I recently attended a Board meeting for a new company where a key issue at hand was the determination of what type of Board we were designed to be — a Strategic Board or a Working Board? At first, i was not sure if a clear distinction was possible, but it became quickly apparent that it was an important distinction to make in order for the Board’s effectiveness to be measured.
A strategic Board is one that would primarily work on the long term direction of the Company. It would be essentially hands-off on operational issues leaving it to the CEO and the leadership team to run the business. The assumption here is that the CEO is experienced and the team is capable of dealing with the tactical operational issues without concern of the Board. A strategic Board still has its formal governance and fiduciary responsibilities, but could spend most of its time debating and adding value to the long term direction of the business. A strategic Board is not for everyone, especially inexperienced first-time CEO’s, who often need regular guidance from the Board (or a Board member) on navigating short term issues. A strategic Board is often devoid of working committees beyond compensation and finance.
A working Board is one that is more involved in the running of the business. The Board would concern itself with short term objectives, setting metrics, tracking progress of each operational unit of the business, reviewing short term results, etc. A working Board tends to be made up of Directors with more time on their hands as the shorter term issues require more attention than setting long term strategy would. The working Board can be hard to migrate to a strategic Board as the Directors become used to being intimately involved with the business.
A strategic Board would meet less frequently than a working Board given that strategy does not often need to be revisited every month.
It seems relevant to decide what type of Board you are putting together (or already have), in order to determine how to interact with the Board, what types of materials to present and what you should expect as the outcome of Board meetings. From what i see, few tech startups go through an exercise to decide what type of Board they have (or want) so start from a confusing and perhaps conflicted position. One thing the CEO can keep in mind is the role of an Advisor can be to offset any weaknesses in the Board — if it is a working Board, attract Advisors who can assist with strategy, if its a strategic Board, connect with Advisors that can regularly be involved in the day to day decision making to help keep things on track.
It’s one of the many issues to consider when building a Company and one of the important items that helps align the contribution of the Board with the success of the business.
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Two articles from InsideSpin that relate to this post:
http://www.insidespin.com/governance-board-lt.php
http://www.insidespin.com/governance-evolution-board.php