Transcript

In the same way that Noam Wasserman talks about the importance of picking your cofounders and being really thoughtful about building your founding team, it’s equally important to think about picking your board members and building your board. You want it to be a set of people that you really want to engage and work with. And so being deliberate about building that board, managing the expectations of the interactions, learning each other, in the same way you would learn each other as cofounders or as the leadership team that you as the CEO is building, is super important.

So when you think about creating a board, remember that your board is with you for a very long time. Each individual board member is likely going to be part of your board for most or all of the journey of your company for a variety of reasons. First, it’s very hard to fire a board member. Most investor board members have a right to a board seat for the duration of their investment. Most outside directors have two to four-year terms, and while you can ask an outside director to leave after a two to four-year period, it’s often awkward to do so, especially in the situation where there’s no real conflict. So this idea of picking your board members carefully is so very, very important, and one that oftentimes entrepreneurs don’t take nearly as seriously as they should.

Think about the notion of diversity across all dimensions. You want diversity of thought, diversity of experience, diversity of background, diversity of gender, ethnicity. You think about the diversity of your business, and having people that have sales backgrounds, that have product backgrounds, that have engineering backgrounds—trying to get a good mix is powerful.

Next, as a CEO, you always want to have at least one peer on the board, at least one other CEO who you can identify with and can identify with your challenges as a CEO. Many of your investor board members may be able to do this, but having that CEO peer member on the board is really powerful. Lots of entrepreneurs think about the board as a way to collect famous people or resumes or network. The resumes and network on your board should be something that comes as a follow-up to the value and diversity that you’re getting. You need real skills and competence on the board much more than you need a famous name.

I think entrepreneurs don’t take choosing board members seriously enough for a couple of reasons. Again, with investors, they often feel like they have to take the investor board member from the investor that’s investing in them. And they don’t really have a choice or a say in that. In some cases you don’t. But as an entrepreneur, part of deciding to take investment from someone should be understanding what the board dynamics are going to be with that investor. With outside directors, oftentimes many outside directors are either someone who’s a friend of the entrepreneur or a friend of the investor. And as a result, the entrepreneur doesn’t really vet that outside director. In addition, a lot of entrepreneurs don’t spend time thinking about what they want out of their board. So in the same way that you would think about what you want out of a new CFO, or what you want out of a new VP of product, or a new VP of sales, you should think hard about what you need out of a new board member. Defining what you’re looking for with the same level of rigor as defining what you’re looking for for a senior executive hire is actually a really good practice.

The red flags that you should be looking out for when you’re talking to a potential board member about joining your board are often things that will feel uncomfortable to you. Follow your gut in a lot of ways—if the interaction with the person doesn’t feel good, doesn’t feel clear, it feels like there might be some kind of conflict or different personality type or culture miss in terms of how you’re communicating—the same way you would with interviewing anybody for an executive role. If it doesn’t feel right, listen to that. That’s often very useful. It doesn’t necessarily mean that you should reject them out of hand, but it means you should dig into that part of it, especially if they come highly recommended from somewhere. If someone hasn’t been on a board before, and this is their first board, making sure you as the CEO or you as the entrepreneur knows what their expectations are—what their expectations of communication are, engagement, where things go, what they’re going to get out of the experience. When a director sits on a bunch of boards and is asking for cash compensation, especially when you’re an early stage company, or doesn’t really understand your business or hasn’t done any work to understand you and the company, those sorts of things are another important red flag to pay attention to. The person who’s overly busy, and you’re just going to be another board that they’re on, that they’re spending time with, but they’re actually not really committed and engaged is something to be wary of.