Oct 072011

Must-Read New Blog

Must-Read New Blog

I’ve talked about Why I Love My Board a few times in the past.  I was reminded at my quarterly Board meeting and dinner this week that it’s a great and unusually strong group, and we’re lucky to have them.  Fred and Brad have both been prolific bloggers for years,and I know many of you follow their blogs closely.  Think of that as getting a taste of the input and wisdom you’d get by having them on your Board.

In a very exciting development, one of my independent directors, Scott Weiss, has now started blogging on the Andreessen-Horowitz platform.  Scott is probably our most outspoken and colorful director (and that’s saying something).  Scott just joined Andreessen-Horowitz as a partner in their fund, so he now a VC, but his experience as an operator both at Hotmail in Internet 1.0 and then at Ironport have been incredibly valuable for me as an entrepreneur, and I expect most of his posts to focus on the entrepreneur’s perspective.

Two of Scott’s first three posts, Looking Bigger and Ridiculously Transparent, are perfect examples of the value I’ve gotten out of my six year relationship with Scott as a Board member.  If you want a taste of what it would be like to have him in your corner…subscribe to his blog!

Mar 312011

Should You Have a Board?

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.

Nov 092010

Why I Love My Board

Why I Love My Board, Part II

I’ve written a few things about my Board of Directors over the years, some of which I note below.  Part I of this series isn’t particularly useful, though there’s an entertaining link in it to a video of Fred that’s worth looking at if you know or follow him.

Today, we are happy to announce that we are adding a new independent director, Scott Petry, the founder of Postini and now a senior email product leader at Google (read the official press release [here]).  Scott’s a fantastic addition to our already strong Board, and the process of recruiting and adding him has made me reflect a bit on my Board and its strengths and weaknesses, so I thought I’d share a couple of those thoughts here.

I think Return Path has cultivated a very high functioning Board over the years, and I feel very fortunate to have the group that we have.  Here are the top five things I think make our Board special, in no particular order.

  1. We have great individuals on the Board.  Each of our individual Board members — Fred Wilson, Greg Sands, Scott Weiss, Scott Petry, and Brad Feld (now officially an observer), (in addition to me) — could anchor a super strong Board in his own right and have all served on multiple Boards of related companies.  And not only do these guys know their stuff…they do their homework.  They all come to every meeting very well prepared.
  2. The individual Board members are different but have different experiences and personalities that complement each other nicely.  Among the three VCs on the Board, two have operating experience, one as a founder and one in product management.  Among the two industry CEOs, one has more of a business development focus, and the other has deep technical expertise.  Some directors are excitable and a bit knee-jerk, others are more reflective; some are aggressive and others are more conservative; some have extremely colorful metaphors, others are a bit more steeped in traditional pattern recognition.
  3. We have built a great team dynamic that encourages productive conflict.  I assume a lot of rooms full of great directors of different types are so ego-laden that people just talk over each other.  Our group, for whatever reason, doesn’t function that way.  We are engaged and in each others’ faces during meetings, no one is afraid to voice an opinion, and we listen to each other.  Some of this may be the way we spend time together outside of Board rooms, which I wrote about in The Social Aspects of Running a Board. Some is about just making sure to have fun, which I wrote about in The Good, The Board, and The Ugly (Part I, Part II, Part III), I talk about other aspects of running a good Board, including making sure to have fun – that post includes an entertaining picture of now-Twitter CEO Dick Costolo and a few of his friends from his FeedBurner days.
  4. We are deliberate about connecting the Board and the Executive team, and the rest of the company.  We encourage every director to have a direct relationship with every one of my direct reports.  They connect both during and outside of meetings, and they have gotten to know each other well over the years.  This is much more helpful to us than a more traditional “hourglass” structure where all connections go through the CEO.
  5. We run great meetings.  We send out a single, well-organized document several days before the meeting.  Board members do their homework.  We focus on current and future issues more than reporting on historical numbers, and we no longer do any presentations — it’s all discussion (I also wrote about a lot of this here in PowerPointLess).

Welcome to the Return Path family, Scott P – we are delighted to have you on board our Board!

Aug 262010

Style, or Substance?

Style, or Substance?

I had an interesting conversation the other day with a friend who sits on a couple of Boards, as do I (besides Return Path’s).  We ended up in a conversation about some challenges one of his Boards is having with their CEO, and the question to some extent boiled down to this:  a Board is responsible for hiring/firing the CEO and for being the guardians of shareholder value, but what does a Board do when it doesn’t like the CEO’s style?

There are lots of different kinds of CEOs and corporate cultures.  Some are command-and-control, others are more open, flat, and transparent.  I like to think I and Return Path are the latter, and of course my bias is that that kind of culture leads to a more successful company.  But I’ve worked in environments that are the former, and, while less fun and more stressful, they can also produce very successful outcomes for shareholders and for employees as well.

So what do you do as a Board member if you don’t like the way a CEO operates, even if the company is doing well?  I find myself very conflicted on the topic, and I’m glad I’ve never had to deal with it myself as an outside Board member.  I certainly wouldn’t want to work in an organization again that had what I consider to be a negative, pace-setting environment, but is it the Board’s role to shape the culture of a company?  Here are some specific questions, which probably fall on a spectrum:

Is it grounds for removal if you think the company could be doing better with a different style leader at the helm?  Probably not.

