(This article was written by Joe
Hadzima and originally published in the "Starting Up" column
of the Boston Business Journal and appeared in Mindshare,
a resource of the MIT Enterprise Forum, Inc., Cambridge,
Massachusetts)
In other columns, I explained
why you need a Board of Directors, how to select directors,
and how to compensate them. Now that you have a great
Board, what exactly do you do with it? Boards, being
composed of people, come in a variety of sizes and shapes.
Not surprisingly, there is no one "recipe" for effective
use of a Board, but here are some ideas and observations.
Board Size
Size and the resulting group dynamics
will dictate much of how you deal with the Board. Most
entrepreneurial private companies I see have Boards comprised
of three to five Directors. Some have advisory boards
(e.g., a Science Advisory Board) which are larger, but
the legal Board usually does not exceed five in number
and rarely is greater than seven. Larger public companies
usually have larger Boards, partly because of the need
to have specialized committees (e.g., Audit Committee,
Compensation Committee). As with Congress, in larger
Boards much of the important work occurs in the committees.
Assuming you have a manageable size Board of Directors,
what do you do with it? First, you should try to establish
a working relationship with each individual Director.
As mentioned in other columns, you should have a "job
description" for the Directors you choose. If you have
found a Director who meets the specific job description,
the result will be a set of on-going interactions, both
outside and inside the Board of Directors Meeting.
Outside of the Board Meeting.
In recruiting a Director, you
should have worked out the Director's level of activity
and attention, both in terms of the number of Board Meetings
expected, and, if the "job description" includes it,
interactions outside of the Board room. These outside
interactions with individual Directors are your opportunity
to obtain individual advice and assistance. Establish
a format which works for the individual Director and
for you: a weekly breakfast, a monthly lunch, twice-a-week
telephone calls, frequent email, a tennis match followed
by a half hour discussion by the juice bar, whatever
works.
The Board Meeting.
The strength of the Board of Directors
system comes from the collective action of experienced
and informed people. It follows that the Board Meeting
has to be a combination of information transfer processes
and resulting decision making. Board Meetings rarely
last all day unless some major event is being considered
such as an acquisition. For a normal Board Meeting, plan
on a minimum of one to two hours, more typically three
to four hours.
Information.
Because time is limited, you should "offload" as
much of the background information transfer process as
possible so that the Meeting can focus more on decision
making. The "Board Package" is the main method of off-line
information transfer and should be distributed to the
Board with enough time for the Directors to be able to
read and digest the material, but not so far in advance
that the information is out of date. Plan on getting
the materials to the Directors about three days before
the Meeting. A typical package will contain the following:
an Agenda, Draft Minutes of the Last Meeting, Financial
Reports with Management Commentary, and Other Relevant
Information. Be sure to keep the Directors informed of
general developments between meetings -- include the
Directors on press release lists, product mailings, etc.
It can be very annoying to a Director to find out something
about the Company from a source outside of the Company.
When and Where to Meet.
The quality Directors you want
are going to be very busy people so you need to get on
their calendars. Schedule meetings as far ahead as possible.
Early-stage growth companies may have Board Meetings
once a month. As the Company becomes more established,
the number of Board Meetings will tend to decrease to
six or four per year, with perhaps more committee work
filling in the gaps. Meeting dates often coincide with
financial reporting periods (e.g., 15 to 20 days after
the end of a month or quarter) or major industry events
(e.g., after the major trade show). Special meetings
will be needed to approve financings. The time of day
for the meeting will depend on whether your Directors
are all locally based or have to travel, and whether
you and they are "morning" or "afternoon" people. I find
morning meetings, like morning doctor visits, work best
because people tend to get behind schedule as the day
progresses. Most meetings are held at the Company's facilities
so make sure the place looks presentable and that your
people are aware that the "suits" will be there.
The Agenda.
You
will have to experiment to find the right formula for
the Meeting itself, but use an Agenda to keep things
on track and moving. A typical Agenda will include: Approval
of Past Minutes, President's Report summarizing and highlighting
(not duplicating) developments reported in the Board
Package, Operations/Marketing Report, Financial Report,
Old Business, and New Business. The "Operations/ Marketing
Report" segment varies from company to company. For example,
one of my software clients is working on its first product
release and the Board spends a good deal of time on engineering,
product features, and market positioning issues. Another
client is facing manufacturing and distribution problems
so the Board has been focusing on those issues. In each
case, the Board hears reports from middle to upper-middle
managers, which allows the Board to get information that
is relatively unfiltered by senior management and keeps
the lower-level managers on their toes. Be sure to allow
enough time for New Business or the "legal stuff" like
approval of stock options, etc. Many companies put these
at the end of the Agenda, which can be a problem if the
meeting is running late and people have to leave. Some
Boards like to see specifically worded legal resolutions,
in which case make sure they have been prepared, while
others will approve items in general terms, leaving it
to the lawyers to draft up the minutes. I recommend previously
drafted resolutions if the issues involved are complex;
it avoids confusion as to what was intended. A Board
of Directors is a legal requirement, but you can turn
it into a business asset by following some of these tips.
The MIT Enterprise Forum of Atlanta
and PricewaterhouseCoopers LLP co-sponsored a gala on
behalf of the Georgia High Tech Hall of Fame. Proceeds
of $28,500 went to Atlanta's Tech High while went to
$10,000 to GATV to establish a kiosk for the Hall of
Fame which will serve as a "first-stop" shop for visitors
to Georgia's technology community.
The Technology Hall of Fame of
Georgia was established by the Business & Technology
Alliance in 1993 to recognize the achievements of outstanding
members of Georgia's technology community. Hall of Fame
inductees have helped shape the development of technology
and industry in Georgia, and each has had a significant
impact on the State. These pioneers and innovators have
played diverse roles - inventors, engineers, entrepreneurs,
investors, and government leaders - and represent a spectrum
of Georgia industries. The members of TAG vote annually
to select inductees who have been instrumental in creating
Georgia's high tech community.
Tech
High is the Atlanta Public School System's tuition-free,
math, science and technology charter high school. The
school's rigorous college prep curriculum integrates
project-based learning with real world connections and
experiences involving internships and mentors. Expectations
are that all students must earn a high school diploma
with the skills that enable them to succeed and lead
in the technology-oriented 21st century.