Setting up a board of directors is a major milestone in a startup’s journey. Done right and you’ll gain access to experts who want your company to do well and can help you move it forward with insights, ideas, and a broader perspective that you won’t find in your leadership team. Here’s how to make the most of your board of directors from day one.
Why Does Your Emerging Growth Company Need a Board?
Building a board goes beyond fulfilling a corporate governance requirement when a company incorporates. It’s recognition that the company is greater than an individualistic endeavor of one or a few founders. The company has become greater than any one person.
For the CEO, the benefits of an appropriately setup board are numerous: You gain a sounding board as new ideas are explored and issues arise. The board becomes an invaluable source of expertise and guidance, and connections throughout your industry. And a board with a diverse composition can minimize the vacuum effect that can limit a company’s growth potential when other viewpoints are overlooked or unknown.
Building a Board
Early stage companies will want their board members to be supportive yet inquisitive, smart yet forthcoming with their knowledge, and experienced yet open-minded. Typically, with five to seven members, an emerging growth company’s board includes a mix of the following:
- The founder/CEO
- The principal investor
- Experts in the industry and senior leaders in their field (such as someone who leads the finance function at a tech company that doesn’t directly compete with yours, or the head of a sales organization or R&D who could offer you valuable input as you build out these organizations at your company)
Another top consideration is diversity, in every respect of the word. You want everyone to bring something unique to the boardroom, in terms of their viewpoints, background, ethnicity and gender identity. What you don’t want is everyone thinking the same way and nodding their heads at everything you say—you want to get the tough inquiries as you start pursuing a particular strategy or consider a personnel move.
Companies are making some progress when it comes to board diversity, albeit in small steps: In a 2021 survey of private companies from the National Association of Corporate Directors, 37% said they had recently appointed a board candidate from an underrepresented group, while 31% made that same claim in 2020. State regulations continue to evolve on this issue, and an increasing number of states have or are contemplating statutes that require a minimum level of diversity on boards.
Tips for the CEO: How to Extract Value From the Board
When you’re head-down busy running the business, your interactions with the board will be a welcome change. It gives you a chance to take a big-picture view of the business and reach out for advice. To make these interactions and board meetings as fruitful and effective as possible, consider these steps:
Develop relationships outside of the boardroom: Make a point of getting to know each board member. You want to be able to feel comfortable talking with them, and vice versa, as you share your worries about the business and ask for guidance when appropriate. Don’t hold back from reaching out—that’s what the board is for.
Make sure each board member understands your business. Most of the board is independent and not in your world—keep everyone apprised of what life is like at your company, its latest challenges and its culture. This knowledge will help the board members tailor their expertise toward your company’s needs.
Leverage their connections: Your board members can become ambassadors for the business within their networks, and help you expand awareness of your company, while building up sales connections, your talent pool, and even your network of other CEOs.
Ask for feedback. How are you doing, and how is the company doing—really? It’s hard to get honest feedback, but the board should be willing and able to do it.
Lean on the board for mentoring. In general, people who sit on boards like to share their knowledge—so put that inclination to good use by noting mentoring opportunities for key members of your team.
Expertise Is All Around You – Know Where to Find It
You don’t have the time or the capacity to know everything. The experts you surround yourself with, whether it’s the members of your board, your trusted advisors or your CEO peers, can keep you informed about trends, best practices, emerging risks, and other issues that may not be on your radar. As frequent presenters at board meetings and strategic advisors to a range of emerging growth companies, RoseRyan consultants fill in these knowledge gaps and help chief executives think of the questions they aren’t asking—but need to. Whenever you need support with the next milestone in your company’s growth journey (such as building out a board and expanding your network), we are here for you.
As CEO of RoseRyan, Dave Roberson leads the day to day business and builds upon the finance consulting firm’s established reputation for guiding companies to greatness. RoseRyan Founder and Chair Kathy Ryan named Dave to the CEO post in January 2020, about two years after he led a large RoseRyan engagement that provided transitional services for the Symantec-DigiCert divestiture. Dave previously served as a senior vice president for Hewlett-Packard Co. and president and CEO at Hitachi Data Systems.