I've been thinking a lot lately about the Billtrust Board of Directors. Not because I'm worried about it. More because people keep asking me about it. A local CEO I had lunch with the other day asked me how we got such a great Board. Edison Ventures asked me to present at their upcoming CEO Summit on the topic of building a great Board of Directors. It keeps coming up.
Step 1 - Build a Great Board
Building a great Board is not something that happens by accident, it doesn't happen overnight, and most importantly it doesn't happen without a great understanding of what you, as the CEO, want out of your board.
I look for Board Members that have certain experiences that I can tap into to help prevent me from making mistakes, that can help me think of things in a different light, that have had business success that are relevant to Billtrust, that are confident but also have a sense of humility. As a technical CEO, I know that I have certain areas that are weaker than others so I'm looking for Board Members that can bring something I don't have.
One of the first things I did when starting Billtrust was form an Advisory Board. Most people think of Advisory Boards as a bunch of executives they can tap into from time to time. For me, I treated the Advisory Board like a normal Board of Directors, without formal voting power. We had quarterly board meetings; I gave them monthly updates, and would call them on average once a month for advice. The three individuals who I invited all brought something different to the table - one was an entrepreneur who sold his company to Microsoft, one was a sales/marketing guru, and one was strong financial background. All areas that I thought would help me.
When we raised some venture capital in 2006, we converted to an official Board of Directors and converted two of the advisory board members and added some additional firepower that brought other relevant experiences. One was a entrepreneur/CEO who sold her company to ADP, another was a CEO who had a wealth of payments experience.
It's important to think hard about the kind of people you want on your Board. Equally important is the types of people to stay away from. I've had both. A loud VC that thinks he knows everything will absolutely kill your board dynamic (I call that the board bully). A financial investor that brings nothing but money to the table won't add a lot of value. A Board Member who has experience in a much later stage of business evolution will be out of place. Building a Board with great names from great companies may look good on your web site, but unless they're actively contributing, I think it's a bad idea.
Board compensation is often a question I get asked. My attitude towards this is to offer board members stock options but no cash component for three reasons. First, early stage companies are usually cash starved, and having additional expenses for board members is not optimal. Second, if potential board members need the small amount of cash I can afford, I've probably picked the wrong person. Third, and most important, it aligns interests. As the company grows, we all prosper. This changes when a company gets larger and responsibilities grow.
Step 2 - Use Your Board as a Weapon
In the early part of my career, I thought of the Board as someone I reported to, gave them quarterly reports, and for the most part did not involve them in the business. This was mostly because I had built a dysfunctional board at my first company that was stocked with VCs and couldn't help with much except for fund raising.
I now use the board very differently. We still have our quarterly meetings but we do very little reporting, we try to spend the majority of our time digging into strategic discussions. What kind of company do we want to be in three to five years? Do we have the right product mix? Should we be doing more or less M&A? If your Board Members can't weigh in intelligently on these kinds of topics, you probably could use some upgrades.
I use the board to get introductions for partnerships, for recruiting new executives, for bouncing new product ideas. All of the Board Members are different and all can contribute in different ways.
One of the best pieces of advice I can give was summed up nicely in a post by Brad Feld on the topic of Being Vulnerable. You need to be able to recognize what you, as the CEO, need help on and have those candid discussions with the board. This will potentially make you more vulnerable to criticism, but will lead ot far better board discussions.
Step 3 - Go back to step 1
In a company that is growing, what you need from the Board changes over time. No different than management team members, board members run out of gas and might no longer have relevant experiences. Two years ago I had a Board Member tell me that he thought it was time for him to swap out. He still wanted to be involved in the business, but just didn't think based on our company size that he could add much more value. That's not going to happen often. Very few people will volunteer to come off the board. So it's the responsibility of the CEO to make those kind sof calls.
I sometimes hear other CEOs complain about their boards, and this is always surprising to me. You don't hear CEOs complain about their management teams, because that's their problem to fix. I think of the Board in the same way. It's my Board and my responsibility to make sure they are engaged, strategic, and adding value.