The best things about your company board

For weeks, we’ve highlighted both good and bad things about boards of directors for your company (or non-profit.)  This week, let’s focus upon number one – aside from the requirements of boards to protect the company itself (not the shareholders.)

Normal functions of boards

Boards of directors fulfill numerous important functions, both legal and structural.  Boards provide or see to it that there are resources for the company (especially money) to operate.  The board selects, monitors, helps, and oversees compensation for the CEO.  The board can replace an under-performing CEO.  The board is responsible for approval of all deferred compensation for all employees at all levels, such as stock option grants, and is responsible for the vision and strategies for growth and protection of the corporate asset.

What should the CEO expect of his / her board?

The CEO has every right to expect his or her board to help with issues when asked, particularly when board members have associates, friends, or contacts that they believe would be able to help solve a problem or provide a service requested or needed by the CEO.

And now, that most important non-legal function

[Email readers, continue here…]   We used to call these personal and business contacts that all board members possess collectively the “golden Rolodex,” but long since have had to replace the name since there is an entire generation of management unfamiliar with the circular Rolodex.  (No, that is not the watch company, if you are one of those.)  Board members each have a collection of associates who, because of their relationship to the board member, usually would be willing to help provide a solution to a problem when called upon.

Some board members have a wealth of great contacts

It is one of the most useful services some board members perform in any organization.  Because of the value of these contacts to the board member, it is important that these contacts not be misused by the CEO, and that each offer is followed up with at least a first contact when a name is offered.

A CEO’s duty to respond to those offering golden contacts

Some of your board members will have and offer more relevant contacts than others, and you will soon learn the importance of keeping those board members in closer contact and better informed between meetings.  The intangible resources they provide can easily lead to finding ways to reduce time and cost to market, to find valuable new employees, and to find new customers who will listen to your pitch because of their relationship with the board member.

How a contact’s relationship with your board member works

People you could not reach yourself are sometimes quite willing to listen and help because of those relationships.  So, use the board for outreach.  If not overused, your board members expect to be asked, to offer and to encourage use of their valuable contacts.

 

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So, your board is dysfunctional. What to do?

It happens. Boards are elected by the shareholders, sometimes with preferred shareholders holding seats by right of their investment.  In that instance, often the investor selects the board member and the CEO goes along with the choice, mostly out of having no alternative at the time.

How the board can arrive at dysfunction

Then there comes the first – or better yet the fourth – meeting of the board following the appointment of a new member.  Remember that the board must by law be acting completely on behalf of the best interests of the company, not the investors, in all deliberations of the board.  For the first several meetings, all parties usually play nice as they get to know the company and each other.

The noisy and dominant, or bullying board member

Some board members come to the table with preconceived notions about the capabilities of current management.  And some board members show their colors in the form of being dominant, hushing their peers and often interrupting others.  Sometimes this board member or another seems to always change the subject to their own agenda during meetings, including challenging management, sometimes by attacking individuals (called argumentum ad hominem), rather than their ideas and statements of vision, fact, or judgement.  And some board members are just bullies, alienating the rest in a single sentence or meeting.

Have you been lucky with your board?

[Email readers, continue here…]    If you have never experienced such a board with members out of sync and out of sorts with each other or the rest, you have been lucky.  But you have missed one of the great challenges of your business career, depending upon the importance of the board, the size of the company, and the immediacy of decisions resulting from these events.

Who is responsible for taming the beast?

If you are the chairman, the CEO or lead director, it is your responsibility to return the group to the core issue and even move to another agenda item if running the meeting.  And if that does not work, temporarily adjourn the meeting to speak individually (and alone) with the offending board member out of earshot of the others.  Describe how the actions of that person affect you and how you see them harming the board itself.  If you get nowhere and you believe your cause to be just and perhaps representative of the group, return to the meeting and air the problem out with the entire board.

And what if the beast cannot be tamed?

What if the person continues with his or her personal agenda or continues to disrupt?  I have had this experience more than once.  The solution I chose was to approach the VC, or another partner of the angel group, and explain the problem.  I would do this only if the problem was seen in consensus by the rest of the board.  In one instance, this brought about a replacement board member much more attuned to the duties and culture of the corporation.  In the other, the offending board member did back off in subsequent board meetings.

