Following last week’s post about the OpenAI board debacle, here are some additional ideas on how to build and use your board of directors. 

Its fundamentally important to build the right relationship between you as founder or CEO and the board. While technically, a board holds the formal power, in that they can hire and fire the CEO, boards generally don’t want to deal with that kind of mess. If there is a need for a C-level executive change it should be orderly and well planned. 

While the CEO job can seem like the pinnacle of a career, it’s a job that comes with a lot of stress and requires focus on a broad range of areas including finance, operations, sales and HR which are often new to founders. Understandably, not everyone loves managing people or working on the quarterly budget, but these and other tasks need to be done and done well. This is where your board can help.

Build On Trust 

The best way to think of your board is in the context of a long-term relationship. It’s not quite a marriage, but it’s close. The board is there to help ensure a good company gets built. And you in turn must build that company. There will be many ups and downs along the way, but the board will be there the whole time. As such, you should pick your board wisely and make sure you get along.

The board relationship must be based on trust and honesty. Since you want to get input and guidance from the board, the only way to do this is to be 100% candid in all situations. There can be no secrets from the board and ideally, few surprises. If you find yourself in choppy waters and wondering if you should share bad news with the board, the answer is almost always yes. 

The board is there to help you, to be a sounding board and give input. However, it is up to the CEO to make the decisions. As CEO you are responsible for all decisions, even if they came from a board suggestion. Another way to think about this is, the board will have input, but you will live with decisions more than they will. Keep this in mind if you ever feel pressure from the board around hiring or other issues.

Always Have A Plan

When you do face a problem you want to share with the board, always bring forward a default plan for how you will proceed. I have found it quite helpful in these situations to write things down to diagnose the situation, identify possible next steps, alternatives, pros and cons etc. Writing things out is a great way to develop a deep understanding of a problem and a good test of your logic and conviction. 

Your default plan may be naive or incomplete, but there is at least something to build on. Whereas if you show up with nothing, the board may interpret this as a sign that you’re not taking action because you’re in over your head. 

The Role of Independent Board Members

Typically, your series A and B investors will have board seats as will the founders. As your company grows, you will want to consider adding independent board members. They are independent in that they are not employees nor are they major investors, though they still have a fiduciary responsibility to shareholders. 

Ideally the independent board members provide complimentary skills to what you get from your investors. I have found that VCs are extremely helpful in developing the overall business strategy and have uniquely valuable skills when it comes to strategic partnerships and fundraising. VCs also have good networks for recruiting executive talent. 

However, most VCs are generalists and do not have in-depth operating experience when it comes to go-to-market functions, enterprise selling, product strategy or engineering. As you build out your board, consider what challenges you will face in the coming years so that you can add domain expertise to help you scale the company to its full potential. Ideally your independent board members have gone through similar growth in a related space. They should be several years ahead of you in terms of the stage of company they have run, but not so far ahead that they can’t scale down to your current situation. You don’t need a public company board when you’re still in the single-digit millions of ARR.

It can be very helpful to speak to an experienced executive when you are wrestling with practical issues whether it’s around pipeline management, pricing, positioning, building a customer success function, etc. You can reduce your execution risk considerably by tapping into people who’ve done it before and learned hard lessons along the way. 

Who You Gonna Call?

When something goes really wrong, as happens time to time in startups, that’s when you independent board members can add tremendous value. A lot of the calls I take from founders are around people management issues, what to look for in executive hires, dealing with performance issues, building bridges between teams that are not collaborating, and in recent years, planning for layoffs.

And every now and then a major crisis arises, such as the departure of a key employee, a lawsuit, an acquisition of a core technology or competitor, a world-wide pandemic, a change in funding climate, etc. In such cases, it can be helpful to be able to reach out to someone who’s gone through similar difficulties and get a perspective and ideas. For sensitive topics, founders often prefer speaking to someone who is not an investor.

You’re not looking for a hard and fast “playbook” as much as a best practices and a sounding board to help you to consider the right issues and build the right processes for your company given it’s stage and focus. Don’t create a big company bureaucracy in an early stage company where speed and agility are among your strongest competitive advantages. 

As valuable as it can be to tap into the expertise of a diverse board of directors, be careful that you don’t end up using it as a crutch, seeking a third, fourth or fifth opinion in order to delay difficult decisions.

Sometimes you just need to make the call. 

For another perspective, Mike Olson (Founding CEO of CloudEra) presented an excellent talk at Monktoberfest this year in which he discusses the purpose and strategy behind building a board of directors. For those not familiar with it, Monktoberfest is the best, most creative conference in the tech industry.