That's certainly one function of every board, but if your board is your "brain trust" and the people you can most use as a sounding board to help you make the toughest decisions in your company, and if it's the one group truly privy to your most confidential information and your hardest choices, then it's a shame if you don't get more value.
It's also true that there will be tough moments in your company's journey where you will want to be able to carry people behind the tough decisions you want. When people are problem-solving with you, they are more bought in, because they're part of the solution. If they've only ever received updates, then don't expect them to be bought into tough decisions when you inevitably have the board meeting where the news isn't positive.
If you buy into the argument that a strong board can actually help you then this post will lay out how to help you have more productive meetings by preparing properly in advance.
How Most Board Meeting Prep Works
I've been sitting on tech boards for two decades, so I have some experience with what goes wrong. The following is a narrative, but if you have a lot of board experience I'm guessing this will sound all too familiar.
- Board meeting gets scheduled.
- Nobody thinks too much about it until a week or two before.
- Management team has a last-minute scramble to pull materials together.
- Management is super focused on its daily work of...winning customers, signing biz dev, shipping product...so this prep is a last minute "fire drill" and is seen as a slight distraction. If polled a week before the board meeting, a good number of founders would say, "I wish we could delay this meeting a couple of weeks" or "I really could do without having this board meeting at all."
- The board deck and financials arrive the night before the meeting. Investors who are traveling get to their hotels late at night. They decide to wake up early to read the materials. They quickly scan it before breakfast. They get reoriented with the numbers so that they aren't caught off guard in the meeting. In-town board members also only scan it, because they, too, have morning meetings before the board meeting starts. Very few people turn up with a strong sense of "what we should be doing" or ready to lean into a productive conversation.
- The financials were prepared by the VP of finance or CFO. The deck itself was produced by a committee of functional team leaders who were asked to do 5-7 slides each for an update. There are too many pages. It passes the weight test. No board member will truly read and be thoughtful about the entire deck, and no team can get through the entire presentation in the meeting. So at the end of the meeting, people will scramble to make the actual decisions with not enough time or consideration.
- The law firm has done its job of preparing the stock option requests, board meeting minutes, and 409a valuations. These arrive at the same time, so given the choice of reading the deck and the financials or this stuff, the board members haven't pre-read all of these materials.
- The meeting starts. It probably starts late. The board goes through admin approvals. Nobody knows how many outstanding shares are in the company, so nobody knows what percentage Mary's 22,475 shares is equal to. Admin time goes into figuring it out. The CEO asks for the board minutes to be approved from last time. Nobody readily knows what was discussed last time, but the minutes are high-level so nobody cares. One person has read them, so the board says, "If she's fine, I'm fine" and they get approved.
- Each section head reads his or her 5-7 slides. The CEO budgeted 20 minutes for each section, but the first three take 35 minutes each so we're already behind. We do a deep dive on financials. We have a few debates in each function because that's what people do; if you put up five slides on "what should we order for lunch today" the board will spend 30 minutes debating that. People debate the information you put in front of them. Never put information in front of people if you don't want it discussed. There won't likely be any cohesive, structured debate about the most important items in the company unless you put it in front of people or unless a board member with experience escalates it.
- The board members race out because the meeting was running over and everybody has his or her next meeting. The board didn't agree on much of substance, even if it was discussed. People are more or less updated. If the company is doing amazingly well, everybody leaves in a good mood. If there were setbacks, everybody starts to doubt but nobody says anything too substantive, because, well, no time was allotted for how to really make things better.
This isn't a narrative of every board or every board meeting, but it isn't far off from many boards and board meetings. It should be your guide for what to avoid. This is what I might call the "inertia board meeting," because if you don't put time and effort into how to get the most value out of your board meetings beforehand?, you are unlikely to get value on the day.
How to Make Your Board Meeting Really Effective
1. Create a set of KPIs for how you manage the business. You should start with a strong set of key performance indicators (KPIs) for how you run your business that your executive team uses irrespective of board communications. I know that's obvious, but I find that many management teams aren't disciplined about how they measure success (other than standard financial reporting?--?and even that can be "seat of the pants" sometimes).
Once you have KPIs for how you manage, you should run them by board members to find out if they think you're missing anything. Make them do some work to agree what success would look like. Often, board members themselves don't do the work to say "What metrics would we like to see?" Sometimes they don't even know.
Any great board member should tell you, "Please don't create any performance metrics or materials that analyze the business that you're not already creating for your own management's use." No great board wants you distracted with doing a whole bunch of financial analysis that is strictly for board purposes. If you develop a strong set of KPIs for how you manage your business and then develop a regular pack that the board is used to seeing, it shouldn't require extra work to prep the quarterly board metrics pack.
