Small boards are usually better

I was on a call yesterday with a subset of one of the boards I am on and one of the directors was talking about how difficult it is to add value on boards.

I agree with that. It is definitely difficult. Also definitely possible, but it usually requires a lot of care and forethought.

I should add at this stage that the director in question has been brilliant for us, and that he has an awesome track record of entrepreneurial success behind him.

One of the reasons I favour small boards is exactly because it is hard for NEDs to add value. Despite their best intentions many fail, and it is also common to see people destroying value by chewing up management time precisely because they are trying to help.

Keeping the number of NEDs small and choosing them carefully is my advice. One or two is a good number for non-investor NEDs, including the chairman.

As I have been writing this post I have been wondering why I haven’t named the director in question. I think the reason is that this is in some way a no-go area, and I was unsure how people in other companies he is involved with would react to him having this opinion – which makes me want to pursue this topic further.

So I will return with another post on adding value from the board. In the mean time I’d love to hear any thoughts or experiences you have had which would help frame my thoughts. This topic overlaps with a couple of previous posts on VC value add, but it is not the same.

  • Pingback: Just fucking do it - Paul Walsh, the Irish Opportunist()

  • I agree Nic. I’ve written my own post but for the sake of keeping the conversation here, I’ve provided an excerpt. http://paulfwalsh.com/just-fucking-do-it/

    I totally agree with Nic. ‘Decision by Committee’ for everything just doesn’t work. You either get very little done or you’re too late to deliver. That’s why we created working groups in BIMA. By creating working groups, appointing a Chair of each one and importantly, giving them the responsibility to make decisions without reverting back to the 12 Executives, it means the ship is much more productive. There are lots of other benefits but I don’t want to go too far off topic.

    Instead of having 12 Executives making decisions about everything, it now has 9 working group Chairs with teams of no more than 5, making the decisions. Moreover, each team is focused primarily on areas in which they truly specialise. Not only does this mean they’re likely to deliver based on their expertise and experience, they’re less likely to cause delays where they’ve got less experience than others.

  • I agree Nic. I’ve written my own post but for the sake of keeping the conversation here, I’ve provided an excerpt. http://paulfwalsh.com/just-fucking-do-it/

    I totally agree with Nic. ‘Decision by Committee’ for everything just doesn’t work. You either get very little done or you’re too late to deliver. That’s why we created working groups in BIMA. By creating working groups, appointing a Chair of each one and importantly, giving them the responsibility to make decisions without reverting back to the 12 Executives, it means the ship is much more productive. There are lots of other benefits but I don’t want to go too far off topic.

    Instead of having 12 Executives making decisions about everything, it now has 9 working group Chairs with teams of no more than 5, making the decisions. Moreover, each team is focused primarily on areas in which they truly specialise. Not only does this mean they’re likely to deliver based on their expertise and experience, they’re less likely to cause delays where they’ve got less experience than others.

  • Sometimes it’s the difficulty in adding value but more often it’s the difficulty in being perceived to add value.

    A good non-exec can add massive value with just a well placed and appropriate question. Equally, a poor non-exec can destroy value with endless inane questions that waste everyone’s time and show a weak grasp of the business.

    In a large board it can often become a contest between execs and non-execs to make sure they’re heard and are seen to be participating. It takes a strong and confident individual to remain silent when they have nothing to say when there is an underlying fear of not being seen to add value. A small board makes the participation much easier and a good chair will ensure everyone’s view is taken before the meeting ends.

    It’s easy to forget that a NED can also add value by being there when there is a real challenge to the business. They may not take such an active part when things are running smoothly but they can be invaluable when things go wrong (as they inevitably will at some point). A calm head in the storm can make all the difference.

  • Sometimes it’s the difficulty in adding value but more often it’s the difficulty in being perceived to add value.

    A good non-exec can add massive value with just a well placed and appropriate question. Equally, a poor non-exec can destroy value with endless inane questions that waste everyone’s time and show a weak grasp of the business.

    In a large board it can often become a contest between execs and non-execs to make sure they’re heard and are seen to be participating. It takes a strong and confident individual to remain silent when they have nothing to say when there is an underlying fear of not being seen to add value. A small board makes the participation much easier and a good chair will ensure everyone’s view is taken before the meeting ends.

    It’s easy to forget that a NED can also add value by being there when there is a real challenge to the business. They may not take such an active part when things are running smoothly but they can be invaluable when things go wrong (as they inevitably will at some point). A calm head in the storm can make all the difference.

  • I guess you can only add limited value to anything, when you only spend half a day per month on it and then the interaction happens in a larger group.

    For example, say you have a friend. You meet her in a group of seven once per month. How much are you really ‘in’ her life? Do you really know what is going on? How do you expect to know and understand of what is going on in her life in that group setting? Even if you were the ‘best’ friend in the world, you would find it pretty hard to ‘add value’, I guess.

    If you want to add value, you need to spend time with people. One-on-one. Otherwise, you are really just an observer, who can occasionally comment. That is fine, but that is probably not what people would understand as having a close friend.

    Why should boards be different?

  • I guess you can only add limited value to anything, when you only spend half a day per month on it and then the interaction happens in a larger group.

    For example, say you have a friend. You meet her in a group of seven once per month. How much are you really ‘in’ her life? Do you really know what is going on? How do you expect to know and understand of what is going on in her life in that group setting? Even if you were the ‘best’ friend in the world, you would find it pretty hard to ‘add value’, I guess.

    If you want to add value, you need to spend time with people. One-on-one. Otherwise, you are really just an observer, who can occasionally comment. That is fine, but that is probably not what people would understand as having a close friend.

    Why should boards be different?

  • nic

    Jens – we spend more than half a day per month with each portfolio company.

    As a very rough guide to my time, I am on four boards and reckon I spend around my time on portfolio management depending on how things are going. That equates to 2.5 days per month each.

    And in addition to that there is a very intense getting to know you period whilst the deal gets done in the first place.

    cheers,
    Nic

  • nic

    Jens – we spend more than half a day per month with each portfolio company.

    As a very rough guide to my time, I am on four boards and reckon I spend around my time on portfolio management depending on how things are going. That equates to 2.5 days per month each.

    And in addition to that there is a very intense getting to know you period whilst the deal gets done in the first place.

    cheers,
    Nic

  • Pingback: Adding value from the board « The Equity Kicker()

  • boarding

    This is another great thing that I have learnt from your blog, keep posts like this one coming lot more!

  • This is another great thing that I have learnt from your blog, keep posts like this one coming lot more!

  • Pingback: How To AMP Your Engineers: Ideas For Energizing Your Best - Legit Way To Make Money()

  • Pingback: How To AMP Your Engineers: Ideas For Energizing Your Best | Marketing consulting for SME's!()