Building Trust within a Startup Board, with Steven van Houwelingen

The main role of a board is to help guide the company through major decisions, such as hiring and firing senior management; approving corporate actions (e.g. compensation, stock options, and budget); and offering guidance on strategic decisions that impact the business longer term. 

As Anu Hariharan writes in her excellent article How to Create and Manage a Board “the #1 attribute you need is trust. And the only way you build trust is with time.” On the other hand -as we all know- it takes a lot less time to lose trust. 

Here, I will elaborate on why within a scale-up board trust is even more important than within a mature company. Also I will present some guidelines on how to build this dearly needed trust. 

The Transformative Nature of Scaling-Up

Scaleups are -by definition- in a transformative state. This means that typically the role of the founders will have to transform as well. They need to transform from being pioneers, hackers, researchers into being managers. Obviously not all founders have both the talent and intrinsic motivation to become the managers that are needed as the company matures. Which often leads to a situation where the original all-founder MT is complemented and/or replaced by non-founders. 

Excellent founders have the self-knowledge to know what management skills are needed at subsequent stages of the company. And they will be constantly on the lookout for talent to fill potential gaps in skills and knowledge that may occur as the company grows. However, quite frequently founders suffer from overconfidence or inflated egos. Also note that during the transformative state of a scaleup founders are very hard to bluntly ‘replace’ because the company is simply still too dependent on its founders. In such a situation an ousted CEO could invoke a chain reaction leading to a severe loss of talent. 

The Guidelines to Building Trust

In situations where replacing or complementing senior management is required while the current MT is not yet convinced of this move a board which is highly trusted by the current MT will be instrumental to guide the MT in this process. 

Besides the well known requirements to build trust in any professional relationship, like being honest and honoring your commitments there are some more specific guidelines that you can follow that will help building trust within a scaleup board. 

1. Build a personal relationship with the MT. Dare to be vulnerable and open so that he or she also sees you as a person rather than as the board member whom he or she needs to impress. Try to really get to know the persons that are behind the MT members. Obviously this will require multiple engagements in various settings. 

2. Set clear rules of engagement with respect to the functioning of the board. Be explicit what the role of the board is and also what it is not. For starters, get to an agreement on the content of the board deck, timing, and structure of the board meetings. An excellent example on how to achieve this is described in the article Preparing a Board Deck by Sequoia Capital. 

3. Whenever possible avoid closed sessions between the board members (i.e. without the attendance of the MT). In case a closed session is needed make sure that the board exits the meetings with an aligned feedback message for the CEO/MT. 

Obviously there lies responsibility both with the board and the MT to build the dearly needed trust within the board. However, in my opinion there lies an extra responsibility on the shoulders of the chairman of the board. 

Author Bio

ScaleUpBoard alumni Steven is an Angel Investor and Entrepreneur who is passionate about ICT and tech startups. After having sold his own company in 2012 he decided to devote his time to startups by helping them to become successful companies. By combining his strong technical background with his experience as an entrepreneur as well as adding a lot of common sense, he helps startups with general advice on business strategy such as but not limited to product development and Improving internal structure & processes. As an Angel Investor, Steven helps with seeding capital and finding additional seed investors, writing business plans and slide decks, finding and negotiating next round financing as well as exting.