Too often, private equity investors try to interfere by implementing textbook concepts, when they have very little experience actually running a business. Acknowledge your lack of experience, and bring fresh perspective by addressing the challenges in a new way.
Roll up your sleeves, and work the company to get the work done. Take up your influential role and contribute real value. Here’s how, but before we dive in – understand that there are three types of boards. Take a moment to think about which one yours will fall under:
- Ceremonial Board is one where all the agenda has already been decided before the meeting, and all that is left is to follow the script and move on… more compliance and show business. Comprised of mostly anonymous low profile people – so reputation was never at risk, if things went south. Board attendance was ABC (A$$ Based Compensation).
- Liberated Board is one where each director is playing to their own strengths, taking an active role, and possibly asking CEOs too many things, some of which may be irrelevant – thus distracting CEOs from running their companies.
- Progressive Boards are not just true to the letter of the law, but also embody the spirit of it – to ensure that the success of a company is longer lasting than the reign of a CEO, or any product cycle or market opportunity. That board functions as a team, maintaining its independence. (or what I would call a learning board, a constructive and collaborative relationship.)
Here are a couple of tips to ensure you build an ideal board…
- Make sure those who form the board, will actually attend meetings. Don’t select those who are board members with 10 other different companies, or who have to travel overseas most of the time. In short, don’t add names, add value.
- The board of directors of an investee company should ideally meet once a month, if not at least once a quarter. Being a director or chairperson may seem like a figurehead role, but it’s more of an advisory role because you’re not employed by the business.
- Hiring the best managers to run the business is one part of the equation, the other part is involving them in segments of the meeting – so everyone has direct access and are more informed.
- Find the balance between having founders, owners, private equity investors and independents. This diversity creates more value in the long term. So what’s a good total – well around 5 – 7 is ideal. Too many, will be a mess and too little, will see no value.
- Meetings are toxic if you don’t know how to handle them. Start with a clear agenda and try as far as possible to stay on topic. And send the supporting documents at least 7 – 10 days before the meeting. You don’t want people glazing over the material while they’re in the meeting – you want active and involved discussion and decision making.
- Follow up, after the board meeting – make it a point to all meet up again to keep open channels of communication.