For entrepreneurial ventures that are pre-revenue to $5M, a board of directors is a critical team that can make a meaningful impact on the company’s prospects during an impressionable time in the company’s life. Board meetings evolve as the company matures and grows, but for young companies forming their first boards, the task can be daunting.
To give you insight and help you manage board meetings, Douglas Roth, director of investments at CI, talked with Brian Murphy, chairman of the board of Umbie DentalCare, to get his thoughts on effective startup board meetings.
Setting a Foundation
Roth: How often should a board of an early stage company meet, and does that change depending on how early a company is?
Murphy: At an early stage startup, the key to determining frequency is balancing the time commitment necessary to prepare and attend the meetings with the need for regular check-ins and guidance.
It’s difficult for a very early startup to devote time to board meetings and in the case of Umbie, I know they are all very hands on. I wouldn’t want to put pressure on them to have to spend days preparing board decks and things like that. But, they need the check-ins and they need the guidance and the board has investors that have a right to check in as well, so, I think six to eight meetings a year is right.
Roth: What about timing? For a pre-revenue company, there may not be a need to have a meeting past the end of the quarter so that accountants have time to put together the results from the quarter and be able to report on them.
But, clearly, once you’re generating revenue, I imagine it would make sense to time your board meetings around the ability to report on the previous quarter.
So, for a pre-revenue or very early stage company, is there a better time than others to hold a meeting?
Murphy: Yeah, even at our stage, the key topic for a board meeting will be some sort of financial number. With Umbie, it’s pipeline and deals closed and we’re looking at things like that on a monthly basis. I think it’s good to space the meetings out so that you can get the latest data. Generally speaking, if you’re looking at financials and a company takes a week to close the books, you might want to schedule the board meeting no sooner than the second week of the month so you can get that latest data.
Also, like you said, you might want to align some of the meetings with quarter-end results if that’s important to the company and the board.
Roth: You mentioned finding the balance between providing frequent enough touch points to report and advise and not overwhelming the CEO and the team with preparations. So, when the team does have to prepare for a board meeting, what kind of information should they gather?
Murphy: The CEO should prepare an agenda that includes a section for regular updates and also one for strategic discussion. The CEO should have a template that he or she follows so there’s no need to create a new deck each time. Regular topics or regular categories that you can touch on each time can be things like pipeline, sales, key hires, roadmap, etc. It’s important to follow that template for the update portion so that there isn’t a ton of prep.
The CEO should also think about the strategic topics they’d like to cover at the meeting. This is their time with the board to get that advice and feedback that will help move the company forward. It should be the key focus.
During the Meeting
Roth: In general, how much time should be allocated to the various agenda items that you just discussed?
Murphy: The agenda’s going to differ meeting to meeting, so I don’t want to say that there’s just one kind of board meeting. Certainly, if you’re on a calendar year and you’re preparing a budget or an annual plan, your board meetings toward the end of the year are going to be about presenting your next year’s plan and your budget, so that can get pretty tactical in terms of looking at numbers, plans and forecasts. Otherwise, the two major parts are updates and strategic topics. There may be some approval items for the board like key hires, options etc., but, generally speaking, I think people agree that you should keep the updates to a minimum. That’s the reason you should send that portion out in advance – so the board members can read it and as long as they don’t have any questions, you don’t spend a lot of time on that part.
Roth: So the majority of the time is spent talking about strategic issues?
Murphy: Yeah, ideally. It’s going to differ depending on who you bring into the board meeting. The more people you bring in, the more time it’s going to take because you have to go through more presentations.
For example, at Moo Print, most of the meetings included the entire executive team. So, you had a marketing presentation, a tech presentation, a product presentation – and they weren’t all just updates. A lot of times it was proposals and directional things, so it’s hard to say. But in general, you want to spend more than half your time talking about strategy instead of reviewing results.
Roth: Who should come to board meetings? You have the board members and whatever that makeup is – the CEO, upper management, other investors and independents etc., but beyond the actual directors who sit on the board, is there anyone else that shoud show up either consistently or periodically?
