McBurney On Boards
ON BOARDS
Kevin McBurney is the Vancouver Office Managing Director and Senior Client Partner at Korn/Ferry International, the world’s largest senior executive search firm. With his extensive experience in C level and Board searches across North America, he has seen countless Founders grapple with company growth and leadership transitions.
http://www.kornferry.com/consultants/KevinMcBurney/
Building Your Board
** Based on this interview with Kevin McBurney, chart out how you will build and maintain a Board that will ensure the health of your venture and meet your entrepreneurial goals.
From Elizabeth’s Live Interview with Kevin
1. At what point in their venture’s evolution, should entrepreneurs start building a formal Board of Directors?
“That’s a very good question. Entrepreneurs struggle with this and what they typically do is they get Board member recommendations through their accounting firm or their lawyers or perhaps their bankers. That’s where they tend to go. These people will often offer advice for entrepreneurs who have revenue of 2 to 5 million dollars or so.
If a company is on a real positive trajectory and the forecast is positive – the accounting firm is saying that the last five quarters you have had x percentage of growth – then you may want to think about an Advisory Board or Board. The Advisory Board may just be 2 or 3 people. For small evolving companies, an Advisory Board member is really someone with very senior contacts and solid CEO experience. Some grey hair. And they might be coupled with someone who knows the space that this entrepreneur and this company is in. You are tapping into their experience.
The typical Board size is 9. How do you choose who is on the Board? My recommendation to an entrepreneur would be that if you have a coherent, intelligent business plan, for the next 3 to 5 years – and not a lot of them do – then look at that carefully in relation to your skills and the skills of others that are working with you. What are you missing? Are you missing networks and connectivity to a customer base? Are you missing marketing and sales savvy? Are you missing very smart financial and tax advice? Create a skills matrix and go after individuals that meet those skills. Essentially it’s not unlike what we do in corporate board search. Be very thoughtfully selective.”
2. What are some key mistakes you see in how company founders build their boards?
“Founders building their Boards with friends or building them without devoting the time to think through the skills matrix. A Board should add competitive advantage to a founder or an evolving business. A Board should not be a bunch of your friends that you know you can tell them what to do and they aren’t going to get in your hair and ask tough questions.
A Founder should not be afraid of dealing with tough questions in this circumstance. I’ve seen people come together on Boards that have been put together by founders and the Board members are very weak – you look and wonder why are they there? They have no experience in the space, their financial literacy is zip. A founder needs to have the courage and the intelligence to go to people who have had significant success in what they’ve done and ask if they would help out or serve.”
3. What are some of the key differences you’ve seen between the work of a start-up board and the board of a well-established large organization?
“Korn Ferry did a survey back in 2008 on the behavioural competencies of an effective Board Director. At the top of the list, in terms of what people identify as competencies, was integrity and trust. Between the entrepreneur and the Board that needs to be there. That doesn’t just happen overnight.
The second competency that needs to be there is what I would call strategic agility. These are people who can see ahead clearly. They can anticipate future consequences and trends. You get this with a bit of grey hair. They have broad knowledge and perspective, They are future oriented people. They can paint credible pictures and visions of possibilitieis and likelihoods. Together they can create competitive and breakthough strategies and plans.
I mentioned courage earlier. That is there as well. But the other high score was on ethics and values. These are individuals that adhere to appropriate core values for the setting during both good and bad times. If the wheels start to wobble, ethics and values are pretty important to have present in a significant way on your board. These are people that act in line with those values.
Strong Board Values trickle down into the organization. Because people observe how these leaders behave. They practice what they preach. If that’s not there and it’s not talked about and lived, then it’s just fluff and nonsense.”
4. What are some of the common struggles you see between company Founders and their Boards?
Its usually disagreement on strategic direction. Here’s where the Founder wants to take the business and the Board, if it’s got the courage of its convictions, disagrees. Conflicts can arise when the Board doesn’t feel that it is getting the financial reporting integrity that they need to give the Founder guidance. Or it might be we don’t like what you’re doing on the marketing side. Or you haven’t got the right sales people. It can be functional disputes around talent, but I would say the biggest struggles are around strategy.
The other main area of Founder-Board conflict is leadership succession. The Board will say if you’re hit by a bus, then who have we got to replace you? Although it’s uncommon in Canada, American companies struggle when the Founder is both CEO and Chairman. The big institutional investors are attempting to convince significant companies to separate the roles. The Board Chair should be focused on the effectiveness of the Board, governance and the hiring and firing of Board members, setting the agenda etc. The role of the CEO is to run the business.
5. How can an entrepreneur know if theirs is a healthy, effective Board of Directors?
It’s clearly about the chemistry around the table. It goes to the competencies I mentioned earlier – integrity, trust, ethics, value, courage of your convictions, strategic agility. If those competencies are present in the Board and people look across the table and know that those competencies exist in the makeup of each individual in the table, then chances are it’s going to work very well. An entrepreneur has to be savvy in putting the Board together.
6. Anything you’d add here?
I’ve seen entrepreneurs put together boards that are intentionally weak so that they can control them. Sometimes entrepreneurs are fearful of boards. What do I need a board for? They haven’t thought through this whole piece of what a Board can contribute.
