A couple weeks ago I sat down with a new CEO of one of our portfolio companies, and we discussed goals for 2007 and what I and the board expected of him. Yes, there was your usual conversation about getting more customers, building out a team, and ramping up revenue while managing costs, but one of the most important points I made to him was in how to communicate with the board. I can tell you that one area where many first-time CEOs fail is in communicating and working with their board. Either they don't give you enough information, they give you too much, or they feel that the only news to share is good news. I have written a few posts in the past on board communication including We Don't Like Surprises and the VC/Entrepreneur Relationship. Given how important this is, I thought I would share a few simple thoughts with you.
With respect to your information flow, make it timely, transparent, and relevant:
1. Timely: we don't like surprises. Tell me in advance. When you think we are going to miss the quarter by a significant amount, don't tell me 2 days before the end of the quarter, tell me as soon as you can. We are partners and this gives us all an opportunity to prepare contingency plans in advance or control our hiring before we run into a wall. CEOs who communicate well make sure the bad news travels just as quickly as the good news. If you don't tell us early, we can't help you.
2. Transparent: let me know as clearly and concisely what the issue is and don't spin me. Transparency means sharing the raw data with me as well as the short summary of why something happened positively or negatively. If we don't get a deal this quarter, and you really don't think it will happen, don't keep it on the sales pipeline and set the wrong expectations for us.
3. Relevant: I don't need to know every little detail of your day-to-day operations but we also do need to be apprised of what is important. Relevancy of course changes with company stage as well. Knowing as soon as possible about the first couple of engineering hires is relevant in a startup but knowing about the 10th engineer does not require a real-time update. If you not sure if a specific update is relevant, err on the side of more is better. Sending an email update out to the board is simple, and trust me, if the news is important, those board members who are more engaged or concerned will reach out to you. If it really is a big issue (positive or negative), I suggest calling a few of the board members to discuss with them.
At the end of the day, information flow comes down to trust - board members trusting the CEO and the CEO trusting the board. The CEO-Board relationship is a two way street. Board members have to be just as direct, open, and upfront with respect to our expectations for the CEO and the management team. This means getting a plan in place for the year that is discussed, vetted, and ultimately finalized which the board and the management team sign up to. If you abide by these simple rules, I can assure you that these tips will go a long way towards helping you build a very strong and healthy relationship with your board. At the end of the day, keeping any relationship strong and thriving is dependent on how well everyone communicates with each other.