Murphy: Certainly members of the executive team. As the company matures, they benefit from direct interaction with the board and direct advice from the board. It’s also good for the board to get a feel for how the executive team is performing. I think that can be very helpful.
Sometimes, though, you’ll want to have closed board meetings where it’s just the CEO and the board, especially if you’re taking up topics that are sensitive or strategic at a level that doesn’t involve the executive team.
Other times, you might want to bring in people who aren’t even on the executive team for something like a special topic presentation. For example, you might want your director of product to come in prior to a product launch for a demo.
You could even have presentations from the outside. For example, you could have a consultant come in if they’re doing a big engagement on brand so they can present their findings to the board.
It all depends. It depends on what kind of executive team you have, what kind of management team you have and what stage the company’s at. But early, early on, I think it’s typically going to be just the CEO or the founders and the board.
Roth: I like the point about outside guests – whether it’s to educate or help facilitate a discussion, or many times there’s a banker helping to raise money or to explore sales and even reporting on those efforts.
Murphy: Sure – or the accounting firm will come in to report audit findings.
Roth: Interesting point with the audits – that raises the issue of subcommittees of the board like an audit committee or a compensation committee. Is there a time where it’s too early to get down into that granularity? Or should every company have those kinds of subcommittees?
Murphy: Of the boards I’ve been on, including Moo that had 200+ employees, we never saw a need for committees. I can’t speak for every company but it just seems like a bit of overhead for a small organization.
Roth: Earlier you alluded to CEO and board member-only executive sessions. Who sits in on those sessions and what are the types of topics that are discussed?
Murphy: Well, you won’t need to have an executive session every meeting, but I do think that you should have them periodically. I think the idea of it is that the board, minus managers, the CEO or any executives, goes into a closed session and talks about how the CEO and the management team are doing. I think it should be viewed as something constructive and just good hygiene for the board to confer on these things. It should be an exercise that builds trust between the board and the management team and I think what comes out of it should be specific and constructive feedback.
And then the role of the chairman is to speak with the CEO as soon as possible after the meeting and distill that information back. Unless there’s a crisis or you’ve lost faith in the CEO, it should never be used as something to make the management team feel uncomfortable.
Roth: So, clearly it’s an opportunity for the board to talk about the performance of the CEO. But, typically an early-stage board will have a number of investors. Does the executive session, in your mind, double as an investor discussion as well?
Murphy: I think so. Early on, your board is typically appointed by your investors. Later on you start to bring in non-executive members who are also not investors. But early on, the executive session conversation is about how the investors feel the CEO is doing and whether they’re concerned or want to give feedback. The whole purpose is for the chairman to distill that valuable information back to the CEO in a way that you couldn’t really do in a meeting with the entire board.
Roth: Right, and I think having the chairman meet one-on-one with the CEO afterwards gives the chairman the ability to have that discussion in a non-awkward way. It’s not “I feel you’re not performing,” it’s “in executive session there was a concern…” It takes it off the shoulder of the chairman and it’s really just the chairman reporting what was discussed and takes that awkwardness away a bit.
Murphy: I agree. The chairman and the CEO should have the best board-to-management relationship and that’s one of the things that supports that.
Roth: That being the case, does it make sense to have a chairman who’s not an investor?
Murphy: Yeah, I’ve seen it a couple of ways. I’ve seen a chairman who’s not an investor and I’ve also seen a chairman who’s an angel investor, so, someone who hasn’t come in at the next round. The board members were from the series A, but the chairman was an angel investor – someone who had been with the CEO and had a relationship with the CEO from day one.
I think it could be tricky to choose a chairman from a board made up of several VC partners. One way or another, the chairman needs to be distinguished from the other board members.
Roth: Okay, so, if you’re having six to eight meetings in a year, how long should each one last? Does that change at different times of the year and at different stages of the company’s development?
Murphy: The duration of the board meeting is definitely going to vary. It’s going to vary depending on the time of year and the type of topics that you’re taking up.
Board meetings around annual planning where you’re trying to go through your plan and have a lot of people presenting are going to take more time.
I personally couldn’t see a startup board meeting taking more than three hours, though. I do understand that when you’re running the board of a public company and you’re flying people in from around the country, you might as well put the time in. But in a startup, I haven’t seen much of a need for that.
