This is the eight and final installment of an eight article series focused on helping early stage investors coach founders on building the best board dynamics they can.
The need for an expression like “hacking the board” reflects the fact that for startups, dealing with a board is about making the best of a situation the founder did not create and cannot fully control. So far we’ve discussed hacks for advising CEOs on planning and running a board meeting, a checklist of expectations of board conduct, handling difficult personas, recognizing the sources of interpersonal conflict and how to fix them gently. Now in this final installment we’ll cover the nuclear option.
The Gentle Fixes Are Usually Enough
The gentle approaches we discussed in the previous article of this board hacking series are usually going to be all that is necessary. Most people on boards are successful and accomplished people who mean well and are there to help. Usually when the CEO takes the time to diplomatically point out an issue the director will be embarrassed and fall right into line. It is only with the really tough cases that the nuclear option becomes necessary.
The Nuclear Options: Board Level Fixes
When a CEO has come up against really stubborn director problems, and the personal and meeting interventions haven’t worked, he or she has no choice but to seek the input of other directors. These kinds of fixes are really the last resort because they put the issue in a more public light, and can involve confrontation and embarrassment. That makes them hard to back down from: there is no going back once a challenging director has been called out publicly, so these remedies should only be undertaken when all else fails.
The first “board level” or nuclear fix is to ask one of the other directors to get involved and give some personal feedback and coaching to the problem director. Peer-to-peer conversations like that can be more powerful than CEO-to-director conversations because they can drive home the point that it is not just the CEO who is troubled, it is other members of the board. The peer giving the feedback should naturally observe the same norms in terms of challenging the behaviors rather than the person, but they should be forceful and direct in setting the expectation that, for the good of the board, the conduct has to stop.
Do Peer Evaluations
If a CEO doesn’t have the right candidate to help with the 1:1 option, or chooses not to pursue that path, there is a more indirect way to tackle it: he or she can ask the board to establish an annual process of anonymous peer evaluations. There are many ways to design these programs, and many models out there, but the concept itself is simple. The CEO just asks the directors to rate each other on categories such as meeting input, effectiveness, preparedness, knowledge, and people skills/EQ.
This kind of process is often administered by company counsel who can keep the feedback confidential and route each person’s feedback to them without the others seeing it. However, it is possible to do it in a decentralized way where all directors see the feedback given to each director, even if they don’t know the source of the feedback. Regardless of how the process is carried out, it is a very effective tool. If a difficult director learns that all of the other members of the board are bothered by their conduct, that can be a powerful catalyst to change.
Have the Confrontation
If the evaluation route seems too formal, to indirect, too expensive, or too slow, I’d first suggest re-thinking that conclusion, because evaluations are a valuable tool even a high functioning board should consider doing. But if evaluation is absolutely not a fit for the board or it is not the right time, then that leaves one final option: asking the problem director to leave. This is obviously not an easy thing to do. And how to go about it is going to depend on the type of director involved. If it is an independent director whom the CEO invited to join the board, then appealing to their sense of decency and shame is probably the best bet – suggest that it does not feel like a fit, that it seems like they are not being as effective as they might want to be, and that they are perhaps not enjoying it as much as they might. If they don’t take the hint, then the CEO will likely have to ask them to resign outright on the theory that he or she invited them and so can un-invite them. In virtually all cases, a self-respecting independent director will leave when it is clear that he or she is not wanted.
If the problem director is an investor director appointed by a fund or syndicate, this can be quite a bit more complicated. The best bet in this situation may be to go to the fund or syndicate and tell them that their appointee is not working out, is disruptive to meetings, has not gelled well with the board and is hurting the value of their investment. When asked directly, most investors will, out of enlightened economic self-interest and fear of reputational damage, offer to swap out their appointee with a different individual who is a better fit.
Phew! Those are some difficult situations, but they bring us full circle. Now with a complete arsenal of advanced board hacking techniques, startup advisors and investors can help their CEOs curb difficult behaviors and make sure the board functions as effectively as it can. Board challenges can be some of the most stressful and tricky issues an entrepreneur will face, but as all advisors and investors know, it is important that the CEO stick it out. Boards matter too much. If the board is dysfunctional, it is only a matter of time before it damages the company seriously. But if the founder can get the problem people in line, the board can focus their considerable efforts on value-added issues like finding the right strategy and fighting off competitors rather than fighting amongst itself.
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