The Equity Kicker

At the tail end of last month I wrote that small boards are usually better, and promised to return with a post about adding value from the board. This is it.

As with VC value add,
the primary value add that everyone talks about is contacts. An introduction to a potential employee, partner or customer has the potential to transform a business.

I agree with that, but I think often times the input to board discussions can be just as valuable, if not more so.

Andy Warren described it this way in a comment to the small boards post:

A good non-exec can add massive value with just a well placed and appropriate question.
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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  an be invaluable when things go wrong (as they inevitably will at some point). A calm head in the storm can make all the difference.

The value comes from experience of lots of situations and also because the director has the benefit of distance from the day to day operations of company.

Despite being up their with networks as a source of value it is less talked about - which is a shame. I think people talk about it less because it is more difficult to quantify and because of fears that acknowledging the benefit of wisdom and experience could be seen as a negative comment on the executive management team.

The best boards operate as a team with different members providing different sets of skills, experience and contacts. An open discussion on this basis is always better than no conversation at all.

This subject is particularly important as bad directors can destroy value by wasting the time of the board and management and by clogging up the debate with the wrong issues. As Andy also said in his comment, particularly beware of the NED who talks just because he feels the need to be seen to add value.

To close I am going to quote 3i Director Patrick Dunne on the subject of what makes a good director. When I read his books on the subject one thing stood out in particular - the importance of good judgement. It is good judgement that underpins everything I have talked about in this post.

Posted on July 7th, 2008 under Entrepreneurs, Venture Capital. RSS 2.0 feed. Leave a response, or trackback.