Five Mistakes That Startups Make When Choosing a Board Member
- Name recognition is everything- Small startups often think that if they can get a well known person to join their board then the company’s credibility is confirmed. The problem is that the effect of getting a big name person to join is very fleeting and the likelihood that marquee name will dedicate the time and do the hard work of being an effective board member for a start up is low. Great idea just not very practical.
- Our new board member will bring….new customers, investors, employees. Once again this is very short sighted as the highest priority in selecting board members should be to bring experience, wisdom, and desire for the organization to succeed.
- Bigger is better- Thinking that a successful senior executive of a $10B company will provide our startup with valuable advice and expertise is not often true. The reason for this is that the large company senior executive is often several layers removed from the day to day decisions that startups make to survive. Making decisions without all of the big company support structure and analysis data is what startups do and they need board members that can operate in that mode.
- CEO’s know everything. Startup CEO’s feel that loading up the board with CEO’s of other successful companies can help the organization win. Startups typically need a variety of functional experts on the board get the most out of the board’s efforts. A careful analysis of gaps in the senior management and the types of strategic thinking the company will most benefit from are much better criteria to use for selecting board members.
- Friend of…. The main investors, The CEO, etc. is not a good idea. Startups need to get the most out of their boards and just because the main investor or the CEO knows and trusts the person does not mean they are the right person for the board. Open minded thinking and straight are talk much more likely to come from a strategic, independent selection than someone beholden to another board member or investor.
Building a great board takes real work but the dividends it pays are great and worth the effort.
An analogy to consider when making key board selections…getting married is fun and easy but getting divorced is painful and expensive.