Jul 22, 2024
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Last week, I participated in a roundtable discussion with Managing Partner Chris Sugden exploring recent trends on growth-stage boards. Having sat on multiple private and public company boards, I’ve developed an appreciation of what is needed to make a board truly effective and successful. While it’s crucial for boards to remain nimble and adapt to market headwinds, many characteristics of successful boards remain true no matter the macroeconomic environment.
In any case, growth-stage companies should fully optimize their boards to scale more efficiently and maximize enterprise value.
Here are three trends I’ve seen from successful growth-stage boards:
1. They run like public companies.
Public and private boards are not as different as one might think – or they shouldn’t be, anyway. A common mistake I often see on growth-stage boards is when the investor’s voice outsizes the independent director’s voice. I believe both parties have important and, at times, distinct roles in the boardroom. Investors have done deep diligence, have well-vetted investment theses, are dealmakers, fundraise, and bring a high level of financial acumen and discipline to the table. On the other hand, independent directors bring operating experience, P&L, and functional expertise; have led multi-disciplined teams; and know how to drive the KPIs that result in shareholder value creation. In short, they’re executors who understand, firsthand, the complexities of running a business. This makes independent directors an incredibly valuable resource for CEOs as they can often serve as a trusted advisor to the CEO and a conduit between management and the rest of the board.
Speaking as an independent director who was placed by and served on an Edison board alongside Chris, I was pleasantly surprised by the full extent to which Edison embraced my role and supported my independence. I was asked to chair the compensation committee, my opinions were sought out and respected, I often acted as a facilitator, and at no time did I feel that I had to echo Edison’s viewpoint. I specifically remember an instance when I had a different perspective, and I gave Chris a courtesy heads-up. He was unfazed and replied, “This is exactly the reason I asked you to be on the board.” In my mind, this is the Edison Edge.
QUICK TIP: Make clear the role of independent directors from the get-go, ensuring that every board member understands the unique value they (are expected to) bring. If you’re having trouble getting an independent to lean in, consider asking them directly for their feedback on a relevant issue.
2. They don't wait until the going gets tough to lean in.
In many cases, boards allow the macroeconomic environment to dictate their activity level. They operate with a heavier hand when market conditions are tough, and they ease up when things are going well. Successful growth-stage boards run differently. They understand that positive market conditions are an opportunity to lean in, accelerate momentum, build trust, and fortify relationships. This way, when the going gets tough, the board’s foundation and relationship with the management team is rock solid. Thus, it can respond proactively, not reactively.
The best CEOs utilize their boards far beyond the quarterly meetings and monthly financial calls. They understand the functional expertise and skillsets of each director and tap into them to help solve problems and work through issues. This can involve asking a director who has e-commerce expertise to review the e-commerce strategy with the marketing team. Alternatively, it can be more formal and involve the creation of a short-term special committee to help the CEO think through a specific challenge or opportunity. Fully engaging and utilizing my board was one of my secret sauces as a CEO.
QUICK TIP: Sub-committees are a great way to keep board members engaged on critical issues throughout the fiscal year. In times of crisis, or when extra attention is necessary, special committees can be formed to address more time-sensitive issues.
3. They prioritize relationship building.
People are everything – on private boards, on public boards, on every board. Not too long ago, many boards, especially in the public arena, did not focus enough on people and culture as their remit was limited to succession planning and compensation. Thankfully, that is changing.
The best growth-stage boards put people first and thus prioritize relationships above all. It is critical to note that this extends beyond the relationship between board members and the CEO and should include exposure to the entire executive leadership team. This helps to create a transparent culture that is rooted in trust and accountability. It also allows the board to have a more informed opinion about leadership strength and succession.
QUICK TIP: If you’re looking to strengthen relationships between your board and your management team, consider hosting a dinner for both groups the night before a board meeting. Encourage department leaders to share updates and solicit feedback in a more casual environment to ensure alignment and build trust before the official session.
When done right, growth-stage boards can truly be a company’s secret weapon. If you’re looking for support strengthening your board, reach out to us at edge@edisonpartners.com.
