What is a Board of Directors?
Let’s start with the basics.
A board of directors is the governing body of an organization. They oversee management, specifically the CEO, and serve as a source of advice and leadership. Providing honest, candid, and thoughtful ideas and advice to the CEO is one of the most valuable things a board member can do.
Why do you need a Board of Directors?
Everyone needs accountability. CEOs, specifically, answer to shareholders and other stakeholders. A board of directors serves as the CEO’s boss, keeping them accountable for their work and the company’s performance.
A good board of directors, though, is more than just an overseer. It’s a strategic team, working with the CEO to help the company succeed.
The purpose of a board also includes:
- Serving as a forcing function
A board can help you lead your organization by creating a cadence of regular, recurring deadlines. It can add legitimacy to decisions or timelines, and encourages cleaner reporting.
- Helping with pattern matching
Hopefully, your board members represent a variety of perspectives. They’re able to draw from a variety of past experiences and recognize patterns that may occur in your business.
- Illuminating the forest for the trees
You’re in the weeds of your business every day, but your board isn’t. They might see things you don’t when looking at results or considering next moves.
- Driving discussion and debate
A healthy board discussion will push and challenge you and your team’s assumptions. Listening to and participating in the discussions and debates at a productive board meeting can be one of the most valuable things you do in a given quarter.
The Structure of a Board
Types of Boards
Boards of directors adapt to fulfill the needs of the organizations they serve. There are many types and functions, but let’s go over the basics:
At Bolster, we often focus on startup boards, but this category also includes mid-sized and large private companies. A private board of directors is the governing body for a private company, providing input, support, and accountability for the leadership team.
Corporate, or public, boards are similar to private boards. As the governing body for public companies, these boards face the most regulation and liability.
Advisory boards don’t have a fiduciary duty to stakeholders. They exist to complement existing boards or leadership teams. Members provide valuable advice, expertise, and support.
Nonprofit boards are the governing body of a nonprofit organization, and members are frequently volunteers or donors. Serving on a nonprofit board is valuable in and of itself, but these positions can also provide experience to help you gain your first corporate/public or private/startup board seat.
Generally speaking, when we discuss boards at Bolster, we’re referring to private—specifically startup—boards. If you’re searching for information or candidates for another type of board, however, we can help!
Types of Directors
We encounter three main types of directors:
Venture capitalists often have a seat on the board as a condition of their investment.
A managing director is employed by the company and draws a salary. Often, they are CEOs, executives, or founders.
Independent directors are chosen to be on the board, and are not otherwise associated with the company or with a relevant investor. The best independent directors bring valuable perspectives, industry experience, or connections to the table.
The Rule of 1s
When you’re building your board, we recommend using The Rule of 1s as your guide.
- 1 member of the management team
- 1 independent director for every 1 investor
The board of directors is essentially the CEO’s boss, so while other founders and executives can observe and participate in meetings, the CEO should be the only managing director.
Independent directors bring something unique to the table. Each one offers a golden opportunity to get an outside perspective on your business. They can bring industry or operational expertise from unique backgrounds, and in a world where investors are still often white and/or male, independent directors can also bring diversity to your team.
Getting the balance right can take some maneuvering or require you to have difficult conversations, but it’s important for the business’s long term success.
We help you find skilled, diverse candidates with wide-ranging backgrounds to round out your board and bring the perspectives your business needs for success.
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An independent director doesn’t represent either the founder or the investors. Instead, they give you the opportunity to invite the perspective of a business operator, functional executive, or customer to the table. They are often from more diverse backgrounds than a CEO or investor, both demographically and professionally, and their input can be invaluable to your business’s success.
We know how important independent directors are to startup success, but early stage companies are still unlikely to have diverse boards. According to our research, only a third of private companies have independent directors, severely limiting their access to outside perspectives at the most senior level.
Building Your Board
Evaluating Your Board
When was the last time you evaluated the performance of your board? When was the last time you offered your board feedback?
When you evaluate your board, consider:
- Is the board focusing on the right things?
- Is the board collaborative and productive?
- Is the structure of the board effective?
- Is there something missing that would improve the board or the organization’s success?
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What to Look For in a New Board Member
Just like hiring any other leader in your organization, it’s important to establish what you’re looking for when you begin your search for a new independent director.
Unlike in an executive search, you’re not looking for functional competencies so much as the right experiences, soft skills, and governance philosophy to meet your needs. You don’t necessarily need someone who has been a board member before, you need someone who will add value to your board.
So, what should you look for?
- Prior board or board-equivalent experience
At Bolster, we encourage organizations to avoid prior board experience as a requirement for their search. Instead, we consider other board-readiness attributes. Interacting with a board as a part of a professional role, as an advisor, or as a member of a community or nonprofit can equip candidates for their first board role.
