Is the relationship between your board and management on the rocks? Though both work towards the common goal of success – or “default mortality”, as LinkedIn co-founder Reid Hoffman describes it – normal role confusion and tension can be a death sentence for startups.
“I use the metaphor that a startup is like throwing yourself off a cliff and assembling an airplane on the way down,” Hoffman told Elad Gil, Twitter’s former vice president of corporate strategy, in Gil’s startup-focused book High Growth Handbook. Describing the formation of a board as an exercise in “asset preservation”, Hoffman continued: “You have to gamble your assets very strongly in order to create something that has ongoing and persistent value.”
Jan Lederman, director of Valhalla Private Capital, hails a high functioning board as a potential force multiplier for a startup. This is achieved through a collective understanding of the underlying business, as well as a constant eye on strategy, execution and financial metrics across all board members.
Maintained by a working relationship with their collaborators, a high functioning board treats their assignment as important relative to other time commitments. Cohesion and communication are key here – each member’s ambition should be to serve the interests of the company, not personal financial motives.
Likewise, a high functioning board asks questions to address potential problems before they arise – a skill developed through deep understanding of the market – it also respects the decisions made by the group (board) and remains impartial to group thinking, for good measure. This allows the company to scale more effectively, avoiding common pitfalls along the way.
Corporate governance, brought to the table by either a CEO or board chair, also plays a key role in the efficiency of a board. With this in mind, Lederman claims that “if a founder/CEO is not experienced in governance, then they probably should not be the Board Chair in its early days”.
This is seconded by Hoffman, who maintains: “What’s really adding to the company and adding to the CEO? It’s not just management of the assets, it’s also helping the amplification. And helping the amplification is helping the CEO, and the exec team, play the game the right way.”
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