Mistakes to avoid with a startup board of directors by Martin Zwilling

  • Source link: https://www.forbes.com/sites/martinzwilling/2015/06/30/mistakes-to-avoid-with-a-startup-board-of-directors/#5e42ef1656fd
  • TL;DR: This article does a good job at outlining why having a board is important and warning of some common mistakes
  • How helpful?: 5/5
  • Topic Tags: Board of directors, governance
  • Relevant questions addressed:
  • Why should my company have a BoD?
  • What are some things to look out for when establishing a BoD?
  • Summary bullet points
  • Most entrepreneurs avoid setting up a BoD until a VC initiates that process
    • BoD can be a great way for an early startup to enlist outside expertise
  • Common mistakes with Boards
    • Too many or too few members
      • Three to five members to start
        • Too many are difficult to schedule and manage. Less than three is not a board
    • Avoiding outside independent directors
      • Outside members provide really important context outside of people who are totally steeped in the day-to-day activity of the company
    • Expecting the board to always support management
      • Primary purpose behind the board is to represent the interests of stakeholders and be the “boss” of the CEO
    • Having the wrong management representation
      • Want to have, at maximum, two managers on the board
      • Board dominated by insiders/family members with little biz experience is not effective
    • Maintaining little diversity
      • Business environment is quickly diversifying, so homogenous board will be insulating
    • Failing to establish adequate structure
      • Board needs playbook to establish roles and responsibilities
      • Board should meet at minimum of four times a year
        • More often for critical issues
    • Lacking commitment/trust in board decisions
      • Culture of trust and respect must be set from the beginning
      • Constantly arguing board will kill the company
  • If the company isn’t ready for a formal BoD, start with an advisory board
    • Group of mentors w/ industry knowledge