Building an Effective Board From Two Types of Directors

Entrepreneurs must make many critical decisions during the long process of transforming an innovative idea into a profitable global company. Perhaps no decision is more important than choosing the right board of directors.

The right board members offer an outside perspective on—and often personal experience with—execution and growth issues, strategic direction and key hiring decisions. Your board should not only offer strategic guidance and vision, but also be willing to make introductions to potential hires, partners, customers and investors.  As an entrepreneur, you need involved and supportive board members you can lean on during the first years when you don’t have full management teams in place, but also board members who have the expertise to guide the company in later stages through growth, partnerships, acquisitions and potential exits.

Some of the key issues board directors should be involved in include: selecting the right management team; compensation and how it’s linked to actual performance; the right strategy at every stage; and monitoring company health, strategic planning, setting key objectives, performance and risk.

When setting out to build a board, the first step is to make a list of the types of needed expertise. Of course, you want executives who know your business inside and out and who have built companies in the space from the ground up. You also want connected partners who will introduce you to key players. But you may also need access to very specialized expertise that only a few people possess. Work directly with your venture investors to get the right people around the table.

Secondly, make sure you get the right types of board members. Two main types exist. The High-Maintenance Board Member wants to get involved in every aspect of your day-to-day business. Avoid these people because they will waste the CEO’s precious time and will distract management from executing on important goals. You don’t need the organizational confusion of board members who act like part of the everyday executive team.

The second type of board member is the Value-Add Board Member – and these are the folks you want. These people bring focused expertise to the table and jump in when asked for advice or when they believe they can add real value, but they leave the day-to-day operations to the CEO and his or her management team.

How do you tell the difference between the two types of board members? That’s one place your venture investors can help—because they likely know your prospective directors personally or have at least run across them in their network.

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