What to look for when you choose board members. And what to avoid. The second of a four-part series.
I've written recently about the role played by boards that advise private companies. Every business I've ever run has had a board, some very much more helpful than others. When I think of my worst board members, they were either hyper-active, eager to take over the reins, or silent; I had one who unfailingly turned up—but never spoke in three years of meetings. So what should you look for in your advisors?
If you have investors, they need to be there but it's important to balance their input with a rich range of experience. Investors (especially venture capitalists) often demonstrate irrational levels of self-belief, taking credit for their successes but rarely feeling implicated in their failures. Other board members therefore will need significant operating achievements under their belt and plenty of confidence. And of course it helps if they have great contacts in your industry or the markets you sell into.
Technical expertise and industry knowledge matters. Don't assume all business is the same; it isn't. The best board members come from business sectors similar to your own. I've sat on boards with highly successful entrepreneurs but their experience was so wildly different that they were both distracting and irrelevant.
High levels of emotional intelligence encourage everyone to play well together. Try to avoid family members, friends, or anyone with too much political sophistication. Boards should be where the politics stop—not where they get an extra polish. Diversity is essential: If everyone around the table has the same background, the homogeneity of thinking won't help you. Different ages, gender, ethnicity, and technical expertise will all make your business smarter.
Similarly, you want a good mix of highly-experienced directors and those who have newer, fresher blood. Seasoned board members appreciate the crucial dividing line between advice and action; they'll have a strong sense of how to avoid getting sucked into execution, while less experienced directors can learn from this. You need your board to have this discipline. If directors get sucked into sales negotiation and internal operations, extracting them is awkward and time-consuming.
Finally, try to find someone who has experience being the outsider, the one person prepared to articulate what everyone else isn't saying. You want people like this inside your company too, of course, but board level is the last place where unspoken-but-obvious truths have the chance to emerge. Groupthink is a systemic problem for boards but tough-minded contrarians resist it.
Should you pay your directors?
Asking any serious professional to devote time and attention to a business in which they have no investment is a big ask. The best directors I've had joined because they respected the company's vision, mission, or creativity, liked working with young, smart people, and looked forward to being part of a success—all excellent motives. Be wary of those who hope to connect you with other investments or interests; Growth is hard enough without adding the complexity of mixed motives.
That said, if you can afford some reasonable remuneration, you are probably more likely to get consistent attendance and attention. But whether you pay your board or not, be very clear, and consistent about the amount of time you expect from them. For anyone advising a business, time is the most precious asset. Don't waste it. Be clear about the commitment you need. Set the board's meeting schedule a year in advance and stick to it. If you're doing a big deal, everyone knows that may demand extra time. Otherwise, hold meetings as planned and on time. The discipline will be good for you and demonstrate, more than money, how much you value your directors.
Be clear about how long you expect your directors to serve the business. Just like auditors, time and contact erode objectivity. You will get greater value from your board in the first three years than any time after that. In this, everyone's goal is aligned: Move on and grow.