Note: This article is part of an ongoing series on Board Directors. To learn more about their roles and responsibilities, download this free eBook today Director's Guidebook: How to be an Effective Board Director in Early Stage Companies or purchase our books at Amazon.com.
In previous posts we discussed the important role board directors can play in early stage, private companies. As an angel investor serving as a director, it is critical to know how to prepare for a meeting. In this article we talk about some do’s and don’ts of board meeting prep - what CEOs should be doing in advance and how venture investors can make sure they show up ready to maximize their time.
Attributes of Great Board Prep:
-
Organized – Agenda agreed to in advance by the full board or its lead director and the CEO
-
Categorized – for information, for discussion or for approval
-
Strategic – focus on one or two important items each meeting
-
Prepared – board materials go out several days in advance
Attributes of Inadequate Board Prep:
-
Poor attendance – get the board calendar finalized a year in advance
-
Sloppy Materials – late, messy, incomplete board materials drive poor meetings and can be a source of liability
CEOs/Board Chair should connect with directors in advance of the meeting – This is important for several reasons. First, getting consensus on the key strategic areas of discussion is important for a well-run meeting. Strategic discussions should focus on tough issues that the company faces. Second, while votes are formalized and recorded at the meeting, it is often very important for critical decisions to be discussed and analyzed in advance.
Board materials should be sent out early – You don’t want directors reading your handouts at the meeting. Most board materials are focused on company status (e.g. financials, sales pipeline, etc). Good directors will have time to review board materials that are sent out several days advance.
Meetings should be in person whenever possible – For out-of-town or busy board members, it can be difficult to attend meetings in person. It’s not unusual to have half of the board dial in for the meeting. In general, this type of meeting does not work as well. As boards mature and their members know each other better, telephonic connections can work, but there is no substitute to in person participation.
Schedule meetings well in advance – For early stage companies, board meetings are typically held every 4 to 6 weeks. To ensure attendance at meetings, an annual board schedule should be circulated at the beginning of the year to make sure everyone is available. Also, having board dinners two or three times a year is a productive way to build strong working relationships on the board. When a board has some distant members, a company may schedule board meetings less frequently, perhaps every other month, and schedule monthly 60 minute update calls in the non-meeting months.
The Board Package – Board materials come in many different formats. For consistency sake, it helps to agree on a standard format that will be used in all board meetings. In addition to a brief outline on strategic topics, it is very helpful to report business performance based on Key Performance Indicators (KPIs). A management dashboard that highlights KPIs is an essential tool for evaluating company performance against targets in an objective way. It is very helpful for board packs to include the history of performance over the past year, a comparison of performance relative to plan and forecasts going forward. Spreadsheets are fine for financial data, but charts are a better visual tool for spotting trends and sparking discussion.
There are several items that most board packs have in common. You should typically expect to find three different sets of documents: 1) Minutes from prior board meetings, 2) Financials and 3) Slide deck with key strategic discussion topics and company status update.
-
Meeting Agenda – This document should be one page long, should not make any reference to the length of discussions, and should clearly mark every item as being for information, for discussion or for approval.
-
Board Minutes – This document should be a very short and concise summary of the meeting and contain the list of meeting attendees and any votes acted on by the board. Proper minutes should not use adjectives or flowery language, should not contain humor or irony, should not make note of times or the relative length of discussions, should not contain conclusory descriptions or draw conclusions, should not quote people or attribute things to individuals (except where absolutely necessary or on procedural points), should not highlight dissent, but rather discussion. Proper minutes just record the sequence of events to show that there was a good and thorough process. If improper minutes are presented for approval, Directors should refuse to vote to approve them until they have been prepared properly.
-
Financials – This set of spreadsheets should include the company’s Profit & Loss Statement, Balance Sheet and Cash Flow Statement. It is also useful to have current vs. plan comparisons. Should also include a forecast at least for the remainder of the year.
-
Key Discussion / Company Status – In most cases this will be a PowerPoint deck with 15 to 30 slides. The slide deck should include: 1) repeat of meeting agenda, 2) board actions, 3) management dashboard, 4) key strategic issues for discussion, and 5) a status update for each department.
Practical Tips:
-
Preparing materials and reports for the board is good discipline and provides management with a framework for quantifying and assessing progress on a regular basis.
-
Board meetings should not focus on status updates.
-
Engage the entire board in establishing what key strategic topics should be discussed in advance of the board meeting.
- A good board holds meetings in person to the extent humanly possible and on a regular basis.
Want to learn more about the roles and responsibilities of Directors? Download this free eBook today Director's Guidebook: How to be an Effective Board Director in Early Stage Companies or purchase our books at Amazon.com.