What about designated board seats?  Can you change?

Designated board seats cannot be changed because of investment documents. In the worst of situations, you might ask another partner of the investment firm for an alternate board member. For non-designated board seats, the solution may be to propose a slate of board candidates without the offending person to present to shareholders for a vote at the next annual meeting, if board members are elected annually.

Alternatively, it is effective – even if confrontational and emotional – to just ask the board member to step down and allow for another to be elected.  And if that person is the CEO, the board will find a more effective solution not at all to the liking of the CEO.  That too has happened in my board career.

And public boards can be the worst… My story

In one extreme case, I was a member of a public board whose members could not agree on anything substantial, each claiming that the value of the company would be damaged in the market by proposed actions.  In this case, the board was not held together by a strong chairman or CEO.  I felt it my duty to suggest, then strongly support, discussions about merging with another company, which the board ultimately did.  In a merger, egos sometimes dictate who survives at the board level (and at the CEO level), and offending board members from one company are rarely retained.

Preventing a step toward mediocrity

Board members can be very professional in comportment and in their exercise of their duties.  Or not.  Putting up with bullies, or those with obvious conflicting agendas not in the best interest of the company, is a step toward mediocrity.

#Berkonomics  #Boardofdirectors  #companymanagement #DaveBerkus

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Let your board help with “what” and “why” – but rarely “how.”

I am sure you can argue with this one.

Sometimes a board member is valuable in teaching the “how” to get things done inside the company.  But experience reinforces the usual fact that a board member telling the CEO or founder “how” to perform a function crosses a line and can diminish the CEO’s confidence and denigrates his or her ability, often in front of the board itself.

Let’s start with the vision for the enterprise

Who is responsible for the vision that drives the company? This is arguably the primary job of the CEO, with agreement from the board.  Many entrepreneurs after taking outside investment defer to their board for matters of direction that include setting the vision, as well as executing the plan.

The general rule for founders and CEO’s with a board

Here is a general rule:  The CEO sets the sails and points the ship, creating the vision for the company.   The board provides input into that vision, testing it against their experience and reason, and challenges it as a part of its duty to protect the shareholders and care for the corporate asset. The board then assures that management receives or has resources to affect the vision, monitoring progress at each step.

What the board does not do

[Email readers, continue here…]  The board does not get involved in how the job is done, but rather why it should be done and perhaps when it should be completed.

How a board member can harm the CEO

Once the members, unless invited in a consulting role, involve themselves in execution of the plan, management is robbed of its principle responsibility – execution of the plan approved by the board.  When that happens, even a good CEO will pause and defer to the board before making strategic operational decisions, slowing the progress, perhaps endangering the company, by allowing competition to gain ground, and sometimes ceding some control to board members who are remote from the operation and may not be the wisest of advisers in each situation.

While we are on the subject, next up will be how to handle a dysfunctional board.  Stay tuned…

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Does your board give you good advice?

This may be news, but boards of directors can offer bad advice.  Having served on more than forty boards, I’ve seen such a variety of good and bad advice that my stories could fill a book.  (oh, wait. They have…)  So, lets delve into board composition, risk of an unbalanced board, and one of those stories…

The composition of your board matters

A typical board is composed of five persons in a company that has received outside funds from professional investors.  Two members usually represent the founders or management, two are from the investors, and one is often elected by the four to represent the industry in which the company works.

The financial investors typically have deep experience running companies, often in other industries.  The fifth board member often is an expert, but not an executive with operational experience.  Realizing that this description is a generalization that fits some, but not all, growing firms, the dynamics of the board are a key component in the effectiveness of advice and leadership given by the board.

Do you defer to those outside board members?

[Email readers, continue here…]  It is not uncommon for the founders or executives on a board to defer to the three outside board members, responding to questions and defending previous actions. All this is proper to the extent that the two founders or executives do not leave their brains at the door when attending a board meeting, acceding to the suggestions of board members as if each were a direction or order.