Rather than simply looking for someone with prior board experience, prioritize finding someone who can round out your board by adding new perspectives or unique expertise. Opening your search up to a broad group of candidates creates potential for a more diverse board, which leads to better performance.
- Solutions for advisory needs/gaps
Define exactly what gaps you’re hoping to fill with your director. Do you need a product-market fit expert? Someone who represents a specific industry or customer segment? A successful sales leader? A financial leader with experience scaling early-stage companies?
The more specific you can be about your needs, the easier it is to identify the right match for your board—someone who will immediately make an impact.
- Governance philosophy and cultural fit
Philosophical alignment across the board is important. Some directors believe a board’s only role is to oversee the CEO, while others feel it’s important for a board to engage with the strategy, management, and operations of the organization. Some prioritize shareholder value, while others believe the board is responsible for maximizing value for all stakeholders. Wherever your board falls, it’s important for the directors to be aligned.
Different people thrive in different environments. Is your board one full of hands-on operations experts? Does sitting on your board require a specific level of financial fluency? Are you looking for a director who can challenge the status quo? Thinking about how a new director will fit into your organization will increase your chances of a successful search.
- Integrity, engagement, and an informed opinion.
Anyone you add to your board should have a high level of integrity and engagement. Their work ethic and values should be apparent in their own jobs and lives, if you expect them to bring those attributes to your board.
The traditional board search talent pool is made up of previous CEOs or experienced board members. This is still a largely white and male group, and doesn’t accurately reflect the variety of leaders who could benefit your organization. A commitment to broaden the diversity of your board—and maximize the talent and capabilities available to you—requires a willingness to take on and mentor up first-time directors.
Interviewing Potential Board Members
A good board can be one of CEO’s most effective secret weapons. Recruiting and interviewing candidates is an important process to get right and is worth every minute you put into it.
Consider the entire board
It’s easy to get side-tracked and focus solely on the seat you’re trying to fill, but the board’s value is in the collective group and their collaboration. Take time to consider the overall composition of the board and how candidates can contribute.
It’s often instinctual to turn to your own network when you’re looking for a new board member. It’s true that personal networks are a valuable resource, but they’re often somewhat homogenous. Boards with a variety of perspectives are more adaptable and successful, so considering a broad group of leaders—including folks outside your own network—is in your organization’s best interest. Don’t get caught up with one or two favorite candidates, either. Have thoughtful, candid conversations with a variety of potential board members.
Need help reaching a broader population of candidates? Bolster’s diverse talent marketplace offers introductions to thousands of highly qualified leaders who you might not otherwise reach. Get started on your search.
Confirm the match
When you’ve narrowed the candidate pool down to your top choices, have them attend a board meeting. Make the expectation clear ahead of time: they should view this meeting as an audition. You should share your meeting prep materials, and the potential director should be engaged in the session, giving you an idea of what they’d be like on your board.
If you haven’t already checked their references, now is the time to do it. Ask questions about how the candidates interacted with other team members, what their typical contribution looks like, and their impact.
Onboarding Board Members
So much effort goes into selecting new board directors, but the job isn’t over once a selection is made. A solid onboarding process can help you maximize the early impact of your new director.
What practices make a good onboarding process?
- Connect your new director with another board member who can help them acclimate and answer any questions they might not otherwise ask.
- Make sure the new director has 1:1 meetings with anyone the board regularly interacts with. Building personal relationships between your new board member and your executive team will expand their perspective and maximize positive impact.
- Organize a check-in after the new board member’s first couple of board meetings. This is a chance for you to ask for feedback on yourself, the company, and the meeting setup. It’s also a natural point for you to offer any feedback or clarification on the role of the board member.
Check out more tips for onboarding new board members.
How should you compensate board members?
First of all, broadly speaking, management directors and investors do not receive compensation for sitting on your board, but there is an expectation to compensate your independent directors. Typically, this comes in the form of equity. Interested in a more detailed look into compensation? Check out this post.
Becoming a Board Member
Getting Your First Board Role
From an outsider’s perspective getting a board position can seem daunting, clubby, and impossible.
Even if you haven’t served on a board, there are things you can do to gain the experience (and positioning) required to get and succeed at your first board seat.
- Senior level positions
To be considered for a board seat, you need to bring something to the table that isn’t already there. Senior level leadership roles can give you the depth of experience needed to meaningfully contribute.
- Regular interaction with a board
Plenty of people regularly interact with a board without being a part of one. Presenting to a board or participating in meetings as a company leader builds valuable knowledge. Even without being on a board, you can learn how one operates and bring that experience to your first board seat.
- Nonprofit or advisory board roles
Nonprofit and advisory boards typically don’t have the same formal or legal responsibilities as private and corporate boards do—and are thus less prestigious—but they do often handle similar issues. Experience dealing with budgets, stakeholders, and complex strategies can help prepare you for your first private or corporate board role.
