Should You Have a Board?
As I mentioned last week, Fred’s post from a few months ago about an M&A Case study involving WhatCounts had a couple of provocative thoughts in it from CEO David Geller. The second one I wanted to address is whether or not you should have take on institutional investors and have a Board. As David said in the post:
Fewer outsiders dictating (or strongly suggesting) direction means that you will be able to pursue your goals more closely and with less friction
Although I have a lot of respect for David, I disagree with the notion that outsiders around the Board table is inherently bad for a business, or at least that the friction from insights or suggestions provided by those outsiders is problematic.
While that certainly CAN be the case, it can also be the case that outside views and suggestions and healthy debate, as long as incentives are aligned, people are smart, and founders manage the discussion well, can be enormously productive for a business. I recognize that I’ve been very lucky that the Board members we’ve had at Return Path over the years have not been dogmatic or combative or dumb, but I do think selection and management of Board members is something very much in a CEO’s control.
But beyond the issue of who sets the agenda, Boards create an atmosphere of accountability for an organization, which drives performance (and many other positive qualities) from the top down in a business. Budgeting and planning, reporting on performance, organizing and articulating thoughts and strategy – all these things are crisper when there’s someone to whom a CEO is answering.
As a telling case in points, I’ve known two CEOs over the years in the direct marketing field who have more or less owned their companies but insisted on having Boards. While I’m not sure if those Boards had the ultimate power to remove the owner as CEO (which is the case in a venture-dominated Board and of course an important distinction), I do know that having a Board served them and their organizations quite well. The fact that they didn’t have to have “real Boards” but chose to anyway – and ran spectacular businesses – is a good controlled case study for me in the value of this discipline.