My story of an unbalanced board and influence

I still recall vividly the board of a young company that was composed of the entrepreneur and four investors, each of whom had differing thoughts on how to use resources to grow the company, giving mixed signals to the entrepreneur who wanted greatly to please each and all.  That company embarked upon an expansion drive before perfecting the operation in its first city, as a result of the board’s direction to the entrepreneur, which was against his better judgment although he remained relatively quiet and certainly compliant.

“The board knows best” is not always true.  And in this case, the company over-expanded, did not have the resources to fix problems at its new remote offices, and died a slow death from issues of control and quality, all of which might have been mitigated had the company spent more time debugging the first-city operation.

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Where’s your team playbook? Hmm?

This one comes straight from football.  From experience and from information about the competition, a coach creates a playbook that contains detailed plans for actions or plays that the entire team must know without question and execute without pause in order to win games and advance toward the playoffs.

But you know that of course.

Your team playbook

What is different about you as a manager?  If you manage with your team knowing the intended results of each action, and if the members of the team have not honed their skills at execution of their tasks, then you are the coach without a playbook.

What if you lead without a team playbook?

Well, if you have a plan but do not share it with your direct reports, then they are acting without motivation toward mutual goals, without metrics to measure their progress toward the goals, and without the leadership that makes great winners.

Contents within your team playbook

[Email readers, continue here…]   So, what does your business playbook look like?  How do you create and update it?  Who gets to see it?  Again, there is a great parallel in football coaching.  The coach creates a playbook from experience and research.  He drills the team again and again in execution of the plays from memory and without pause.  He keeps metrics for each team member to see, including yards gained, passes completed, games won.  He compares these metrics to past seasons, to competitors, to his own lifetime bests.

You are the team coach

You as a business leader are the coach for your team, no matter what the size.  Trained employees execute their tasks better than those who are not.  You are responsible for the training and for the outcomes both for individuals and the team.  You set the goals and develop the metrics by which your team is measured against those goals.  You publish the metrics and use them to focus and align your team to perform even better.

Or are you just a “fan in the stands?”

You develop, train, measure, and reinforce successes, all based upon your coach’s playbook.  Unless of course you have no playbook and are just a fan in the stands without a clue, cheering for a team you know and love but do not effectively lead.  All because of the playbook you should have created, shared, and used as your team’s guide to success.

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Can your team overcome messy problems?

Some problems seem impossible to surmount

Leaders and teams can be overwhelmed.  We’ve all probably experienced this. Several big problems hit us at once.  Or the system goes down, stranding everyone. Or worse yet, “We’ve been hacked.” Add the twist of ransomware?

The inevitability of a big problem

As we grow our businesses, we inevitably run into problems that seem for a time impossible to overcome.  Our development team is stumped with a problem; or the marketing organization cannot come up with a theme for the next campaign; or the team has hit a wall where further speed, size reduction, or other constraint seems impossible to overcome.

Limited resources are the rule

No one has the resources to solve all problems in all areas of the business.  And every department can use creative thinking from others outside the department to overcome barriers created by “inside the box” thinking.

Methods you can use to solve those problems

[Email readers, continue here… ]  There are at least three excellent methods of reaching out to solve seemingly insurmountable problems, aided greatly by virtual companies, cost-free distance communications and the newest mass communication tools such as group video conferencing.

Swarming for a solution

First: Swarming. The project leader presents a problem to the entirety of the inside network of stakeholders, including suppliers and even customers if appropriate, and opens a channel for easy communication between the players.  The group interacts quickly, and solutions seem to fly in from several sides, tested and refined by the swarm until solved.

Crowd sourcing with outside resources

Today, it is possible to easily send a problem out to the world of thinkers within and outside of our network, offering a reward in the form of money or prestige for the one solving the problem first or best.  There is no fixed cost to this network-enabled technique until the solution is offered.  And the sheer size of the open-ended workforce will create potential solutions far more creative than when the problem is presented to an internal group of departmental thinkers.

Tiger teams are a great temporary resource

No CEO wants to create a permanent team for a temporary problem.  Most of us fear that such teams or committees find their own self-perpetuating reasons to continue after the primary problem has been solved.  Tiger teams are formed with the specific purpose of focusing human resources upon a single problem, solving the problem then disbanding with a quick celebration of success.  There is no issue of leadership succession, allocation of additional regular meeting time or even of failure.  The team comes together to solve a single problem, and either solves it or passes it back for solving by an outside resource such as crowd sourcing if unable.

