Events and
publications
June 23, 2010
Business model innovation
8.00 – 9.00 am
University of San Diego
July 23, 2010
Free
webinar: Agile Strategy for New Ventures
An introduction to applying the principles of agile strategy to maximize new
venture success.
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Developing an effective board for venture success
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Board members
Selecting members
With the right board design in place, you can now turn your attention to recruiting and selecting the right members to your board. It is important to take into account both the individual qualifications and the collective skills and team dynamics of your board.
You should seek individual team members who offer the right personal skills and experience for your board. Typically, these might include:
- Broad business experience of ventures at your stage of evolution
- A specific area of skill or knowledge that will be of value to the board
- A deep understanding of the role of a board and individual board members
- The ability to work and collaborate in a team, yet independent minded and able to think and reach conclusions without being unduly influenced by others
- Strong ethical standards and an understanding of legal and regulatory requirements
- A good listener, able to ask questions, alert and inquisitive with sound problem-solving skills and judgment
- An effective meeting participant with strong communication skills.
In addition, you should try to achieve a balance of skills, experience and personalities on your board. Ideally, your board will consist of the right mix of people to provide the full set of skills, knowledge and perspectives your venture needs to realize maximum value and results.
Reviewing board member and team performance
Just as your management team should be reviewed periodically individually and collectively, so too should your board. In our experience, this is rare for venture boards, but it is a powerful process that generates significant benefits.
From time to time the board should take time to review and critique its own performance. Led by the chairman, the board should evaluate its results against goals, and also evaluate its working practices against best practices. Such an exercise can generate rich lessons for your board.
In addition, the board should define processes for performance review of individual members. Typically these reviews are conducted by the chairman or by an independent board observer or advisor. The reviews should be based on the board member’s performance against responsibilities, and should include assessing the extent to which the board member is:
- Devoting adequate time and attention to board matters
- Developing an appropriate level of company-specific knowledge
- Doing an appropriate level of preparation for board meetings
- Participating effectively in board meetings
- Maintaining independence and avoiding potential conflicts of interest.
Such reviews serve to improve the individual performance and contribution of board members. Unlike with management, board member reviews do not carry the potential sanction of dismissal. Board members can typically only be removed in accordance with the organization’s board policies and bylaws.
Board management
With the right board design in place and the right members making up the board, you can focus on the third area of excellence – board management. Typically it is the chairman’s key function to manage the board and make sure it performs effectively. The chairman should lead the board in setting its purpose and direction, and in balancing discussion and consensus building with championing progress of key issues. In doing so, he or she will secure support and advice from the CEO and other board members. Well-managed boards typically have three characteristics:
- A balanced schedule of formal meetings. Most ventures hold formal board meetings regularly, monthly or bimonthly. Each meeting should comprise a regular review of performance to date, a focus on a specific topic, and time for ad hoc discussion. The specific topics should be carefully considered and scheduled. These can include a strategy review, approval of the annual business plan and budget, review of management performance and approval of bonuses, review of market / competitive conditions, review of innovation and research and development activities, and many other topics.
- Continuing informal oversight. In addition to the formal meetings, well-managed boards have effective processes for ongoing informal oversight. Primarily based on continuing chairman – CEO dialogue, this can be supplemented by assigning individual board members to specific areas of ongoing oversight based on their particular skills and experience.
- Continual timely information sharing. Board members should have continuing access to timely, accurate and relevant information. Good CEOs ensure their boards are always kept apprised of all key developments, and make sure there are no surprises at board meetings. With the wide range of online collaboration tools now available, boards today are able to keep informed, discuss issues and reach decisions between formal meetings.
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This article has presented a framework for board effectiveness for innovation-based ventures. By following these key principles, boards can ensure they become a major strategic asset for their companies, and playing a pivotal role in driving venture success and value.
Additional reading and resources
Brancato, Carolyn Kay and Christian A. Plath. “Corporate Governance Best Practices: A Blueprint for the Post-Enron Era”
An informative publication from The Conference Board that outlines corporate governance best practices. Although focused on public companies in the wake of corporate scandals, the key insights presented can be applied to early stage ventures.
Coulson-Thomas, Colin. Creating Excellence in the Boardroom: A Guide to Shaping Directorial Competence and Board Effectiveness
A complete review of board creation and operation processes. This book offers valuable advice with respect to structuring the board, selecting directors, defining chairman responsibilities, and improving board relationships with management. Furthermore, the strategies outlined provide a framework for evaluating board performance.
Nadler, David A. “Building Better Boards” Harvard Business Review, May 2004 (subscription required)
This article focuses on board building by executing a detailed blueprint and assembling a high performance team. Through a process created and endorsed by directors and management, a good board can turn into a seat of challenge and inquiry that adds value without meddling and makes CEOs more effective, but not all-powerful. Nadler presents advice on agreeing on the best board model, objectives, mind-set, roles, people, agenda, information, and culture, which complement the information presented in this article.
Sonnenfeld, Jeffrey A. “What Makes Great Boards Great” Harvard Business, reprinted in Businessweek.com, October 2007
A short article by a well-known Yale management professor distills the core attributes of board effectiveness. To become great, boards and CEOs must create a climate of trust and candor, foster the willingness to openly question assumptions, ensure individual accountability by giving directors specific tasks that create a connection with the company, and incorporate performance feedback at the board and individual level.
About the authors
Michael Lurie is Founder and CEO and Dan Zagursky is a Manager with Blue Mine Group in San Diego, CA. Blue Mine Group is a strategy firm specializing in new product development, venture management, and corporate innovation.