CEOs of growing businesses—especially those who are applying technology to shake up an antiquated industry—are missing an opportunity if they don’t seek industry statesmen for their board who can balance their passion and tech-savvy with historically rooted industry experience and insight.
For instance, Axiom, a legal technology player, can attest to the power of bringing in an industry statesman to sit on their board. SEC Chairperson, Mary Schapiro was instrumental in bringing regulatory insights to the company mindset, making introductions to general counsel and participating, alongside Axiom, in legal roundtables on issues facing the $750 billion legal industry.
Likewise at Accolade, Senator William Frist helped establish relationships with medical experts able to assess the company’s efficacy, made introductions to healthcare and public policy experts, and leveraged business relationships to improve client relations.
Advisors of their caliber may seem out of reach to entrepreneurs running small and midsized companies, but there are many industry statesmen who are eager to help technology-enabled companies that are transforming industries for the good. Follow this advice for how to find, screen and select impactful board members and you’ll discover what a transformational difference the right people can make in your ability to lead and grow your business.
1. Leverage your private equity relationship. To increase your chances of gaining access to rainmaker-types, make sure the private equity firms you are talking with have a track record of placing independent, high profile individuals on their boards.
2. Research past performance. Make sure you know everything there is to know before you meet them. By the time you ask for a meeting, it’s too late. Your offer is implicit, and you’ll suddenly realize that you are the one being interviewed. Talk to others who have worked with this person in a board capacity. Find out if they approach the role with the energy and passion you are seeking.
3. Don’t get star struck. A great name is valuable, but it is much more important to find a person who really understands your business and will proactively work with you to help you grow. It’s not unheard-of for CEOs to be so intimidated by a celebrity board member that it undermines the person’s value and diminishes the productivity of board meetings.
4. Make sure you are on the same page. It is useless to have someone on your board, no matter how great they sound, if they are not willing to proactively market your company. During the due-diligence process of recruiting a board member, you need to confirm what level of commitment they are willing to deliver to ensure a mutual understanding is in place.
5. Understand how well they know your industry. Even the technology guru who brings a critical perspective to an outdated industry needs to understand at a micro-level what is going on in your business. Only then can they be an effective sounding board and provide valuable feedback and advice.
6. Caveat emptor! A board member is an expensive pick and it’s almost impossible to separate with a director before the end of their term (some people would rather part with the equity than undertake the difficult legal battle and risky majority vote). High profile directors usually receive 0.5% of the company, sometimes with additional equity on the way and a co-investment opportunity. To put this price in context, CFOs typically receive approximately the same amount of equity for a work schedule of nearly 365 days/year. A director, on the other hand, will typically log about 15 days/year under normal circumstances, but much higher during times of capital raise (e.g., IPO) or M&A.
The right board member will deliver much more than just a well-known name and another opinion at the board meeting. They will provide priceless leadership advice, proactively use their network to make connections, and in a perfect world, they will become a virtual “you” and act as an ambassador of your company.
The trick is to align your company with well-connected board members who are passionate about your growth, and eager to open the right doors for you.