- Formal training around corporate governance
Finally, many universities offer courses and seminars to help professionals learn about corporate governance, board structure, and roles and responsibilities without holding a board-appointed seat.
Not all CEOs will value these opportunities equally, but providing a narrative of your leadership and board-related experience will help CEOs understand the skills you can bring to the table.
If you’re looking for your first board role, seeking out and responding to board opportunities that match your experience, knowledge, and skills can be helpful. Since many board roles are filled through referrals, it can be helpful to expand your network. Consider anyone in your extended network who might be in a position to influence board placements—such as VCs, angel investors, or current independent directors—and learn about ways that you might add value to their companies. Be open about your intentions, but be patient. Waiting for that first role can be the hardest part.
By the time you’re at the interview stage for a board role, the CEO and other board members have read your resume, considered your skillset, and contacted your references. Getting to this point is a big deal.
What should you expect when interviewing for a board role?
You’re likely one of several highly qualified finalists. It’s likely you’ll have multiple interviews with multiple people. You should be familiar with the company and the existing board, prepared to share about your experience and what it could mean for the board if you’re hired, and ready to ask questions yourself.
What are good questions to ask in an interview for a board role?
- How does the board operate?
- Are they formal or informal in their meetings?
- Are there expectations outside of standard meetings?
- Do they talk about issues or possible business scenarios offline?
- What do they see as the greatest need of the company over the next 12 to 18 months?
- What are the current strengths and weaknesses of the board?
- What is the CEO like to work with?
- What are their values? Do you share them?
You may also be invited to a board meeting for a trial run. You’ll likely receive the same materials as everyone else, and you’ll be expected to participate just as you would if you were on the board. There’s really only one cardinal rule: be yourself. Don’t hold back. Engage with the people, issues, and processes as if you were on the board. Have a point of view, and treat it as an audition.
Want to learn more about interviewing for a board of directors role? Check out this article to learn what executives look for in a new board member, how to spot red flags before joining a board, and more.
Your First Board Meeting
Preparation is the key to having an impact in your first board meeting, and every future meeting.
Consider these six tips to help you prepare:
- Understand the company’s financials
- Find a board buddy—someone to help you acclimate
- Learn the corporate structure and governance
- Meet the team and start building relationships
- Get to know the product
- Schedule extra check-ins with the CEO
Making an Impact
There are plenty of benefits to serving on a board, from gaining professional prestige to networking to learning and growing in your own career. The best part, though, is the impact you’ll have as you influence the course of an organization’s future.
So, how do you maximize your positive impact? While every board is different, there are a few (nearly) universal things you can do to be a great board member.
Spend dedicated time studying the materials before the meeting, so you can participate in meaningful discussion rather than summary or catch-up.
Practice good meeting hygiene.
A great board member attends all meetings. They prepare ahead of time, show up on time, and don’t leave early. They are fully present at all times and participate in meaningful discussion.
Have a point of view and speak your mind.
The best board members are fearless in speaking their mind. They’ll bring up tough and uncomfortable topics, rather than waiting to tell you “what they really think” outside of the meeting. It can be challenging to be a contrarian or to raise thorny issues, but that’s one of the most important things a board member can do. Your role is to represent the interests of the company, meaning you speak for a lot of people who are absent from the board meetings.
Hold the CEO accountable.
It’s easy for first time directors to hesitate to do that part of the job, but really great board members consistently ask challenging or important questions.
Connect with the CEO outside the boardroom.
Board members are more effective when they have ongoing relationships with CEOs outside of meetings. Whether through semi-regular email exchanges, periodic calls, or the occasional coffee, make an effort to get to know your CEO—just as you’d want your “manager” to do with you.
Build independent relationships.
The board is a team like any other. A great board member takes the initiative in facilitating relationships that build trust, candor, and transparency.
Approach situations strategically.
A great board member understands their business’s customers, competition, economics, and core values. They invest time in learning about the drivers of the company, their strengths and weaknesses, and the industry dynamics. They reach into their networks and provide relevant resources. They think outside the box, referencing their own experience, pattern matching, and using their knowledge to push the company forward.
Know who you serve.
Board members serve the shareholders, not the CEO or the other directors, but ideas around who directors serve are evolving. Now, that category can include the environment, the community, customers, employees, vendors, channel partners, and others in the ecosystem. All of these constituencies can impact shareholder value, but they’re not always in alignment, so the role of the board member is challenging. The best way to think about it is that you serve the business, not any one stakeholder.
Be an independent thinker.
Don’t just rely on the CEO or go along with other board members, form your own independent opinions.
Remember, it’s not your job to solve the company’s problems. It’s the management team’s job. It’s your job to hold them accountable and to provide ideas.
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