Is it fair to expect a leader to change his or her style just because the Board doesn’t like it?  Less certain, but also probably not.

Is it fair to give a warning or threaten removal if the CEO’s style begins to impact performance, say, by driving out key employees or stifling innovation?  Probably.

Is it fair to give feedback and coaching?  Absolutely.

This is one of those very situation-specific topics, but probably a good one for others to weigh in on.  I do come back to the question of whether it is part of a Board’s role to shape the culture of a company.  Is that just style…or is it substance?

Jul 252004

The Good, The Board, and The Ugly

Fred, Brad, and Jerry have done a bunch of postings recently, and threaten to do more, sharing the VC perspective on many aspects of startups and entrepreneurship. I thought it might be interesting to share the entrepreneur’s perspective on the same subjects. I’ll try to cross-post and keep pace, but I’m already a couple behind, and I can’t crank out postings as fast as these guys can! (For reference, Fred and Brad are on my board, and Jerry as Fred’s partner is an advisor to my company, Return Path.)

Topic 1: Boards of Directors. All three have many good points. Brad says that boards come in three flavors (working, reporting, and lame duck), and that small companies need working boards which include other entrepreneurs in the industry as well as management and investors. He also advises to take good care of directors and not let them get bored. Fred calls the good ones engaged boards (interactive, candid, engaged, passionate, and involved) and says that while you can have a good company without an engaged board and even with a bored bored on occasion, to have a great business you need an engaged board. Finally, Jerry says that you should pick your board carefully and build it with some diversity like you would a management team and to avoid people who will yes you.

I basically agree with all of these points, and would add the following four thoughts for entrepreneurs:

1. Building a board can be one of a CEO’s greatest trump cards. Without being even a little bit disingenuous, you can use the “I’m the CEO and would like to talk to you about a potential board seat with my company” as an entree to meet face to face with some of the most interesting, senior, brand-name people in your industry (turns out, flattery will occasionally get you somewhere). Use this card wisely and sparingly, and always be prepared to follow up on your meetings, but take full advantage of it as a way to network. You never know what opportunities you’ll uncover along the way.

2. Don’t think of managing your Board as a burden. Communicate early and often to your Board members and make sure all big conversations and debates are pre-wired in one-to-one conversations before Board meetings, and that debates are framed and researched properly in advance of meetings. Nail the basics (reporting, financial reviews, well-crafted and easy-to-read materials sent out several days before the meeting), so you can focus the valuable meeting time on strategy, not on the minutiae.

3. Figure out how to work differently with investor directors and outside directors. VCs who sit on your board have very different interests, time availability, and things to contribute than outside directors, especially non-retired industry executives. Not all directors are created equally, and you don’t have to behave as if they are.

4. Sit on a board yourself. There’s nothing like a real-live counterpoint to make you take a step back and think about how to build and run an effective board. Find something — another startup, a nonprofit, your high school or college alumni association — to join as a board member. Watch and learn.

All that said, the most important thing I’ve found in running a board is following Brad, Jerry, and Fred’s collective wisdom about fostering an engaged/working board. Definitely don’t let them get bored on you!

May 142004

Who’s The Boss?

That’s not just the title of a mediocre 1980’s sitcom starring Tony Danza, it’s a question I get periodically, including last week in an interview. A writer I know is working on an article on entrepreneurship and asked me, “Before you started your own business, how did you like working for other people?”

The question made me think a little bit. I know what she was asking — how I liked being the boss instead of working for one — but the way she phrased it is interesting and revealing about what it’s like to be a CEO. One of the biggest differences between being in a company and starting or running one is that you’re not working for a person, you’re working for many people.

As CEO of the company, I work for a Board and shareholders, I work for our customers, and I work for our employees. That’s how I approach the job, anyway.

Return Path’s Board of Directors is my boss, even though I’m one of the people on it. I report to the Board, and the Board is responsible for hiring and (hopefully not) firing the CEO, so technically, that’s my boss. The Board is also made up (for small private companies, anyway) of representatives of our biggest shareholders. As the main owners of the business, they are concerned with the growth, profitability, and overall health of the company, and they want to make sure we are building shareholder value day in, day out. That’s one very important perspective for me to have every day.

But I also work for our customers. I have to see myself as serving them — and more important, I have to steer the organization to believe that our customers are at the top of our food chain. If I do, then things will go well in the business. We will have the right products in the market at the right time to bring in new accounts. We will have a tremendous service delivery organization that wows customers and keeps them coming back for more. We will beat out our competition any day of the week. We will keep people paying our bills!

Most important, though, I work for our employees. This is very simple. An organization thrives because the people who make it up come to work inspired, focused, and productive. When they don’t, it doesn’t. I can’t wave a wand and make everyone happy all the time, but I try to focus a significant part of my time on making sure this is a great work environment; that the managers and executives are religiously focused on developing, managing, and motivating their teams; and that we’re doing a good job of communicating our mission, our values, and why each person’s job is important to the cause. This one’s the hardest of the three to get right, but it’s worth the effort.

Certainly, I don’t respond to each of my “bosses” every day as I would a direct supervisor, but in the long haul, I have to balance out the needs and interests of all three constituencies in order to have the organization be successful.