A venture’s board of directors plays a significant role in its success. An effective board both contributes substantial value to the venture and directs it wisely to maximize growth and value for its stakeholders. By contrast, an ineffective board can become a major drain on vital senior executive time, and can destroy substantial amounts of stakeholder value. This article introduces a framework for improving board effectiveness to drive venture success.
Many venture boards suffer from one or more problems that lead to sub-optimal results. Boards dominated by one or two personalities do not act with the considered wisdom of all members. Boards made up of unqualified members are unable to act effectively. Board members who act only in the interests of some stakeholders bias the board in ways that may not be in the best interests of the company. Some boards are too involved in day-to-day detail, whereas others are too detached from the business. Many boards lack focus and structure, and are managed too loosely.
In our experience, building an effective venture board requires excellence in three areas:
- Board design – defining the right board structure, roles and responsibilities.
- Board members – selecting right mix of qualified members, and reviewing fit and performance periodically.
- Board management – managing the board with the right blend of formal meetings, informal oversight and information sharing.
We will explore board design in our next entry.
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