4 questions about how to structure a board

One of my favorite aspects to my former venture role involved the board work. It’s an opportunity, when things go well and the dynamics are healthy, to truly provide helpful advice to companies as they grow. Boards can also be the opposite of that. Founders can dread these quarterly meetings, where they have to convene a group of people with competing ideas about how they should run their business.

So how do you as a founder structure your board well? I’m stuck in traffic this Wednesday afternoon (don’t worry, neither of us is driving), so I probed my colleague Tom Cassels, who’s been involved with boards for the past few decades. He’s currently on 3 health care boards as an independent.

This is the second installment of “4 questions with.” The first looked at the regulatory concerns around GLP-1s. If you’d like to be on the receiving end of one of these, don’t hesitate to reach out. Just don’t expect any softball questions!

SO: What is the most common thing that founders get wrong when it comes to their board?

TC: “Thinking the relationship starts and ends on the board agenda. Founders view the board as something they’re accountable to in exchange for money; instead of viewing them as partners in vetting and executing strategy. Every board meeting should not just be a financial update. That is not the highest and best use of anyone’s time.

Another thing I’ve seen happen a lot: Founders wait far too long to get an independent. And then they don’t make sure the independent is actually independent. Sometimes they get a list of people from their investors, and make a consensus pick who they think has the best resume. Expand the aperture beyond your direct network and that of your investors.”

SO: Does experience sitting on boards matter a lot when picking an independent?

TC: “Yes, absolutely. You’re picking a fiduciary, not just a friend. It’s not about who you personally like, it’s about their ability to do the job. Don’t listen to investors on this, or the people who have advised thus far. This person needs to bring a truly unique and complementary skill set to the board and be positioned for the next stage of growth. By the way, the right time to hire an independent is when you realize there is a hole in your execution plan. That can be as early as the Series Seed. You might get pushback from investor board-members, but it’s worth fighting for the board you need. Not the board you have. Founders can sometimes forget that independents can also be swapped out if the fit isn’t right.”

SO: How do you manage the dynamics of your changing board composition following a fundraise?

TC: “As long as the lead investor is not an existing investor, I’d recommend going somewhere for a weekend to get to know each other as a group. That new person will change the dynamics, for good or for bad. Or not at all. Founders should try to have an early read on that. It changes how founders should be thinking about managing the non-reporting part of the agenda. There should be fewer, more directed questions when there are more, newer voices around the table. Sometimes, a larger intervention is required. At one company I was consulting on governance practices, the company got a new lead investor at the Series B. And there was a lot of consternation between the seed investor and the B lead. This relationship hijacked board meetings and only after bringing in several independents did the meetings get constructive again.”

SO: How should you compensate independent board members if you’re a founder?

TC:” Independent board members can play a few roles. If that person is working solely with the founder, then it’s equity plus some T&E. But those independent board members might also be brought into team events and speak to trends in the market. In those cases, a set fee per day might be considered and in my experience it’s what works best.”

That’s all, folks! If you have board-related questions, feel free to reach out to Tom. He is a sucker for good conversation accompanied with a glass of French burgundy.