New CEOs face many issues and situations they've never confronted before in their careers, but having a board may be the most challenging. Reporting to a committee of people is very different from having a single person as a boss. Managing this relationship is a great test, especially for CEOs with little experience working with boards. Here is a cheat sheet.
1. Choose board members wisely.
CEOs don't often get to choose their board members. When they do, it's important to be selective and handle the process as seriously as hiring an executive. Here's what CEOs should look for in their board members.
- People with CEO experience. Only someone who has been a CEO can understand all the issues and challenges that are inherent in the role. One trend with boards is to have people with more functional expertise. A board that consists of mostly subject matter experts--e.g., CIOs, CSOs, CFOs--can quickly evolve into an operating entity. This is dangerous and undermines the CEO's credibility.
- Breadth of capabilities. While having a board composed of former CEOs is valuable, they don't all have to have the same background. Most CEOs come from a functional area of business and have special expertise. CEOs should consider the company's needs before filling a board seat. Kevin Hrusovsky, CEO of life sciences company Quanterix, advised:
You need to select someone who brings those capabilities and contacts that can benefit the business. For instance, you need to have someone with a strong CFO/finance background to run the audit committee, or someone experienced in HR to run compensation.
- Chemistry. The board needs to get along well with each other, the CEO, and the executive team. Hrusovsky agreed:
Now that I've been on many boards, I probably have a more complete appreciation for the importance of chemistry between board members. They don't have to agree with each other--in fact it's productive when they don't--but they have to respect each other.
- The right motivations. It's critical to understand why a candidate wants to join the board. Some big investors think they should have a say in how the company is run. This rarely turns out well, because they don't often have the right experience to provide value to the entrepreneur. In other cases people accept board seats because they still want to run a company. However, they aren't willing to commit the time or risk their reputation by actually becoming the CEO.
2. Get to know your board members.
Whether you chose them or not, you should develop a relationship with each one. Hrusovsky said, "It is important as a CEO to take time to get to know each board member and interact with them so that you can benefit from their experiences and their approaches."
3. Be transparent.
Present the right information to the board. Colin Doherty, CEO of Fuze, a cloud-based unified communications platform, said, "The number-one most important thing is transparency. Boards are an oversight governance management vehicle. They can only really help you and advise you with things that they know."
This does not mean giving the board every detail about every department. It does mean giving them a high-level overview of how each department is tracking toward its goals and key metrics.
This also means including the negatives as well as the positives, continued Doherty: "The human nature and condition is to talk about things that are going well and try to avoid talking about things that might be challenging. The more they know, the more they can help."
4. Coach them to provide feedback.
Boards also need to learn how to provide valuable input to you. Ask for their feedback regularly. This includes soliciting specific advice on not only how to improve the company, but also on your performance.
5. Limit board tenures.
Where possible, board positions should be one-year appointments and only be renewed with the unanimous approval of the entire board. This provides a way to easily remove board members who aren't helpful.
The symbiotic nature of the board/CEO relationship means the better it is, the more healthy and productive the company can be.