2. Decide what your most strategic issues are. About six weeks before your board meeting you should meet with the executive team who attends or prepares for board meetings and agree what the most significant issues the company is working on. This can include: fundraising, product development choices, sales, marketing effectiveness, competition, business development, M&A...whatever. But what are the key issues management is grappling with? You can write this as a narrative in 3-5 key bullet points. When you have these identified, you can agree which items you think are relevant to the board. There are three tests whether this is relevant for your next board meeting:
- "I need to disclose this item to the board so that they aren't later surprised by it." (It can be good news or it can be bad news?--?but it can't be a surprise.)
- "This is an issue that is bubbling up and I'd like to get my board's input to make sure I'm thinking about it correctly."
- "This is something that requires board approval." (An obvious example is an annual budget, and this usually is a large part of at least one of your annual board meetings. It can also be executive compensation, a big deviation from budget, raising debt, an RIF (reduction in force), etc.)
3. Create a short strategy/discussion deck. Create a 5-10 page presentation in your favorite presentation software on any key issues you are grappling with. It's sort of a "primer" for the board, or as some CEOs call it, a "pre read." This is a way to frame the issue you're wanting to talk about. If you have some key metrics or financial figures that go with the pre-read, even better.
Example: "We're thinking about launching a new line of business."
- Our current product only has 30 percent gross margin.
- We could raise price, reduce costs, or keep margin steady and sell more units.
- If we raise price, we worry about competition since we have competitors already below our price point.
- We can reduce costs, but it will take us 12 months to reduce the bill-of-materials.
- We can stay steady, but given our customer acquisition costs we are concerned we won't scale profitably.
- We therefore would like to launch an adjacent product. We think it will have a 30 percent attach rate to our core product. Our adjacent product has 70 percent gross margins, so if we can get even a 20 percent attach rate, we can hold prices steady on our core product and increase total margin from 30 to 38 percent.
This is all made up, but an example of what a single 5-7 page discussion deck might look like and what topic it might cover. Is this extra work versus just turning up at a board meeting and presenting financials? Sure. But it's a great discipline, even internally, for solving your most important decisions.
4. Create a board agenda. I would create a board agenda in advance with particular focus on topics and time allocations. Be very specific and purposeful about how much time you plan to spend in each area. It surprises me how poorly most boards are about time management and how much time boards allocate to less important topics and get stuck rushing more important topics.
The agenda should be purposeful. Think to yourself about the goals of the day, what is important to you and how much time you want to allocate toward it. If you start with admin (409a valuations, small stock option allocations, board minutes) and you then chew up 20 minutes with this?--?it's your own fault. I hate starting with unimportant stuff. We travel by airplane to sit around considering 0.02 percent stock grants? In my mind the least important stuff should be at the end of the meeting. That way if you're squeezed for time you either rush the admin (if it's truly just admin) at the end or you can approve it via a UWC (unanimous written consent) after the board meeting, or schedule a 15-minute admin call in between board sessions to approve this.
Save your agenda for the things that matter most to you.
5. Get your financial deck out 72 hours in advance. 90+ percent of financial packs come out 1-2 days before the board meeting, and I think 65 percent come one day before. There is limited time for board members to read them, digest them, compare them to the last board meeting, and write up questions. It's no wonder your board meeting becomes a financial update meeting. You can't expect your board members to get a deck at noon the day before a board meeting but then not have three other meetings the day before, so at best they're likely reading them in the evening. If you establish a pattern of three days in advance (72 hours), nobody has an excuse for not reading them and you have strong grounds for not doing a deep dive on them during the board meeting.
6. Send your agenda to each board member individually or set up calls in advance.
Send the agenda in advance and ask for "pre calls" to see whether they'd like to add items to the board agenda or whether they think these topics are the right ones. If you have the time to get your strategy deck done early, it's also worth sending.
I think in the best run-boards, the CEO has 30-45 minute calls with each non-exec board member before the actual board meeting to walk through the financials one-on-one and walk through the strategy information and the agenda.
I think this is critical for a few reasons:
- You make sure every board member truly understands your performance and turns up on the day ready for a discussion/debate.
- You can find out what they really think about the critical decisions you need to make. That way if they think you need to add to your agenda you can. If they disagree with a decision you can understand why. If you want their support for a hard decision you can figure out where they stand.
- Think of your pre meeting like a congressional whip "counts the vote."
- Pre-calls also help you with one-on-one rapport building so that you're more in control of the room when you're all together.
Is this "overhead?" Yeah, probably. But it's part of managing a board, which is part of running a company effectively. If you manage the pre-game, you have a better game. If you drain financial issues before the board meeting you can spend more time on critical discussion and less time on information dissemination.
I'm sure not every board member agrees with my assessment of how to prepare for great board meetings. Some members probably hate pre-calls, which they see as overhead. Some members probably want most of the board meeting to be a review of financial information. I personally don't think they're right but it doesn't matter what I think. What matters is that you figure out how to best work with your board. Decades of experience have taught me that early pre-planning makes for much more effective board meetings. But even more important than that is having a board that agrees.
Disclaimer: I've been on dozens of boards over the years. I am not talking about any individual company. I promise. If this sounds like your company and that I'm talking about you?--?it's only because this is how more than 50 percent of boards are run.