Board Now or Board Later?

Thursday 16th April 2020 Dave Sharp Start Ups!

When I'm working with a start-up one of the more difficult concepts that comes up is the board of directors. This can range from not understanding what one is through to believing that the board will take the company away from them. Not every start-up needs a board right away but the earlier that the board is discussed and the process is in place the better.

The definition of a board is "A board of directors is a body of elected or appointed members who jointly oversee the activities of a company or organisation."

The key word here is "oversee". A board of directors is there to advise and guide the company management team, not tell it what to do. The management team is the management team and is not replaced or negated by the board of directors.

So if the board is not there to tell you what to do, what is it there for?

Advice: The board should be available to the management on a monthly basis to discuss the current issues within the business, be a sounding board and ultimately give advice to the management team.

The board should act strategically while the business acts tactically. The longer term trajectory of the business can often be be seen more clearly and objectively from the boards point of view, and the management team needs to allow the board to act in that way by providing all the information it needs.

There are several legal requirements for companies that the board is typically best placed to handle - especially within those businesses that have raised VC cash or have private shareholders in place. The board should manage and inform those 3rd parties on behalf of the company and authenticate information coming out of the company that was destined for those 3rd parties.

The board has a format.
There is a chairperson - the ringmaster of the board and ultimately the person responsible for the activities of the board, appointments to the board and the interaction between the board and the company. Directors have a board seat. Lastly the board can have an Non-Executive Director contingent - people appointed to the board to advise but don't have a day to day role with the business.

The benefits of a board of directors can be massive as long as the right people are appointed. The Chairperson is the key position. The Chair needs to be someone with the right levels of understanding and background in the sector the business operates in and needs to have the time available to work on the business between board meetings. The Chair should also have connectivity and a network that will benefit the business.

The Chairperson and the management team should then discuss and agree how many and of what DNA the rest of the board should hold. If the business has a large reliance on technology then at least one board member should hold a detailed background in tech. If the company intends to list on the AIM stock-market then at least one board member should have successfully done that before.

The board members should have two basic abilities, one to deal with the companies core requirements and secondly to be able to plot a route forward for the business. As the company and Chairperson look at the business is should become apparent where the company would benefit from having a board member (sales, marketing, finance, tech etc.)

The benefits of a properly functioning board are massive. The company management should be able to direct the board towards the issues that are holding the company back and get qualified insight back from the board to help the company overcome those issues.

The board should be able to strategise for the management team and bring options and opportunities forward for the management team to consider as part of the development strategy for the company.

The board should be able to open doors through their combined networks that the business could not access otherwise and be able to bring in expertise that the business can apply to problem areas.

Lastly, the board is the interface to investors, venture capital, share markets and other finance sources to allow the management team to focus on delivering the growth the business needs.

Its never too early to start the discussion about having a board of directors, the appointment and the use of its members and how to get the most out of it. Its not something that should done lightly or without taking care and attention to learn about how they function and the impact on the company. Start-ups benefit greatly from having a board in place early (as long as its the right people) and establishing trust and a working relationship between the board and the management. If problems set in appointing a board will not save you - it isn't a safety net but correctly dealt with the board should be able to help you pivot out of trouble.

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