This is the first post from our series, "How to Perform Better in the Boardroom" - advice gathered from interviews with seasoned directors of technology startups to help SaaS CEO's run an effective board.
For startup CEO's, there's a heap of good advice out there.
Amongst it, I reckon "don't get fired" is one to keep in mind.
Maybe you don't think that's a risk but I've been talking with experienced company directors that have some cautionary tales worth listening to.
This is a great example:
"The CEO was under a lot of pressure, so when we heard he'd had a heart attack, we were all pretty shocked and concerned. A mutual friend of the CEO and one of the directors headed to the hospital to comfort the poor guy but he wasn't there...
The CEO had faked the heart attack!"
You can picture the next board meeting: The CEO (just back from the dead), red faced with palms sweating, anxiously reciting some well versed excuse like:
"I really did think it was a heart attack! Turns out it was just indigestion. I had spicy tacos last night. My bad."
That guy got fired. From the startup he founded.
Hearing this story, we got thinking and started interviewing investors that sit on the boards of high profile SaaS startups and public companies to get some practical advice on how to build effective relations with their board of directors.
Here are three simple tips every SaaS CEO should follow to win in the boardroom.
1: Avoid White Lies & Diversion
"Trust is the big thing from a CEOs point of view. As soon as a board starts to lack trust in the CEO, its irrecoverable. You start questioning everything."
OK - so, maybe you have some sort of moral code and you're not planning to fake a heart attack. But have you used diversion lately? My two year old does it all the time.
Me: "Did you poo on the carpet?
2 year old: "Hi Daddy, can I have an iceblock?"
Me: "No. You did poos on the carpet"
2 year old: "Do you want an iceblock Daddy?"
In the words of one director, "You're making yourself look like an idiot. As if I'm going to be distracted from the question I was trying to understand."
It turns out that good CEOs have an optimism bias so they're prone to diversion.
Some great advice to avoid your optimism ruining board relations is what I'd call "Put Down The Pompoms":
"Great CEOs have clear separation between their role as CEO where they have to be a cheerleader for the business, and their board roles.
Create the board paper, then take a big breath and look at it as if you're an independent director. This is bloody hard but it puts you in the right frame of mind."
Now, my two year old isn't intentionally lying but probably only because she doesn't yet know how. As a CEO, it's best you avoid your inner two year old when dealing with your board.
"If I ever got lied to, my first reaction would be to fire the person, my second would be to resign. You can't operate without trust. I'm safeguarding other people's money, so if someone's lying to me it's impossible to do my job."
2: Invest in the Relationship
Your board have likely invested in you and you need to reciprocate. There needs to be a particularly close, trusted relationship with open communication lines between the Chair and a CEO.
So how do you get there? Here's some quality advice...
"Manage your directors like you manage your staff. Understand how they like to be looked after."
Consider these questions:
- How do they like to be communicated to? Lunch, email, formal or informal?
- What's motivating them to be here?
- What are their common points of contention. What's their world view and experience?
To get the most out of your board, you need to think beyond the board meeting otherwise you're missing out. Have dinner with your board, keep in touch regularly. You'll head into the board room with a slimmer list of things to talk about and get right into strategy.
3: Make Strategic Decisions With Your Board
Here's a quick story that might sound familiar.
"The CEO had done something that was completely counter to the strategy we'd agreed at the previous meeting and had put a lot of time into it.
They were presenting it in a very positive light. I was sitting their with a confused look on my face. When reading my minutes, it was the complete opposite to what was agreed in the previous meeting.
When I pointed this out it was sort of viewed as a bit of an attack. His answer was "We had the board meeting 6 weeks ago and the world changed so I though this was a better strategy and went with that."
It breaks down how the board is supposed to work. If time is critical, you just ring up the Chairman and explain. A lot of CEOs end up asking for forgiveness rather than permission. That's fine, but can turn into an ego issue really quickly and can do a good job of breaking down board relations."
I'm not saying you're guilty of this but maybe a friend or someone you know. ;-)
I am saying that if you're going to change the plan, you should be upfront about it. It's an essential part of a healthy relationship. Going ahead and making strategic decisions without consulting the board is like throwing ice onto a nice warm fire; things quickly go from cozy to soggy.
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AskNicely helps businesses measure and improve customer happiness. The "How to Perform Better in the Boardroom" series of posts is aimed at helping start-up CEO’s build an effective board which helps shape quality strategy, leading to quality service and happier customers.