Customer development guru Steve Blank recently wrote a couple of good posts (part 1 here and part 2 here) on what is good and bad about board meetings in the twenty first century and how we might change them. As he says, board meetings haven’t changed much…
As customer and agile development reinvent the Startup, it’s time to ask why startup board governance has not kept up with the pace of innovation. Board meetings that guide startups haven’t changed since the early 1900’s.
Reinventing the board meeting may offer venture-backed startups a more efficient, productive way to direct and measure their search for a profitable business model.
I will take summarise Steve’s key points and then add my thoughts at the end.
Steve’s First point – board meetings are necessary
From the investors point of view board meetings are good because being a director of portfolio companies is part of their fiduciary duty to their investors, they believe that their presence on the board will allow them to guide the company and increase it’s value.
From a founders point of view:
Founders who have a great board do recognize the uncanny pattern recognition skills that good VC’s bring … and … An experienced board brings an extensive network of customers, partners, help in recruiting, follow-on financing, etc.
Plus the board meeting is an obligation that came with the cheque.
Steve’s second point – too many board meetings suck
- They focus on big company metrics (balance sheets, waterfall charts etc.) rather than the key metrics that matter to startups (customer validation, lifetime value etc.).
- Which leads to the wrong discussions – not focused enough on the search for a business model
- Not real time enough – i.e. too much changes in the 4-6 weeks between board meetings
- Wastes management time – the drill of preparing for the board drags on business performance
Steve characterise’s his solution as “Boardroom is bits”, by which he means it exists on the internet in blog format. Note that for established companies this would augment rather than replace traditional board meetings.
We propose that early stage startups communicate in a way that didn’t exist in the 20th century – online – collaboratively through blogs.
We suggest that the founders/CEO invest 1 hour a week providing advisors and investors with “Continuous Information Access” by blogging and discussing their progress online in their startup’s search for a business model. They would:
- Dialogue and feedback on key strategic issues happens continuously
- It becomes more structured
- The updates are asynchronous which is more efficient for all parties than scheduled calls and emails
- The efficiencies allow investors to work with more startups and geography is less of a restriction
I think a lot of the problems with traditional board meetings stem from the aura that surrounds them and a lack of willingness to challenge tradition. The best founders and directors are conscious of this and work hard to choose the right metrics and keep the discussion focused on value add areas. When I was at Reuters Venture Capital I was taught that the metrics the board considers should be the metrics that the business uses to run itself day by day and week by week – that’s great advice and I still use it today.
So good management of board meetings can get over three of Steve’s four issues with board meetings – namely wrong metrics, wrong discussion and wasting founders time. This is easily said, but can often be difficult to action in practice at companies that have established traditions which are suited to the foibles of individual directors. The earlier the board chooses to focus on becoming productive the greater the chance it will succeed.
This leaves the 4-6 week periodicity of board meetings as the major issue. At the moment good boards work around this with emails, one to one meetings and phone calls, and additional gatherings of the whole board if circumstances demand. As Steve says this is highly inefficient and often doesn’t happen enough, particularly when people are busy.
Using a blog to discuss major issues would cut out the need for a lot of this extra work and could really help. Keeping an open dialogue via a weekly post on the top 2-3 issues that the board is grappling with would give everyone a good sense of the progress being made, putting it in writing would clarify thinking, and the added structure would aid memory and decision making. Being able to quickly get a reminder of the discussion to date would speed up many of the discussions that I get involved with. Most investors and non-execs are on multiple boards and involved with multiple other companies beyond that, and remembering all the detail on all of them is challenging.
However – this will only work if there is genuine commitment from all parties to the process. Non execs need to read and respond to blog posts as appropriate with clear and helpful comments, and likewise the CEO needs to spend the time to make the weekly updates useful.
This process isn’t for everybody, not yet at least, but for those who can write and who are comfortable with social media using a blog like this could really increase the pace of execution. And then when the formal board meetings do come around everyone will be more up to speed and the discussions will naturally be more productive.
It’s also worth mentioning that Steve is (unsurprisingly) very focused on customer development. That’s fine, but boards have other matters to consider (HR issues, financings etc) and measuring and discussing those shouldn’t be forgotten. The good news is that the principles discussed here apply to those issues as well.