Seek truth with your board of directors
Venture Investor, VenRock Partner, Waterfall Evangelist
Intense debate and surfacing problems makes a great board meeting.
Board meetings are confidential.
Boards are an intense experience over time, so enjoy the ride.
Lesson: BoD Management with Brian Ascher
Step #10 Best Practices: Seek truth with your board of directors
I think a great board meeting is characterized by one that you've had just real intense debate about the truth. You've really surfaced the problems that the business is facing, as well as what are the potential solutions, and the good stuff.
But a great board meeting shouldn't be about cheerleading. And it's not necessarily the absence of controversy. It's really trying to push the business forward by uncovering the issues that really need attention by this room full of people who are both management of the company and the outsiders, some of whom are investors, some of whom are not, but all of whom want the company to succeed. So it's really about seeking truth and solutions to problems and everybody pitching in. At the end of those meetings, you usually feel pretty tired, but energized.
Some early entrepreneurs make the mistake of feeling like, "Oh, I can't talk to my board about that. So I'll bring that to my advisers or whatever, and they'll teach me how to package it for the board." And I think that's okay for an early entrepreneur, but hopefully they are getting advice from people who've built highly-functional boards and have had productive relationships with the boards. And what they're telling him is, "Seek truth with your board. Don't hide things, don't spin things, bring them the truth. Here's what you'd expect a good board to respond with. And it'll be okay. And they'll help you through it."
And if they don't, then you have an issue with the board, and you need to seek advice on how you go fix that. Because life is really good when you've got a great board.
The issue of board members making requests of management for more reporting or topics or whatever is a really interesting one. Personally I like a management team that's willing to push back. If they feel like a request is extremely labor-intensive and not valuable to them, I like to hear that. Because sometimes a board member doesn't know how much effort will be required to fulfill a request, or thinks they're well-intentioned and on strategy by requesting it, but management believes strongly otherwise.
Now, if that same board member asks two or three times, or you're hearing it from multiple board members, or they ultimately come back in each successive request and persuade you with strong logic, then I think management should bite the bullet and realize that, "Okay, let's dive into this topic and see if, perhaps, we were shortsighted in our initial pushback on it."
So there needs to be a give and take, and both sides willing to cooperate a little bit, but it certainly shouldn't be that everything every board member asks needs to be addressed. That will run any management team ragged because boards members have different viewpoints and don't understand how much it takes to respond to all this each time.
Board meetings should absolutely be confidential. And I would go beyond presumption and actually have an explicit conversation if there is any inkling of a doubt that there is going to be one-hundred percent confidentiality.
Now there should be an expectation and just a realization that investors need to report back to their partners, but those partners are equally bound to confidentiality. If it is something that is very sensitive, no one will be offended if you remind everyone, "Hey, we're discussing some potential acquisition interests. Let's keep this super confidential."
It's really important for the CEO to make sure the board knows who else in the company on their executive team may know about a given sensitive topic like M&A or maybe there is another executive that's not working out that has changed his plan. So those board members know that if there is another executive in the room that's a topic you can't ask about right then and there. You have to wait for the closed session with the CEO.
The other topic is related, which is what should be a CEO or a founder's expectation with regard to a board member having direct relationships with other non-board members in the company, other executives. I think this gets back to that cycle of trust. A real healthy dynamic is knowing that your executives having direct contact with the board is a good thing, but it may not start out that way day one. You have to build trust.
The CEO has to trust that the board member really does have the best interest of the company at heart and is very candid with the CEO about what's on their mind, what concerns they have, who they've spoken to and what they heard. And you need to feel like that is a healthy process that enables your executives to get benefit from the board, enables your board to be that much more informed about your company. And these are real long-term relationships built on trust and ultimately friendship, that's great. But it can be a sticky topic.
The stickiest situation is when a CEO is not working out, and you're hearing this from the executives. Ultimately, for the good of the company, that's a good thing when it happens because usually by the time board members are hearing directly from executives, it is overdue. But it is important when that happens.
You just want to make sure that the relationships have been built up enough that the board is going to know how to calibrate it. And this is why it is actually in the CEO's best interest to let that happen, so that you can understand the difference between a disgruntled employee who is coming to you with a one-off agenda against the CEO versus understanding that, "Okay, this is the belief of the management team. There are real problems in the company. They've not been addressed despite the CEO having heard about it." That is a valid time for a board to take action based on hearing from the management team.
I think the last best practice I would recommend is have some fun. Boards do form bonds over time. It's not all about having fun and just being pals, but it is nice to develop the friendships and nothing creates a bond like overcoming challenges and ultimately succeeding.
But even if you don't, it's an intense experience that you go through together so it's nice to get to know each other personally. Maybe, have occasional board dinners ahead of time and ultimately approach it with an attitude that they are here to help, we're here to have a little fun, and introduce a little bit of humor into the meeting. You can get through even the toughest of times and most difficult challenges in a way that's good for everybody and maybe a good time too.