In each of these three methods of problem solving, the strength comes from the focus of a group that is temporary, committed, and focused.   And all three are children of the new age in which management and communications are fluid and readily available for problem solving.

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Hire for your core. Partner for the rest.

A trend for businesses large and small

There is a major trend shaping up that is worldwide, already identified by hundreds of thousands of startup and small business CEO’s.  By carefully recognizing and focusing upon the very core of the business, these CEO’s are allocating their scarce cash resources to hire the best talent they can find to support that core business, and then reaching out to partners, independent contractors, and other small businesses to provide all other functions.

What is your core competency?

There is much to reinforce in such behavior.  By definition, your core is your intellectual property foundation, the thing that makes your business most valuable to customers, investors and perhaps someday to potential buyers of the business.  Every business has an intellectual foundation where the CEO’s knowledge and vision create a barrier to entry that deflects some or much of the potential competition.

Patents, branding, marketing and more

In the patent world, we protect this intellectual core with what we call a “patent thicket,” aptly describing the attempt to surround the core patent with other patents that defend the core and further prevent competitors from attacking the central component of the business.

[Email readers, continue here…]   Sometimes we protect our core with effective branding and marketing.  Or we do so with brilliant research and development, highly trained sales forces, large advertising campaigns, or secret processes.

Using your scarce capital and other resources

Using this focused approach to hiring, companies can stretch their limited capital further, assure better protection of corporate secrets, and make use of the core skills of partners that are attractive and beyond the reach of a small company’s abilities.  In this new environment of cheap communication worldwide, it is only reasonable to leverage these advantages through partnering with those whose core complements yours.

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Are you a remote manager? A good one?

Are you a virtual manager?

Can you be effective if you are a “virtual” manager, commuting from home or a home office and being with your employees only part time?

Measuring your performance

In a virtual environment, people measure you mostly by your actions, and remember only the most recent good work you’ve done for them and for the organization.

The typical scenario for a virtual manager

Today, many companies hire great managerial talent who commute from a remote home location. Often, such senior managers start with a four-days-here, one-day-from-home plan that slowly degrades to two then sometimes three days operating remotely.  And some senior managers are quite successful at driving innovation, vision and excellence from a distance.  Some companies are operated entirely virtually and there is no other way to manage.

Does your performance need to be better if virtual?

[Email readers, continue here…]  I’d suggest that the quality of a senior manager who must control from a distance must be higher than one always on the spot in front of middle management and staff. And I’d think that not every such remote manager is able to rise to the occasion, constantly creating a sense of urgency and a push for excellence in his or her absence.  One thing is for sure. The risk of failure is higher when a manager is often absent from the scene of the problem, no matter how strong the person’s skills at delegation and no matter how competent your employees are, one level down the ladder.

Hone your skills of delegation

If you find yourself having to share your time between a distant location and home base, whether because of constant travel or living in a remote spot, you should redouble your energy – focusing your people at all levels toward being able to make decisions with skill and confidence.  You should hone your skills of delegation with accountability and practice your communication skills so that short communications count more than ever.

Ways to make virtual management work

And you should find ways to focus your people upon your vision of excellence without seeming to merely be a cheerleader encouraging from the sidelines.  Some great managers do this by keeping a mental or physical list of several, perhaps three, key performance indicators for each direct report, and quizzing about progress in regular planned or chance meetings.  Others keep a dashboard that alerts them to excursions from expectation and permits more management by exception.

How can you leave yourself behind when absent?

It’s all about your performance, especially when you’re physically absent some or much of the time.  Take a few minutes to think about ways in which you can creatively leave yourself behind when you are absent, encouraging others to feel your sense of urgency directed toward achievement of your vision, even in your absence.

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Can you name the two most powerful words for business?

Here’s a puzzle where the answer come first.

“Help me.”

Over the years I have heard many stories from entrepreneurs, students, news reporters, even my children, all telling me that they could not get someone’s attention they wanted or needed until they used the words, “Help me.”   The simple request is disarming, enlarging the object of the request to a status of importance in respect to the questioner that is difficult to ignore.

