Surviving Board Dysfunction
My Board of Directors is dysfunctional. We are always in conflict with each other and cannot agree on decisions. Is there anything I can do?
Everyone has the fantasy of an aligned board whose members engage constructively and bring fresh, vibrant perspectives and skills. I give a few pointers in the class on boards of directors and in an earlier blog post. The reality, however, is often quite different.
I assume you have tried all the simple things, like regular 1:1 meetings with your directors where you can use your Svengali-like powers to charm them, all day sessions where everyone can hash through their strategy thoughts and feelings in some cathartic manner, or rock climbing or paintball team-building sorts of exercises, or whatever the trendy virtual equivalent is nowadays. If that all fails, you should pinpoint your real issue.
First, where are your neutrals? Depending on your company’s stage, you might have two Common directors, two Preferred directors, and one to three independents. The independents are supposed to keep factions in line by exercising judgment and bringing industry and business credibility. Some of my worst experiences as a director are times when the board was not neutral, usually because the independents utterly failed by blindly siding with one faction or not exercising independence or care. Perhaps the voting agreement gives you and your investors the right to pick some new independents and try again.
Second, perhaps some of your directors lack competence or temperament, or do not care or engage. If you cannot replace those directors, you can try to add new members to alleviate the competence deficit. Maybe you need more directors with experience at your particular stage of growth, or in your industry, or with current operational problems in order to scale. Identify the missing skills and propose some new directors who can help bring rationality and judgment back to your boardroom.
You might also try making your board at least half women. Female directors are proven to dramatically lessen conflict on boards and help boards make better ultimate decisions.
Third, are your investors the problem? You cannot fire your investors, but perhaps the investors might consider appointing a different director. I do not recommend you consider this option lightly, as the original champion for your deal will almost never be removed from the board and you risk being seen as troublesome, which could tank the lead fund’s support for your future rounds. Maybe you could, in extreme circumstances, even try to arrange a buyout of a troublesome investor.
Fourth, if your board is just not aligned on your business objectives, you have a fundamental problem. It is important to have engaged, business-oriented disagreements, even with a little table thumping and the occasionally shouted colorful phrase. But such discussions must end with a decision everyone supports. If you cannot reach consensus, consider methods to resolve deadlocks. Try targeted, short-burst experiments to determine which course achieves the company’s mission better. Spin out a business with an adjacent strategy and let the dissidents invest in it. Submit to the judgment of trusted third parties to break deadlocks.
Fifth, perhaps your directors need more psychological care than you are ready to give as a CEO. I am skeptical of the efficacy of lead directors for startups, but they can be most excellent for boards that require behind-the-scenes politicking and therapy sessions between meetings to relieve the tensions prior to board meeting eruptions. A lead director can actively listen to all parties and channel feedback in an organized, constructive way.
I should note that just because someone is behaving obstreperously does not make the person wrong. Control your desires to taser the speaker and listen carefully to the inherent business concerns and advice. Beneath it all might lie facts or testable assumptions.
That leads to my final point: perhaps you are the problems. Sometimes boards are broken because the CEO is unable to handle the company or situation. If you have lost the fundamental confidence of the board you might mistakenly perceive it as dysfunction. If you care about your company’s success, you need to listen carefully and accept if you need to step into a new role. Strong boards make better companies, but you must be up to the challenge. Companies frequently outstrip founders’ abilities, so be gracious and magnanimous if your company needs stronger leadership than you can provide.
An investor I know says that if the board and the CEO cannot align, one of them needs to go — and it will not be the board departing. Whatever the irritant, you need to find the thorn and remove it, else you will likely soon be departing, or your company will find itself soon in the land of the startup dead.