How To Structure Your Board
A board of directors is not a one-size-fits-all proposition. Companies benefit from different sets of expertise at different stages in their growth, and it’s natural for board composition to evolve as companies mature. Having diverse perspectives around the table can help fill knowledge and skill gaps as the company evolves.
In this episode of How To Launch, Goldman Sachs investors Allison Berardo and Hillel Moerman share advice on building your board.
More Tips for Structuring Your Board
1. Diverse Group of Directors – Thought, Skill and Background
One of the greatest assets of a board is its ability to close blind spots for a leadership team. Having diverse perspectives at the table can help prevent complacency at the company, help avoid short-term thinking and foster creativity and innovation.
2. Directors Need Job Descriptions
Directors should know why they are on a board. They should understand what to bring to each meeting, whether that means observations of the competitive landscape or relevant candidates for open positions. They should also have a sense for how they can be most helpful beyond the board meeting itself. Every director’s seat should be a little bit different, which helps amplify the impact of the board as a whole.
3. Directors Should Be Dreamers – And Realists
The best board members encourage the CEO to think big, but also ask the hard questions. Challenging the CEO and other board members, respectfully and with shared goals, is part of the job description.
4. Save a Seat For Those Who’ve Been There
Operators are not optional. There’s no substitute for on-the-ground experience. Boards that lack operating experience are missing an essential piece of useful knowledge and mentorship for the CEO.
5. People Leave Boards – That’s Healthy
As the company matures, a CEO may need less mentoring and instead seek more specific functional expertise. At earlier stages, a board might be composed of more generalists. Over time, specialists with significant experience in engineering, accounting or fundraising can become essential pieces of the puzzle. It’s important to establish a framework up front for how to turn over board members when appropriate.
6. Start Small and Stay Lean
There’s no magic number for a board, but early stage companies that are growing fast tend to thrive with smaller decision-making groups. As companies grow more complex and new investors join the cap table, adding seats and perspectives can be a great addition. Still, companies should always know why they are adding individual directors and focus on making each seat count.
7. Check References
Don’t solely rely on anyone’s word about a new director – even another director’s. Do your diligence with the knowledge that this person is going to be providing counsel on some of the toughest decisions your company will face, likely for years to come.