Putting together a good board of directors for your company is an important but a frequently postponed task when you are trying to scale up your company. But if you have received an investment from a venture capital fund, chances are you will need to put together a decent board sooner rather than later—if for no other reason than because it is a requirement in the investor agreement.
While there is no one definition of a good board or high-quality board members, you need people with high levels of integrity and commitment, who collectively bring to the table enough of the right kind of experience in business, finance, corporate governance, marketing and other relevant areas.
Boards can add real value to your company. Many Indian entrepreneurs have a black-and-white view of the board in the early stages: Either they think it should be totally pliable and simply sign off on what the promoter wants, or else they fear it will pose obstacles along the way. So they are cagey about board expansion, restricting it to family and close associates.
The right board, however, adds value in several ways: It brings together the collective wisdom and networks of a number of very good people, leading to better governance of the company and hopefully better strategic choices being made. So seek out and appoint high-quality directors who are genuinely independent.
Appoint board members carefully
It can be awkward to ask someone to step down. Therefore, a wrong appointment can create serious difficulties, especially given the influence a director wields in the company. Also, no really high-quality director would wish to serve on a board that includes poor-quality people. So recruit carefully, even if it takes more time than you had anticipated. Get to know each candidate well, do a thorough reference check and set the bar high.
Adding value: Appoint directors who are genuinely independent.
Don’t appoint on the basis of ‘name value’ alone
This is a trap that entrepreneurs in India often fall into. They go after big names, assuming that this will add credibility to the company. While that is true, well-known people usually have many demands on their time. Also, they often have a larger-than-life reputation; their real ability to contribute may be a little less than your expectations. You need directors who will be able to give you time and mindspace when you need them.
Build your board at the right time
It is important that you don’t do this too prematurely, nor leave it too late. If you do it too early, you will end up spending too much time managing the board and too little building the business. If you wait too long, you may have ended up building the wrong kind of company.
Invest time in the board
Managing the boardroom and working with it does take time and, yes, consumes bandwidth. A good board member expects to be given the opportunity to contribute and that’s good for the company. This means you will have to spend time engaging with board members, both during and outside meetings.
Choose the right mix of skills and experience
You need people with the right blend of skills and experience. At Naukri.com, we picked people who collectively had experience in marketing, sales, engineering, product, venture investing and finance. At least two had been entrepreneurs in the past and have built companies. Several are independent directors in companies that are bigger and perhaps better than ours. Two have more than 30 years’ experience of diverse kinds.
The chemistry must be right
It is important that you get along with your board members and feel comfortable enough to level with them, especially if there is bad news to be delivered. At the same time, they must not be your buddies or your cronies. Often, a strong board can save you from yourself. But at the same time, remember that the board is your ally and not someone whose only job is to police you.
The author is co-founder and chief executive officer, InfoEdge (India) Ltd, which runs the Naukri.com website. He writes a monthly column on careers and enterprise.
Write to Sanjeev at firstname.lastname@example.org