The Role of the Board in Helping Founders & Builders work the ReinsWed, 07/14/2010 - 13:46 | by Jim Vollett
Here is a recap of the previous three articles in this series:
In the first article of this series, Helping Founder CEO's Turn Over the Reins, I reported that in order to be successful, most early-stage tech companies need two very different types of innovation, and therefore, two very different types of CEO’s - Technical/product innovation, supplied by the founder CEO, and Managerial/sales innovation, supplied by the builder CEO.
This transition is critical to the success of the company. Done well, it will lead on to powerful growth; done poorly it can severely set back the company. This transition requires a shift in identity of the founder, which is often a painful thing, but can be very rewarding.
In the second article of the series, Helping Builder CEO’s Pick Up the Reins, I reported:
• How the founder can hire the right builder,
• How the builder can select the right founder company to work for,
• The challenges for a builder in coming from a larger company to a smaller one.
In the third article of the series, Helping Founders and Builders Work the Reins Together. I reported that creating the relationship between them was critical to success, and I outlined six steps to support that relationship. Hiring right is only the start. There is still a lot of work to ensure the relationship between the founder and the builder turns into empowerment rather than a power struggle.
What is needed - an independent outsider
I also spoke of the need for an outside translator because the challenge of building the relationship between founder and builder is inevitable. It will only be solved by both parties growing—by looking for the truth, wisdom and validity in the other. This can be extremely difficult, and painful.
This relationship building is best supported by an independent outsider, who has a foot in both the cultures, and can translate from one culture to the other.
The Board of Directors has a very big interest in this transition going well, and a key role to play in filling this outsider role. Historically this role has been filled by either the Chair, or another trusted Board member, in an informal way. And often this works.
But just as often, it does not work because the Chair, or trusted Board member, either does not have those skills or does not feel independent enough to play the role. So more and more Boards are turning to a skilled executive coach, trained in these transitions.
Sometimes an introduction between the Founder and Coach is sufficient for the founder to engage. However, when the other ways do not work something more formal is needed.
The purpose of this article is to give Board members, and senior management who attend Board meetings, ways they could act to support this transition between the Founder and the Builder. But first we need to talk about the role of the Board.
The traditional role of a Board - ensuring shareholder/stakeholder value
Traditionally the Board was composed of individual directors representing key shareholder constituents. However, once they became directors, they were required by law to act in the best interest of all of the shareholders. This does not always happen; however, it does on good boards.
The Board’s traditional role was one of governance—audit committee, CEO reviews, etc. that ensured that the management of the company was not abusing the capital invested by the shareholders.
Board membership has become far more complex in the last few years, even for private company boards. It is not enough to just take all shareholders into account. Boards now need to take all stakeholders into account —employees, customers, suppliers, environment, government, etc. The cost of not taking stakeholders into account can be very high (as anyone can attest who has been subject to an unexpected audit or environmental activism).
And Management has become more reliant on the Board being on the look-out for special risks and opportunities of the company. Most Directors sit on several boards, and can bring the knowledge from one to another. As well, most directors are people that have already achieved a certain degree of success that is relevant to the company, so they have developed an intuition that can discern these risks and opportunities early.
A greater role - mentoring Management to world class performance
However, there is even a larger role the Board can play. When we have been invited in to do a Board review, we discover that Management often has a much higher expectation of the Board than they have for themselves. They want the Board to use their knowledge, time and connections to mentor the company to world-class performance.
Management want directors who have been where they are going, who have mastered key aspects of their business already, and can bring that mastery to them. They want directors to have connections which open doors, and links them to resources that they need. This mentor role goes well beyond governance as it is traditionally known.
Management wants the Board to demonstrate the way.
How they can do that - the annual governance review
Most Boards now go through an annual governance review (If the company is public on the TSE, it is required). Now a Board can just go through the motions, and have it mean nothing. Or they can use it as an opportunity to do a 360 degree review of the Board, and each director on the Board, with an independent facilitator.
Done properly, this review will give numerical feedback as well as deeper qualitative feedback on the underlying themes. Then the results are delivered in a Board meeting where the misalignment captured in the key themes can be worked through to alignment. The individual feedback can be delivered in a way that does not produce defensiveness or withdrawal (although this requires skilled guidance from the coach).
You are likely not as aligned as you think
Having had the privilege of conducting 360 processes, I usually discover there is conflict under the surface that never appears in the meetings. This is because people do not know a way to resolve it positively so it seems like a better idea to keep it hidden. However, once we introduce an individual confidential process, it quickly comes to the surface. And once we introduce a powerful group process to solve it, people quickly engage until they find a true alignment.
The value of this process
This process allows the Board a way to reveal deeply held conflict and process it safely. It is the positive exchange of negative information. It may reveal that some directors have outlived their usefulness and it is time for them to move on. It will give individual directors feedback on their performance and how they can improve. It is pretty hard to deny an issue when three or more people give you the same feedback.
And it will demonstrate to the founder that everyone on the Board is willing to look at themselves, and expect the same of him/her. So when the biggest issue on the Board is the founder bringing on a Builder CEO, the founder will already be ready to deal with it.
And as important, the facilitator of the 360 is now a trusted independent outsider that can support the transition through all its stages—coming to accept the need, hiring, and building the relationship between Founder and Builder.
Call to action
If you are a member of a Board, or senior management in a company who attends Board meetings, and you see that there will need to be a Founder—Builder transition at some time, consider these options to see what most serves you.