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The first element of trust is that everybody feels that there's transparency.
And there are obviously conversations that have to take place in a certain way,
and there are some things that are just inappropriate to blurt out.
But we basically know those.
That's not what I'm talking about.
I'm talking about being protective of information or
feeling like you have to create your image with your board in
order to leave the other board members feeling confident.
The confidence comes from the, ultimately by the way,
all of the confidence comes from the performance of the company.
You can be the best showman in the board room, but in fact,
over time if you're not producing results, it doesn't matter.
And the converse can be true.
You can be a little, kind of, [SOUND] maybe timid in the board room for
whatever reason.
Maybe it's your personality, but you are getting results.
That's where the confidence comes from.
The other place where the confidence comes from is when your board members see that
you are running an efficient meeting, because their time is valuable,
they know your time is valuable, they know the company is invested in this meeting.
And so, when they see you coming and
you're actually the structure of the meeting, and the way the meeting is run,
and the way each person's having a chance to talk,
the CEO's not doing too much talking, progress is being made.
That is another way that a CEO can instill confidence with the board.
But I guess I reject the notion itself that you're
supposed to create confidence or project confidence.
What you're really supposed to do is add share holder value and
run the company well, and run the board meeting well.
The rest will follow.
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If you leave those board meetings consistently, prepared to do something
different because you learned something from the board meeting.
That's a mark of a good board.
And plenty of CEOs are this way, they think a good board meeting is when they
leave and nobody got mad at each other and they accepted all their proposals.
I don't feel that's the case, because then the board just became compliance.
So, first step is diagnosing, do I in fact, have a good board or not?
And I guess my point is that, some people's definition of a good board is
actually the opposite of what I think is a good, well functioning board.
But let's assume you don't feel like you have a good functioning board.
Then you have a question about, is it the people or is it the process?
If it's the people, that's a tough fix because you are going to have to
turn over people in the board.
If it's the process, then I think the easiest advice is to seek someone,
either on border outside your board and say, it's not working.
I mean, I get these really smart people and we all get along, and
we show up on time.
But every time I leave the board meeting,
I just don't feel like I got any value out of it.
And then you diagnose, well, how do you run your meetings?
And what materials you send out?
And let me see materials.
And usually, someone who's got some experience will be able to diagnose it and
say, here's your problems, and if you fix these things you'll fix your process.
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With a public company, there's a lot of regulations and
rules around what you can and can't do.
What you should do.
There's things that have to take place in board meeting.
Largely, all of those don't exist in a small private company.
Secondly, in a large public company,
the board members tend to not be significant shareholders.
They may own just tiny percents.
So, if you can imagine lets say the Board of Disney.
Although you might have a few old family members from the Disney family,
most of those shares are spread among funds and other individual investors.
So, but with a small company, often times the entire ownership group is in the room.
Or let's say 80% of the ownership in the room.
So, you start with different demographics.
Secondly, generally, the CEO is at a different stage in their growth.
So, if it's a mature company, you're looking at how do we grow 5% a year or
how do we make these little moves.
But with a small or medium size company, you're trying to move in leaps.
And that requires more of a mentorship role from the board.
And you kind of get more into operating details, and
those are some of the kinds of differences.
But there aren't the guidelines or
the framework that exist with public companies and private companies.
So, what oftentimes happens, and I think it's a failure of small boards.
Is that people kind of wing it, and the CEO wings it,
in terms of what he or she writes in the board material.
Then the board members kind of show up, and
they're not quite sure where's the line between helping them with operations.
And them I'm actually starting to supplant management as opposed to
supporting management?
So, those rules are generally not as clear as they might be in a larger company.
Norms that are clear in a public company or
not necessarily clear in a private company, I'll give you an example.
There are attendance rules with public companies that are defined.
There are no attendance rules that are defined in a small or medium size company.
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Traditionally, a non-profit board is a collection of your large donors or
people who can have access to large donors and bring in money.
So, it's really a development board.
I think the world is moving, and they're moving.
The non profit boards are moving more in the direction for
profit boards, which is that we want operational strategic help.
But in order to do that, it can't just be the people who write the big checks.
It has to be people who understand operating issues and
understand the difference between the operating issues of a non-profit versus
a for profit.
So, the problems that are occurring,
which I think over time will get fixed, is we have our largest donors, but
they don't know how to run businesses because of where their money came from.
But they were excellent as fundraisers.
The next is we have a wave of people are coming in saying,
we're going to run non-profits like for profits.
But the problem is they don't run the same,
because the metrics of success aren't the same.
In a for profit, it's simple, over time, more cash has to come in than go out,
it's that simple.
Non-profit is different, they're mission driven.
And I'd like to think about the two as in a for profit, your goal is to make money.
The mission is drives that.
So, the mission drives the financials.
Non-profit's exactly the opposite.
The financials drive the mission.
And you need board members that understand that.
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I think, really, the best boards are the ones where the CEO has
the confidence in themselves and in their direction.
That they're free to talk about the things that are worrying them,
that are troubling them.
To say, I have this issue here that is keeping me awake at night,
and I have to be honest with you, I really don't know which direction to go.
And I'm hoping to take advantage of the five of
us being in the room to give me some advice on what I should do here.
That's a confident CEO.
A CEO that lacks confidence is one that wants to protect themselves and
create an image that they have all the answers,
but of course, they don't have all the answers.
And by the way, they're fooling no one,
because the board members know that nobody has all the answers.
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