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"Strategic Boards? Your Best Competitive Advantage in Demanding Times"©
by Frank Moscow, President
The Brentwood Group, Ltd.
featured in the High Tech Advisor

Is your board of directors a strategic asset for your firm? Does your board add tremendous value? Do your board members have the knowledge, experience, sophistication, and contacts to help you navigate and prosper in demanding times, or does your board merely put the "fun" in "dysfunctional" and prevent you from growing the company? Strategic board members in emerging-technology firms can make a big difference in the success of those firms because small company boards can be more involved, more hands-on, and more action-oriented. As the vast majority of growth-technology companies fail, doesn't it make sense to leverage the best talent possible to ensure your success?

We have identified five key mistakes made by growth-technology companies in building a great board of directors:

Mistake No. 1: Too many founders/insiders.
Ideally, the only insider on the board is the CEO. Why?

• You already know what the insiders think, so why not avail yourself of the best possible outside expertise?
• A director who works for the CEO is not going to confront him or her in front of the outsiders. More insiders means less rebuttal and fewer great ideas discussed by the board.
• Vice presidents who are not board members become second-class citizens. The director and vice presidents can and do take advantage of that discrepancy.
• Filling a board with insiders creates barriers to an open, candid dialogue. Whether assessing CEO performance or analyzing the strategic plan, an internal bias dilutes the objectivity needed to be a great director.

Mistake No. 2: Nepotism/cronyism.
If you fill your board with family or friends, you may never even consider the other options available to you. Are relatives or friends truly the best? Do their skills complement those of the other board members and support your strategic plan? Can these family or friends add unique knowledge, experience, and contacts that drive your company forward, or are they merely rubber stamps, meeting the minimum corporate governance requirements?

Mistake No. 3: Poor compensation for your board.
Great board members are the best bargain a company can have - they are under compensated for their work and their contribution to a company’s success. Strategic board members can make a huge difference in the success of a technology firm. How do you quantify the value of access to other business leaders, the great idea, the major mistake avoided, or an introduction to the right funding partner? A highly qualified board member is a phenomenal resource that you could never realistically attract into your company in any other way. This is a unique opportunity to leverage to make your firm a success. Make the most of it. Don’t be cheap.

Mistake No. 4: Failing to strategically recruit your board.
In today’s funding environment, companies are so desperate for money that they don’t apply much rigor or analysis in evaluating the skills and strategic contributions of the board members who may be part of the funding package. Why strategically recruit your board? Because you have no greater strength than the ability to harness the collective wisdom, insight, and experience of a diverse group of leaders, each of whom brings a unique perspective, functional knowledge, and business history to your board. Even pre-revenue emerging-growth technology firms with the right story can attract world-class committed board members. So how do you recruit a strategic board? The same way you recruit for any senior executive requirement.

• How does the board define success? Coalesce on the real purpose and goals of the board and then determine specific strategic skills necessary to achieve those goals.
• Define the critical strategic needs that are not represented or under-represented on your current board. Rank your most critical issues in order of importance; namely, those that keep you up at night or represent the most significant opportunities and challenges for your firm. Outline the experience you'll need on your board to achieve those objectives (such as initial public offering experience, merger and acquisition experience, specific technology knowledge, specific geographical expertise, customer knowledge, and marketing/distribution expertise).
• Outline board structure, size, meeting frequency, and committees (audit, compensation, and nominating-governance committees are the most common) to ensure that you know what skills and added value you need going forward and to clarify what you should expect from a new board member.
• Develop a profile or position specification just as you would for key executive positions. The specification should track to your strategic needs. By recruiting to the specification and focusing on the criteria of the role, you will focus on the right board member rather than a convenient name.

Mistake No. 5: Failing to develop a search strategy.
A search strategy moves you from "Whom do you know?" to "Who is the best person to add strategic value to our firm?" It forces the board to align on goals and expectations, and it provides the opportunity to fully discuss and resolve any discrepancies before you talk to a candidate. While it may be easier to ask friends and colleagues, the position specification provides the discipline to approach only those unique individuals who can meet your needs.

Following are a few suggestions for your search:

• Supplement a weakness rather than add to a strength.
• Shoot high – the caliber of people willing to contribute in a great environment is quite high.
• Cast a broad net: go beyond what is easy or convenient by engaging with world-class leaders whom you may otherwise never get the chance to know. They bring with them their unique network, which could add tremendous value.
• Focus on real contribution, not marquee value. Ask other CEOs or peer board members if the board candidate has the time, expertise, and strategic view you need. Is this prospective board member prepared for board meetings? Is he focused on the company's winning, or merely winning arguments? What happens when he disagrees with other board members? What are his strengths and weaknesses? Today's boards are implementing 360-degree review processes or double-blind surveys for board assessment. This information would be a great data point as you evaluate prospective board candidates.

Remember, each and every director makes a compelling reason for other directors to remain, leave, or never join in the first place.

Choose wisely.