.
Get help in recruiting
You might not be able to afford one, but if you can, hire a recruiter. Recruiters can play a critical role by helping you dramatically widen the scope of your search to find the best candidate. In lieu of a recruiter, see if you can find someone with experience recruiting board members to volunteer their expertise.
That volunteer may be your lawyer or accountant. The key is to have another set of eyes to help you in the process.
Be highly selective
There is nothing more damaging than having a bad board member (it’s no different than hiring a bad employee). A disengaged board member is a waste of your time and energy.
Once you’ve found the collection of board members you’re looking for, you’ve got to be proactive in managing them. Even a good board won’t be productive without knowing your business’s needs, goals, and issues.
Put your board members to work
Board members can add value, but they will only do it when you ask them to help. Always be on the lookout for the next project that can utilize your board members’ expertise and knowledge.
Know when to let a board member go
And don’t wait too long to do it. When you run out of things for your board members to do, it’s time to let them go. They should bring value to you and your company. If they don’t, fire them and replace them with those who will.
Founders and CEOs don’t typically have that option with investor board members (although you may at your next round of financing), but they certainly do with management board members (for example, co-founders that have outlived their tenure on the board) or independent board members.
Don’t create anything for the board that doesn’t add value to your business
Many founders and CEOs lament board meetings because they think the meetings consume their time and add no value. In reality, that perception is an obvious symptom of a bad board and the only cure is to fix it. Once you have a good board in place, make sure that whatever you create for the board (presentations, dashboard, etc.) are things you are already using for your business.
Expose your board to the guts of the business
Board members can only be helpful if they understand your market, your business, and your operations. If you feel the urge to hide things from them, you have a bad board. If you don’t think they would understand your business, you have a bad board. If either of those things apply, fire your board members and hire the right ones.
Once you have people in place that can help, open up the guts of your business to them. Have your senior managers walk the board through each function, expose the issues that you struggle with, and then ask them to help you resolve them. If they can’t, then you know what to do: fire them and find members that can.
The important thing to remember is that a bad board of directors can cause unnecessary work and stress for a company’s CEO or founder. But it doesn’t have to be that way. If you’re able to recruit the right members and make the best use of their expertise, it can be a pivotal moment in your business’s growth.
Looking for a complete guide to assembling and managing the board of directors your company deserves?
OpenView’s ebook, Building a High-Impact Board of Directors: A Guide for Expansion-Stage CEOs leverages OpenView’s considerable experience working with entrepreneurs like you to provide the insights and actionable steps you need to:
- Understand the value that an effective board of directors can provide
- Assess whether or not it is time to change your current board
- Recruit and assemble a high-performance team
- Establish a clear management rhythm to engage your board effectively