The board of directors for a startup is often crucial for its performance and sustainability. Still, the makeup of the boards can be very varied and display a broad variety, ranging from boards filled with stellar executives and industry leaders and veterans that are bursting to the brim with pedigree, to ones filled by a close knit circle of friends and family. Regardless of their makeup, they all have shown a wide range of performance, ranging from passive, to profitable and sustainable, and some to even being scandalous and criminal (think 2000’s Enron). While some poorly functioning boards have brought good results, it’s a much safer bet that more often than not it’s the high functioning boards that can consistently bring in success and growth for their startups.
Boards are comprised of human beings, and just like human beings, they follow the same dynamics that influence group behavior. A strong, capable leader is much preferred for leading the board and getting things done. It falls on the CEO to create a board that can offer independent views and insights while nurturing a constructive atmosphere whereby different board members’ views and opinions are heard depending on their area of expertise and what the issue is. Sometimes a new startup will have leaders filling multiple roles, such as conflating the roles of both chairman and chief executive officer. To prevent overburdening the leader with too many responsibilities and hinder a startup’s progress, it is prudent to have an independent chairperson on the board, as an independent chair with years of informed experience can provide much needed guidance and mentorship to the board, and lessen the leader’s burden.
At larger organizations and firms, board seats may be a form of patronage, with many members sitting on different boards while simultaneously running their own businesses or companies. And of course, they receive quite handsome compensation just for having a board seat. What this means is that these board members may not necessarily have the startup or company’s best interests at heart; with multiple board seats and their own company to worry about, it is doubtful whether they can contribute and engage with the startup when needed to. Also, some may view the board seat more as a form of prestige, rather than as a position of responsibility and important decision-making. It is crucial to make the board as a team of active members that have the startup’s best interests at heart, and are willing to engage and contribute to its growth and success. An active board that works together can be a great blessing for a newly established startup and vastly improve its chances of succeeding in a tough environment. By framing your board as a team instead of just a collection of individuals, you promote collaboration and encourage each member to dedicate more time and effort into making the board perform better.
Another key component for creating an effective, high functioning board is diversity in terms of race, gender and experience. It’s no secret that the boards of top performing companies usually have a diverse makeup, and their diversity also encourages innovation and change that translates to higher profitability for the companies. Yet, some boards are still rather homogenous in nature not because of any overt racism or sexism, but because the members think it’s much simpler to do things this way, and that by making things simpler it means making things better. Of course, this is definitely not the case; one reason why diversity produces better results is because all board members bring differing, independent points of view that can challenge the conventional way of doing things and bring much-needed improvements and innovations that ensure the startup thrives in today’s fast-changing environment.
Establishing a great board for your startup takes dedication, effort and time. However, the payoff is very much worth it as a dedicated, high functioning board can bring much success and growth for your startup.