I have seen situations where you’re having an all-day, strategic offsite meeting and you invite the board member to participate, but I can’t see a board meeting lasting that long. A strategic offsite is different. It’s a whole different atmosphere. It’s meant to be creative, stimulating and fun.
Roth: I agree. I can see that when there’s a crisis or even a really positive point in the company and you need to really think things through. Or, if there’s some Outward Bound-type of team building that the board should participate in. But if you’re having 4-6 meetings a year, I don’t know how a meeting longer than three hours could be valuable.
Murphy: I don’t know either. And that gets to another point. The CEO should feel free to reach out to the board in between board meetings to discuss things. If there’s more to talk about, it doesn’t have to happen only at the board meeting. The only things that really need to be included in the board meetings are the governance-type things.
Roth: What about the formalities of a board meeting? Do you need to have someone taking minutes? Do you need to have company counsel sit in?
Murphy: Yeah, there’s a backdrop of formalities of course. A board meeting is a necessary and legally required element of governance so there has to be some formalities like minutes and votes on certain things, and it’s the role of the chairman to keep things legal and structured. But that said, at a startup, you want to keep formalities to a minimum and keep the emphasis on ideas and productive dialogue. I don’t think there’s any sense in acting like a public company before you have to.
After the Meeting
Roth: What are some of the follow-up actions that typically occur after a board meeting?
Murphy: As soon as the board meeting ends, it’s really important for the CEO to be sure that he’s captured any takeaways and specific requests of the board for immediate follow-up or for presentation at the next meeting. A lot of times the board will ask for information that you don’t have with you and they’ll say, “Okay, I understand you don’t have this handy, but can you get it to us before the next meeting?” You definitely want to avoid showing up to the next meeting without having taken action on these things.
Roth: Do you typically see interim reporting in-between board meetings – whether it’s financials or product development or pipeline reports?
Murphy: Absolutely, if you’re on a monthly financial reporting schedule, it’s quite common once the management team approves the financials and has reviewed them internally to share them with the board regardless of the board meeting schedule. And you might agree to share other bits of information with the board as well whether it’s sales reporting, pipeline reports etc. I think that’s appropriate.
And then there are also special requests. They may ask for analysis – like if you’re running a TV campaign they might say, “Hey, can you send us the campaign analysis so we can see what the results are?” I think it’s typical for requests like those to be fulfilled between board meetings.
Roth: Earlier you alluded to the CEO reaching out in between board meetings and speaking with the directors either to give them updates or to seek advice on a particular topic. The board meeting is a unique environment in which all the people are together, can hear each other’s perspectives, can push on ideas that they don’t necessarily agree with, offer alternatives, build on ideas they hadn’t thought of that someone else brought up, etc. How do you balance not ruffling any feathers and the benefits of that dynamic with having individual conversations in between board meetings?
Murphy: Well, you don’t want to do something that undermines trust. If you’re going to be reaching out to board members in between meetings, you don’t want to just have to have a close relationship with one board member.
It’s good to have some level of contact and relationship with board members outside of board meetings and certainly there should be no surprises at the board meetings. I think an effective CEO should have a good idea where members of the board stand on issues before the meeting so that no one is surprised.
As with most things, it’s a balancing act. It’s fair game to reach out and say, “Here are some things we’re thinking about and here are some things I’m going to bring up at the board meeting, I wanted to get your input on this.” But it’s not meant to be an exercise of politics that undermines trust.
Did you like the topic? Did we miss anything? Got anything to add? Let us know in the comments section!
About Brian Murphy
Brian is vice president, supply chain and customer experience at Teespring, executive chairman of the board of directors for Umbie Dentalcare and a mentor at Betaspring. Over the past decade, Brian has focused on the digital printing space as a founding manager at both MOO and Ofoto.com (which became Kodak Gallery). With a career best characterized as “bringing order to chaos,” he has helped early-stage companies overcome the special challenges and obstacles associated with rapid growth and constant change. His specialties include international e-commerce operations, product development, manufacturing and finance/analytics.