Organizing an optimal governing board of directors for your organization is an important yet daunting task. Ideal boards look differently from company to company and need to factor in the organization’s goals at a macro and micro scale. Here are a few scenarios in which companies decide to add or transition board members in the startup, small-cap, and non-profit environment. 

1. Build around the founder of a startup. You and your co-founder want to secure a Series A financing round, and the potential investor wants equity and a board seat. This is the first time you are having to consider another voice at the table.  

2. A profitable, high-growth organization is in the midst of transition. The corporate executives that brought the company from zero to 50 million in revenue are exiting, while new leadership comes in to take the organization to the next level. The board of directors is changing, and what these new additions will bring is critical to the future. 

3. The non-profit you have been associated with is looking to network into areas enriching its current focus. Their mission is to serve a specific community population, and they want to widen their reach. They are considering an additional board director to connect them to potential investors and thought leaders in a specific location with the right relationships.  

The nuances of a governing board or board of directors vary with the type of organization and the intention of the business. As an executive recruiter bringing leadership to organizations across all sizes, there are a few universal questions to consider when building a high-functioning board of directors.  

1.    Clarify your company’s vision and identify the gaps in your game to get you there. List what each current governing body member brings to the party and identify specifically what experience, skill sets, contacts, or investment your current team needs. Look beyond investors alone. Seek those who align with your North Star yet bring a diversity of thought. Be cautious of “Friends and Family” members, as each seat is high-value real estate. We need this board to drive the company’s success and ensure whomever you consider brings true value to the vision.  

2.   Understand the reciprocal value to the board candidate. What is the interest in the company? If part of the agreement, board compensation should not be the primary driver. Motivations can range from personal passion and giving back, leveraging operational excellence in a different environment, exposure to an extended network, career development, etc. The key is understanding what is in the relationship for both parties before making a commitment.  

3.    Understand engagement and communication style. If the individual is experienced and brings domain expertise but is bullheaded and doesn’t listen well, the board meetings become inefficient and dreaded. Reference individuals who have worked with them on other boards or, if a first-timer, in other operational leadership roles for a year or more. Transparency and open communication are mandatory on the most effective boards. 

4. Ensure the size is appropriate for the stage. The number of board members can range, although a general rule of thumb is five at Series B and seven at Pre-IPO. I have seen startups with 40 people struggle to get executive alignment with a board of nine. Too many people were involved, bogging down decision-making, and speed is of the essence in a young company. 

5. Set a committed review period. The tenure of a board member varies, and expectations should be set upfront. The needs of an organization change as it evolves, and it is fair to all involved to evaluate the ongoing contribution over time. Replacing a standing board member can be a tremendous distraction if rules of engagement are not initially established. 

The Board of Directors of an organization can play a significant part in a company’s success. The importance lies in understanding our goals, what expertise will get us there, and how the team harmonizes optimally. The right people in the right positions can supercharge the right team. Clearly define your needs and your map to get there, and carefully assess who you bring in to help.