“Competence is under-rated,” is not what one would expect to hear from an investor and member of multiple boards on the topic of what makes a great director.
However, for Rory O’Driscoll, a founding partner at Scale Venture Partners, do no harm may be the most important motto for a director to keep in mind.
“In the mind of the entrepreneur; they’re not thinking is my board great, but can I make sure they are not bad?”
But O’Driscoll did outline four key responsibilities that a good board member considers conscientiously.
Hiring and firing the CEO
Arguably the main role of a board is to manage the core executive of the team, this includes the hiring and firing of the CEO. When O’Driscoll sees a CEO take a bold and deliberate move against the advice of the board, he asks, “is this a mistake or a fatal error?” If the latter then the decision-making process becomes far easier.
Finance the company
The continued financing of the company is central to the role of the board. This shows the undivided loyalty to the CEO, vision and future that lies ahead. It is also important as a funding withdrawal from the board would act as a negative indicator to the wider market, preventing future external funding.
Agree with the CEO on their broad strategic direction
The alignment between board members and a company CEO is also crucial. However, there is some nuance. The views on a company’s broad vision stated at the beginning of the relationship must align, but that does not mean that the board and CEO have to agree on iterations and updates in the future.
Determine with the CEO when to exit
Exit expectations can be a challenging aspect of the board vs chief executive relationship. Often the board, consisting of VCs requiring billion dollar outcomes, will push for higher and higher valuations.
This could go against the desire for a company to be acquired for strategic reasons. However, as Jay Desai stated in a previous interview, exit expectations must be agreed upon pre-investment. Therefore, in acquisition discussions, this should not be a point of contention.
Ultimately, there is much more to a board member than mere introductions and advice. Entrepreneurs should think extremely carefully in the board formation process, this is an individual you can never get rid of, as long as you are private board seats last for life.
In addition, this person has a one-in-four vote of firing you. As Rory suggests, the most attractive trait in a board member is a “rational decision maker”.