Confessions of a Director

Advice on making the most of your board of directors.

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Hambro International's Art Spinner says most CEOs don't know how tomake good use of boards. Here he tells you how

Although Inc. has examined boards of directors in the past, we've always tackled the topic from the entrepreneur's perspective. This time we wanted to hear an experienced director's view. Meet Art Spinner, a founding general partner of eight-year-old Hambro International Venture Fund, sponsored by London-based Hambros Bank. He has been a director of 11 companies and on the boards of advisers of 2 others. When you count the collective experience of his nine colleagues at Hambro, he's had a bird's-eye view of the operations of 88 boards of directors.

Spinner grew up on Manhattan's Lower East Side, attended Claremont Men's College on a scholarship, graduated from Harvard Business School, and worked as an intern at the White House in 1972. A keen listener who constantly experiments with personal time-management systems, he prides himself on getting to the point. Here, interviewed by Capital Strategies editor Ellyn E. Spragins, he gives some plain talk on how to get the most out of your board.

Entrepreneurs almost always worry about the wrong thing with their boards of directors: that the boards are going to steal their companies or take them over. Though entrepreneurs have many reasons to worry, that's not one of them. It almost never happens. In truth, boards don't have much power. They are less well equipped to police entrepreneurs than to advise them.

Chief executives often don't understand why they need to have a board at all or what value directors add. People are multidimensional, and their greatest strengths are often their greatest weaknesses. Some of the best operators we have worked with are effective precisely because they are inward looking, single-minded, and focused on their company.

Very often, however, those individuals have little experience or interest in dealing with the outside world. They are not outward looking, and they have little interest in strategy. The board can play an important role in complementing the CEO's strengths. When a company falters or gets into trouble, that's when a board can be very effective.

Treat your directors as individual resources. The greatest contribution directors can make is adding credibility to your company. Today virtually no product is unique. So when you're approaching a prospective major customer, what you're really trying to do is convince him or her that your company will be here 10 years from now. A lot of entrepreneurs are mystified by their competitors' success. They say: "Gee, I have a better product. Why is someone else selling more?" The reason is, the other company is able to present a coherent concept and a management team that has stature and credibility.

As a director at Lotus Development Corp. and Compaq Computer Corp., Ben Rosen of Sevin Rosen Management Co. created among opinion leaders perceptions that would have been difficult for the entrepreneurs involved to establish on their own. That's a lot of what I do. I call somebody, a potential customer or partner, and say: "I believe in this company -- go with me on it. And if I let you down, don't ever do business with me again."

You can leverage a director's credibility even more directly. One of our companies is Vertex Semiconductor Corp., run by Bruce Bourbon. Apple Computer Inc. is one of his target customers. So he wrote a form letter with the top and tail of the letter left blank, and he asked one of his directors, a guy from Venrock Associates, which helped fund Apple, to send one to John Sculley, Apple's president and CEO.

Another important contribution that board members can make is to bring with them the company-building "technology" they have observed in other companies over the years. That is a responsibility every director has and every CEO should make good use of. I have a loose-leaf binder that contains, among other things, the financial-reporting packages used by Joe Rodgers at Quantum Corp. and the management-by-objective techniques developed by Irwin Federman at Monolithic Memories Inc.

One of the things Federman discovered, for instance, is that the classic Christmas bonus has a kind of negative value. People are never quite sure if they're going to get it. If they do, it's more or less what they expected. If they don't, they're upset. Instead, if somebody accomplished something great, Federman would hand the person a check for $10,000 the next day. He found that the unexpected bonus has a powerful effect on an employee.

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