I recently wrote about why building a board early in 3Pillar’s history was a pivotal decision that dramatically accelerated our growth. At 3Pillar and at other companies where I’m a board member, I’ve routinely seen firsthand the powerful impact that a focused, high-performing board can have on a business’ health.
The post received more interest than I would have expected and several comments made me realize that not everyone understands what a Board should be doing. If you’re building out or fine-tuning the board of directors at your company, aligning the board around its charter is critical. I’m fortunate that I have been able to experience that dynamic from both sides of the equation. As the founder and CEO of 3Pillar, I’ve cultivated and worked with a board almost as long as we’ve had a company. On the other side of the coin, I serve as a board member for venture-backed companies like InGo and Semo, where I’ve had the privilege of helping push fellow CEOs to see their businesses in a new light.
Throughout all of these experiences, there are four distinct roles I’ve seen boards fill when they are operating at their best:
- Governance. The board ensures the decisions that are made to reach the organization’s objectives are in the best interests of the company’s various stakeholders. Governance must always be exercised in a manner that fulfills the board’s fiduciary duty to each of its primary stakeholders – shareholders, clients and employees – and honors its duties of care and loyalty. As I wrote about in my last post, once governance is properly up and running (a big “once”), it should not consume the majority of a board’s time and energy. Governance is critical but the most value is derived from things like strategic direction. Which leads me to…
- Strategic Direction. At 3Pillar, the board provides me with a sounding board in developing strategy. Not only do they approve strategic plans, they often play a hand in developing the strategy itself. The board asks probing questions, provides an outside perspective, and helps to identify blind spots that our leadership team and I may have. At 3Pillar our board is intimately involved in our 3-year and annual planning processes. It is also deeply involved in our corporate development efforts. We have recently made a number of strategic acquisitions and board members have been instrumental in advising on strategy, sourcing potential targets, and reviewing the business case based on their experience.
- Accountability & Compensation. The board must ensure that the management team, especially the CEO, is performing. Ideally, the board will take part in a formal review process, but even more importantly, the board should provide real-time, direct, and specific feedback on performance to the CEO. Following each board meeting I call for an executive session, excuse everyone except the board members themselves and seek radical candor about the meeting, my performance over the last quarter, and their observations about the team. As an executive, it’s unrealistic to think that your direct reports will give you the type of unvarnished feedback you need to improve your own and your team’s performance. Look to the board for direct, candid feedback and for a sounding board to discuss the performance of your direct reports. If you’ve built the right board, these will be people who have already carved a path that you may be trying to navigate for the first time. Learn from their experiences so you can avoid the pitfalls they know exist.
- Sustainability. Ultimately, the board is responsible for ensuring the long-term viability of the business. Sustainability is exercised through the identification of risks, threats, and opportunities, as well as through long-term succession planning. At 3Pillar, the board challenges me regularly to ensure we are striking the appropriate balance of offensive and defensive positions that will lead to the long-term prosperity of the organization (5+ years). They work with me to monitor our executive talent bank and to develop a pool of candidates capable of succeeding me and other key executives. While I certainly don’t have plans to go anywhere, it always behooves you to plan for the worst, especially when there are around 2000 employees that a succession would impact.
To wrap it up, a board that is focused on the right things can be like rocket fuel for your company’s growth, not to mention your evolution as a leader. The ways they can help are immeasurable. A board that is focused on the wrong things, or isn’t really sure what they should be doing, can be a detriment to your success and a massive drain on your time and energy. Ensure that your board is narrowly focused on 4 key areas and you will set your board – and your company – up for long-term success.