Dear Founder,
I’m sorry you’re dealing with this. It’s not fun. But you have to fix it—because your directors won’t. I’ve outlined ways to do so below, but first, let’s take a step back to identify why this is happening.
Remember when you first created the board? This was at the beginning of the formation of the company, when everything was full of potential and it seemed that there was only upside. You decided to give up some control, probably in exchange for equity, and there was harmony. If a board member joined as the result of funding there was likely peace and excitement at the moment, but these sentiments also came with certain expectations: namely, the expectations he or she bought into around growth, market opportunity, leadership and more.
Now, if there are problems, you need to understand how they occurred. One clue: it’s likely that you haven’t delivered against the board’s expectations.
As with any relationship, the founder’s relationship with the board changes over time.
While your relationship with your board likely began amicably, your company was much younger and different then. As it grows, it will encounter problems. How the CEO and the board deal with these problems determines everything.
In good times—you have a good quarter, you did what you said you would do—you and the boardmembers are in harmony. You can ask them to open doors, they cheer you on, and they challenge you to go faster. That’s good board behavior.
Board dysfunction is usually preceded by company or CEO dysfunction—it generally happens when the business or the CEO isn’t doing well. It’s not okay to dismiss this situation, thinking the board is being a pain in the ass and hoping they will go away. They will not go away, and it is their fiduciary duty to intervene and restore growth. Therefore, it’s important to immediately identify the root cause of why the board is upset. A few things to consider:
- Is this new behavior, or has it been going on for a while? Is it that board meetings used to go well, but now you dread them? It’s time to ask yourself, what’s changed?Maybe it has to do with your last product shipment. Or perhaps you can’t find a head of sales. Or it could be that customer reception isn’t what was expected. The result of any of these issues is that the board’s trust in you has now shifted. The board should know what’s happening AND they should know what you’re doing to fix it. Being defensive won’t help. Problems don’t have to be bad things—as long as you address them quickly. Put yourself in their shoes. What do you see?
- Are there execution issues? You said you’d hire a person and you didn’t; you said you’d land customers that you didn’t; you said the product would be released by a certain time, but it wasn’t. If you have any of these execution issues, the board is banking on you to fix them.
- Are there aspirational issues? You said you’d become a market leader in nine months and you didn’t. Aspirational issues are less fatal and they can be resolved with the board over time.
Now, it’s time to take a closer look at how you dealt with the issues, and how your response impacted your credibility. Questions to ask in a personal assessment include:
- Would my investors vote me onto the team if they were deciding today? Why or why not?
- If we were looking for funding would they re-up? Why or why not?
- Have I underperformed and made myself vulnerable to criticism and angst? Have I created a soft underbelly?
- What am I doing to show the board members that I’ve identified problems and am working to resolve them?
Also consider whether it’s the whole board or just one member who is out of phase with everything else. If so:
- Do you know why he or she may be cranky? Sometimes, it’s due to the other things going on that are not related to your company. How’s their company or fund doing? What else is going on?
- Address the problem proactively. You may not have control over these issues, but you still have to deal with them. Call the board member to discuss the behavior privately. Share with them what you’re experiencing and ask them what’s going on to try to understand where they are coming from.
- You may also consider speaking with another trusted board member about this issue and asking them to reach out on your behalf.
You have to manage your board differently than you manage your customers and employees.
Your board has unique powers. Think about it. A customer can fire you, but you can get other customers. An employee can leave you, but you can find other employees. Board members? If you ask most board members what their #1 job is, they’ll most likely say it’s hiring and firing the CEO. Of course, board members will be involved with all kinds of other things—from providing strategic insight, advice and counsel, to opening doors, to assisting with all of the regulatory obligations that can come with being a public company. However, they will always say their #1 job is to ensure they have a great CEO in place.
Too often, CEOs don’t understand the board dynamics they walk into and therefore they have no idea to how to manage a board. A few things to keep in mind:
- Be realistic about what a board is and what it isn’t, and how it functions.
- Be aware that you’re gaining or losing credibility with a board every day. Just because you once had tons of trust and credibility, this doesn’t mean that you can’t lose it all very quickly. I once saw a public company CEO lose the support of his whole board in less than a week.
- Be able to predict where the board is on any given issue and why.
As I’ve said before, leading a company is like playing three-dimensional chess. Here are five of the right moves to make:
- Be transparent with the board. Some founders may be concerned that honesty makes them look weak. Not so. Tell the truth. This is what will enable the board to trust you to accomplish your company’s goals. This doesn’t mean every time you have a bad night’s sleep over a problem that it requires board notification. You’ll have to assess what is worth telling them. I’ll give you some clues though: if there is a massive outage or something that will cause a loss in revenue, the board needs to know immediately. It’s a little bit like managing any relationship. If I’m going to be home late, I’ll be in trouble if I don’t call. If I do, I’ll just hear appreciation for the courtesy of knowing (most of the time). Don’t forget to call when you’re supposed to call.
- Put the board to work. Your board is made up of the people who are closest to your company. They know your aspirations and your problems and they’re aligned around wanting you to succeed.†Instead of doing all the work and just asking them to judge you, ask them to help you. Bring them into the loop so they can help problem solve. Almost every board member wants to help.
- Tell them about the issue and the options you’re considering. Ask what they would do if they were in your shoes.
- Ask them for their advice on your strategy and ask them to help open doors.
- Engage in dialogue, not debate. Don’t make it “us against them.” Don’t force them to a decision; encourage them to come along willingly. Do that by making them feel as if they are part of the solution. This may mean taking two bites of the apple, not one. Instead of saying, “Here’s what I’ve decided, and I need you to support it,” try a two-step approach that offers them room to weigh in and solicit their opinion. “I’ve been thinking about this…,” and then, “what do you think about that idea?” This should bring them along on your journey.
- Know when to hold’em and know when to fold’em. Not every decision should be given the same weight. You have to know when something is worth giving the sleeves off your vest. If this problem is a 10 on the Richter Scale, you know best what you have to do. However, if it’s a 2, let the board win. Trust gets burned on the small things that don’t matter. Don’t allow that to happen. Compromise on the small nits so you can retain trust and gain consensus on the big things.
- Quickly determine whether or not the board is with you on the next steps. Before every board meeting, check in with all the board members on the agenda topics and ask if there’s anything else someone wants to cover. It’s important to understand all of the key issues in advance. We all know that sometimes someone comes in with a bee in their bonnet and they ruin the meeting! Avoid that. To do so, give them the chance to tell you where they’re coming from and why.
- Identify where everybody is. Are they as excited today as when they invested in you? You should know.
- Is their trust in you growing or shrinking, and why?You need to know.
- Do you have alignment around the cause of the problem and what is being done to solve it?
Your relationship with your board is a long-term partnership, and in many ways is not too dissimilar from a marriage. To make it successful requires transparency, trust, more communication than imagined, and the willingness to compromise.
Also, remember that your boardmember is in a different position than you. Their job is to tell you what to do, and they don’t have to deal with the consequences. Advising is easy, but execution is hard.
I’ve been in both roles and I can tell you, my perceived IQ went up 10 points as soon as I became a board member because I didn’t have to deal with the reality of anything I said. But for now, you do. Good luck and go get ‘em!
All the best,
Maynard