The board of directors of any company plays a pivotal role. In a public or private company, the board members' interactions with the CEO and the rest of the C-suite will help determine the company's future. Putting together a good board is a difficult task, and many companies have failed. So if you're building a board of directors, how do you make sure you'll have a good one?
YPO member Bernie Tenenbaum knows a thing or two about being on a board of directors. After all, he's sat on over 50 of them, and served as the associate director of the Sol C. Snider Entrepreneurial Center of the Wharton School of the University of Pennsylvania, the oldest and largest academic program in entrepreneurship in the world. Today, Tenenbaum is the founder and managing partner of Lodestone Global, a consultancy focused on strategy assessment and board design and development. He helps companies put together a board that is right for them, with the mix of skills and personality their industry requires.
On an episode of my podcast YPO 10 Minute Tips from the Top, Tenenbaum shared his tips for putting together the perfect board of directors:
1. Strategy precedes governance.
If you don't have a clear vision of your future, don't bother trying to gather a board of directors. Tenenbaum says, "The first step in building the perfect board is this strategic assessment, basically a more sophisticated, 'What it is you want to be when you grow up?'" He goes on, "Strategy precedes governance. Once when you have a precisely defined strategy should you think about governance." Additionally, having a board requires a particular mindset. Tenenbaum advises, "Don't look out the rearview mirror. Look out the front windshield. If the board is effective, it's there to drive strategy and to clarify objectives. If you spend all your time focused on what happened yesterday, instead of what's going to happen tomorrow, you're not going to be prepared for tomorrow." Boards are there to make CEOs better in the future.
2. Are you really ready for a board?
If your company doesn't need a board, you may want to think twice about whether you even want one. Tenenbaum directs, "The first thing that any good entrepreneur or CEO needs to do is to take a hard look in the mirror, naked. It's not fun." It can be a humbling experience to be exposed in such a way; some CEOs simply aren't a good fit for it. Facing a board requires the confidence to know where you're going, but also a willingness to be challenged. "You have to be clear about where you are now and, most important, where you want to go," Tenenbaum says. Having a board also requires you to have the time to dedicate to them. It won't work for every company, and that's OK!
3. Look for people, not résumés.
Tenenbaum knows it's tempting to get big names and big résumés when you're building your board. He explains, "I was the pet professor on a public company board. It looked nice on the annual report." Certainly, you need to ensure your board members have the right skills for the job. He quips, "If you're going sailing, don't get Sherpas who are good at carrying everything up Mount Everest. If you're going hiking, don't get tugboat captains." Remember that ultimately, business skills are not what's most important in a board member. "It's an art," Tenenbaum advises. "It's people, not résumés, that you're looking for." And those people need to remember the humanity of those in the C-suite. "One of the most important things a board can do is to ensure that the talent and, most important, the emotional health of the leadership are intact and focused," Tenenbaum offers. "I always try to spend 45 minutes at the end of every board meeting in a one-on-one with the independent directors and CEO to find out how they're feeling. It's a lonely place sometimes, and it's not the kind of thing you can talk about with most people." CEOs may seem invincible, but they're human, too.
4. Honesty is everything.
Whether a CEO is looking at him- or herself in the mirror or a board is examining a C-suite's performance, Tenenbaum believes honesty is a key to success. He shares, "I may have been that pet professor on the board, but I also wasn't afraid to say, 'You know, you're wrong!'" This willingness to face reality is critical in a leader. Tenenbaum advises, "If you aren't willing to confront the real truth in a direct way as an owner, you've missed the opportunity to improve." The board and CEO need to work together to identify the truth, and then find ways to make the situation better.
5. Remember you're putting together a band.
Tenenbaum says putting together a board is an art, literally. "You're putting a band together," he explains. "You want a band with six drummers? It's gonna have a very different kind of sound." Beyond their individual abilities, board members also need to work well with their fellow members. Tenenbaum says, "The art of assembling the right people is not just a question of whether they're capable and experienced and knowledgeable in the things you're interested in. Will they play nice together in the sandbox? Are the flavors going to blend or to clash?" Finding the right board is about understanding each member's business skill set and cultural mindset.
Each week, Kevin Daum explores exclusive stories inside YPO, the world's premiere peer-to-peer organization for chief executives age 45 or younger.