The teacher in all of us

There is a bit of the teacher in all of us, and a request for help is a natural trigger to bring this out.  And there should be an equal – if not stronger – bit of a student in each of us as well, allowing us to drop our egos a notch and ask for help when we need it.  There is no shame in admitting ignorance in even the most unusual of circumstances.  Yes, this is true, even when we may think we know the answer in advance.

Use in negotiations

[Email users, continue here…]    One of the many important tactics in negotiation is the strategic use of the words, “Help me,” when attempting to understand the position of an adversary.  Suddenly that person feels it reasonable to explain the reasons behind a position, or facts that may not have been available to you, all in order to support his or her position.  Armed with those new facts, a good negotiator can often craft a solution that addresses those concerns and achieves the goals of both parties.

Use in fact-finding

Reporters and students learn this early when they attempt to get the attention of a busy CEO or politician. “I am a student studying your industry for a term report.  Could you help me understand your issues so I can be sure to cover them in my research?”  There are an untold number of doors opened and hours spent by very busy people in response to such simple outreaches asking, “Help me.”

Reducing the emotion in a confrontation

Instead of hiding your ignorance about an issue in a discussion, a term used by someone on the other side of the table, a position taken by an emotional employee, stop and ask, “Help me to understand.”   I’ll bet that nearly every time, the other person will pause and spend time teaching that would have been spent in persuasion.

Filling in your personal knowledge

How about asking for help when you do not know a process, the kind of help that might take hours or days of training, not just minutes of explanation?  A busy person hearing this kind of request may respond with: “I know of a book” or “Here is a resource,” or “Sure, you can sit in on our next training class.”  I have never heard an “I can’t do that for you” in response to a “Help me” request.

And far beyond a simple technique in negotiation or attempt to access a busy executive, these two words are the key to lifelong learning.  Who among us can’t use that?

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Do you take those loyal, key customers for granted?

OK.  We know that an executive’s job is not easy. Nor is there much time in a typical day for outreach of any kind. Especially in your growing company, you are drawn into daily process issues by all of your direct reports, often responding to questions and problems, leaving little time for strategic thought.

That’s bad behavior!

And that behavior results in leaving little time for outreach to the most critical component in your chain – your key customers. During CEO roundtables which I attend regularly, fellow CEO’s analyze a compatriot’s use of time during the once-a-year personal presentations each makes in turn.  If the presenting CEO is honest in the analysis of actual time spent each week, it is often revealing to all to see how many hours are spent turning inward toward meetings, operational management, or responding to emails or texts sent by others.

Then, what is a benchmark for customer outreach?

As a group, we set a bar of fifteen percent as the minimum amount of time each week that a good CEO should spend reaching out to the company’s key customers in a proactive attempt to find issues, trends, unmet product needs, and of course create bonds that make their jumping to a competitor more difficult.

But, do your customer know that they want?

[Email readers, continue here…]   We all remember the story of FedEx, where future customers didn’t know they wanted “absolutely, positively overnight” until they saw what that could do to make their businesses more competitive.

Find the pain

Do customers know what they want from their suppliers for future products?  We often ask our sales people to “find the pain” and show how our product solves that pain problem.  But it was Henry Ford who famously said, “If I’d asked my customers what they wanted, they would have said ‘a faster horse’.”   Some new products arrive with no frame of reference.  FedEx, the automobile, the Internet, and many more examples, prove that there can be a significant market for ground-breaking ideas.

Show them a prototype

Do customers know what they like when they see it?  Of course, they do. So why not show a prototype, asking for input to improve it or adapt it to the needs of the customer?   With that kind of interaction, the customer becomes a partner in development, tied to the success of its outcome and much more willing to purchase it when completed.

Build relationships from the top

Is business built upon good relationships?  Of course, it is.  And who is best to create closer relationships at the top than two CEO’s speaking personally without distraction?   I have won deals after forming such trusting relationships and have lost deals to those who have beaten me to the opportunity.

The challenge is also the opportunity.  A good CEO spends time with critical customers and values the feedback and relationships that result.

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