How to select, manage, and motivate your startup board

Adam Milgrom is a veteran of the startup company board scene.

He’s made well over 20 angel investments into startups and currently sits on the boards of Future Super, YourGrocer, StreetSmart Australia and The Australian Communities Foundation. That’s all in addition to offering advice to a myriad of other companies.

Adam featured earlier this year on the Startup Playbook Podcast where he gave some pearls of wisdom around engaging your board members and ensuring you tell them everything — good and bad — in order to get the most out of them.

Sensing that Adam had a bit more advice to give, we sat down with him and asked a range of questions about selecting board members and getting the most out of your board. These are our key takeaways.

Enthusiasm and diversity can trump experience in board selection

Early stage startups won’t really have much of a choice when it comes to selecting their board members. Their board generally consists of the founders (typically up to three of them if there are more co-founders) and a representative from their first investor.

As startups mature, they can afford to start bringing in external business experts and leaders to their board. While many founders opt for seniority or profile when deciding on a new board member, Adam says they should measure their skill level against their enthusiasm for the role:

“I’ve seen a number of board members with plenty of skills on paper but low enthusiasm. That’s crucial with startup boards. I’d always choose a slightly less skilled but incredibly enthusiastic board member over the opposite. It leads to them not bringing all their skills or contacts to the business. They won’t lean in if they are not passionate.

If you have four members on your board, you can afford to have one or two who are a little more green in terms of board experience, but make up for it with the passion they have for your business.”

Adam also says you should ensure you have a broad range of diversity, and a mix of professional and life experiences on your board to ensure you are making the best decisions.

Enthusiasm also helps to tackle the motivation challenge

With your initial board (typically consisting of founders and early investors) there’s no need for remuneration for board positions because everyone at the table is motivated by the equity they have in the business.

But as the board grows and takes on expertise — and particularly if you want to bring on independent directors — you will need to start compensating board members in order to recruit the best people to work with you. This could be in cash or equity. Startups, typically being short on cash, often won’t be able to compensate their board to the level they can get at larger companies. This is why Adam says the enthusiasm of your board members is so important:

“The motivation for joining a startup’s board should come from more than just remuneration. Payment is typically more of a token acknowledgement than a driver.”

Let the board directors into your day-to-day

Adam suggested on the Startup Playbook Podcast that founders tell their board members as much about the business as possible. This might go as far as adding your board members to your company Slack — or another form of workplace communications tool — to give them visibility over the day-to-day running of the organisation.

“Your board is part of your team.

With startups, your board is not there to take an adversarial stance with your decisions and act as guard rails as they may do with larger companies. They are there to support you and help grow the business.

If you only know a little bit about a situation, you can only give surface-level advice. The more context you have, the deeper the advice you can give.

But you can give even better advice as a board member if you’ve had time to go away, think about the problem and also look at how other companies are solving it. So knowing about issues as they arise can be very useful.”

Onboard your board directors like any new recruit

Adam says it’s also well worth your time as a founder to introduce your board members to the team and induct them into the business as if they are full-time staff.

“You need to go beyond the minimum of just going through the board pack with the new board member. This can be very time consuming for founders, but once it’s done the pay off is immediate”.

Communicate before board meetings to root out disagreements ahead of time

Adam also believes it’s crucial for startup CEOs to communicate any decisions that have been made ahead of the meeting to avoid getting derailed if there is a disagreement. This is usually the job of a company board chair, but as most startups do not have chairs, the CEO has to assume this role.

“If a board member disagrees with your decision, you need to know that ahead of the board meeting, and not discover their view during it.

You should be using board meetings to come up with constructive solutions for problems, not air an argument on the problem. That should be done ahead of time.”

Don’t get sucked too far into governance

While it is important for founders to involve themselves in the activities of the board, you can overdo it. Adam’s seen founders take on too much responsibility with governance to the overall detriment of the startup.

“It’s a common trap. Founders think that poor governance is the one factor that will hamper their startup, so they focus their time on it. When in fact, their time is best spent on operational matters.

Also, while governance shouldn’t go wayside, startups do need to focus their board on strategic matters first.

Ensure the board is properly supported and briefed, but leave the finer details of governance to others.”

Takeaways summary

• When selecting board members, look for enthusiasm as much as experience.
• Board members can be remunerated in either equity or cash. But given startups shortness on cash, they will probably be more motivated by a passion for the business, founder, or problem (or a mix of all three).
• Invite your board members to your company communications platform and give them as much visibility over the business as possible.
• Induct the board member into the business as if they were a new staff member. Let them meet the team and fully understand all the organisation’s problems.
• Settle any disagreements on company decisions ahead of a board meeting. Use the board meeting to discuss strategy and solutions, not argue decision-making.
• Don’t overdo it on governance. Your board and team are there to support you, so don’t be afraid to delegate some of that responsibility.

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