There might come a moment that entrepreneurs and CEOs realise that they need to set up a board for their enterprise. This could be driven by various reasons, both internal (i.e. they realise that they are stuck with specific challenges that cannot be solved with the existing team or advisors) or external (i.e. prerequisite from external investors).
Whatever the driver is to set up a board, you as a CEO will have the challenge to establish a (well- functioning) board. This document aims to provide some pragmatic steps to assist with this challenge.
- Are you ready for it?
The 1st step will be to ask yourself if you not only see the need and value of a board but also that it is worth the effort. As the set-up and the life cycle of a board will require your effort and time and without that it will not give you much value.
It also requires you as a CEO to have clarity on your expectations from your board, to provide sufficient and timely information (good and bad) to the board, to be open to get feedback, be challenged and to be advised. This is a prerequisite to make a board work, if you are not ready for that yet, you better start working on that immediately.
- What are your goals with the board?
The next step will be to have a clear view on what you want to achieve with your board. Ask yourself what your challenges are that you cannot solve yourself nor with your C-team. These challenges will typically be in one of three following domains:
- Knowledge and experience (eg funding, internationalisation or scaling)
- Perspective and accountability (ie inside out perspective or meeting governance obligations)
- Networking and connections (access to people that are out of reach for you).
Nb: In the situation that the setting up of the board is a requirement from your investors it is still advisable to define your goals, so you can discuss this with your investors and try to influence the composition of the board.
- What board members do you need?
You need to assess what profiles your board members need to have in order to meet your goals, as defined in step 2. Based on these requirements you can define their profiles. In case of investors in your board, it is advisable to also include independent members in your board.
- What type of board?
You have to decide what type of board you need and/or want e.g. an Advisory Board, Pure Investor Board, Supervisory Board or other. This might depend on external factors (investor requirements, legislation, etc) otherwise it will depend on your own goals and specific situation. The type of board could change over time eg to start with an Advisory Board which is changed later into a formal Supervisory Board. Ask legal advice to prevent making the wrong choice here.
- Size of the board?
The most important is to make sure that you have the right knowledge and experience in the board to reach your goals. This will determine the size of your board and will typically be 1-3 persons. The size of your board could further be influenced by your shareholder structure or change over time.
- Meeting rhythm with board members?
It is crucial to have a clear meeting rhythm that is agreed and respected by all. Avoid meetings that are rescheduled or not attended. The rhythm will be determined by your goals and will normally be (bi)-monthly.
- Information sharing with board members?
A good functioning board needs access to timely and adequate information, so make clear agreements on format and timing. Make sure that the preparation of the regular information for board meetings does not cost you excessive time (max 4 hours per meeting). Make sure to also include bad news or your concerns, as those are the domains where you can use advice.
- Payment of your board members?
The payment of your board will depend on the experience of the board members but will generally be around Euro 15-25K per year. It is highly advisable to have a contractual agreement with your board members, including a finite term.
- Where to find your future board members?
Good board members are difficult to find, so you have to play an active role in finding them. Avoid appointing friends or associates (as you want an independent view), so you have to search outside that circle. Use your network to find and approach them. You could consider using a (specialised) recruiter. Make sure that they meet your requirements and that you have a cultural fit.
- How to make your board work?
It takes time to make your board work as they are social systems. The structure and governance is important, but the social element makes them work (or not). Mutual trust and respect is a must. All subjects should be discussable and everyone can get access to information needed. A climate must be developed where assumptions and beliefs are challenged, as to avoid groupthink. Speak out to members who do not take their role seriously. Organise yearly evaluations as to analyse performance, both of the whole board and of the individual members.
Kees is a recent ScaleUpBoard Alumni who has worked in different industries in various roles before starting as an entrepreneur. He has founded various companies mainly in the telecom domain including Globalinternet, started in 2012, which he independently turned into a successful company with offices in three continents, services in 175 countries and a global customer base. In 2020 he sold Globalinternet to APAX Partners in France. He brings his experiences as a founder/CEO of a fast scaling company, building global partner networks, selling to multinationals internationally and preparing for exit to his role as a mentor and board member.
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