Startup general interestVenture Capital

How to run a board meeting

By November 22, 2010 One Comment

At the annual get together for all the DFJ Network partners last week we spent Tuesday morning sharing best practices between funds.  The guys from DFJ Frontier (offices in Los Angeles and done some interesting deals recently, including one of my favourite new services Unsubscribe) have written a handbook for the CEOs in their portfolio which has lots of practical tips for running small companies and explains what it means to be venture backed and how DFJ Frontier likes to interact with their investee companies.

I particularly liked the following section, entitled how to run a board meeting:

How to run a board meeting:

While there is often a relationship between time spent preparing and the success of the board meeting, we want you to focus on your business. Preparation for Board meetings should not occupy a significant portion of your monthly schedule because the Board documents should represent the same information that you are working with every day to run your company. Preparation will help you begin and end board meetings on time, so you can get back to running your company.

Don’t surprise your Board, especially with bad news. Talk to Directors at least a few days ahead of the meeting, making sure there are no surprises for them or for you. If there is something new for which you need the Board’s support, let us know as soon as you can. You can think of yourself as the driver of a performance racecar with your Board as the pit crew. We’re here to help you, but we only get an opportunity to see you in person every few laps. It is important to avoid "selective disclosure" (ie, don’t hide bad news), so that we are prepared to help you when we get together for the Board meeting. Regardless of whether you are delivering bad news, a new idea or some other change in company direction, having a conversation in advance can eliminate emotional responses and give all parties a few days to generate potential solutions. Never hide bad news. We are used to hearing good news and bad news, and we know how to take this information in stride.

Help your senior management team understand the appropriate level of detail for Board reports. Board members don’t need to hear every detail of last month’s marketing activity, for example. Directors need enough data to advise on big decisions and enough information to grasp the health of the business. There is an art to providing the correct level of detail at Board meetings, and your investors can help you fine tune your presentation, especially if you share it in advance.

You might be surprised at how frequently bad news is hidden.  In many ways it is a very human characteristic to want to please the board and to hope that problems can be ironed out without the board ever needing to know, but it is emphatically the wrong way to go with startups.  I’m not advocating that every little issue be discussed at the board – the CEO needs to make a judgement call as to materiality, but keeping the trust of board members with an appropriate level of disclosure gives you a better chance of getting the help a company needs to pull through and avoids board meetings getting difficult as non-execs ask difficult probing questions because they aren’t sure they are getting the full picture.  The other thing to bear in mind is that selective disclosure can lead to a slippery slope of keeping bigger and bigger news hidden from the board.  I’ve seen this play out a couple of times now, and it isn’t pretty.