The mythology of renegade founders building massively successful companies is unescapable. But of course nothing happens in a vacuum. What is oftentimes left out of the narrative, is who founders surround themselves with — their team, investors and partners.

One key element, easily overlooked or misunderstood, is the Board. For some, this seems to defy conventional wisdom: that the Board’s role is principally to “hire and fire” the CEO and approve strategy.

This is a mistake. The Board can play a pivotal role in a startup’s growth and ultimate success.

I had the opportunity to (virtually) sit down with Bill McNabb, the former CEO of asset management pioneer Vanguard, business advisor Ram Charan and Dennis Carey, the Vice Chairman of global recruiting firm Korn Ferry, about their new book: Talent Strategy Risk: How Investors and Boards Are Redefining TSR, about how to do just that.

In this piece, I explore four areas around how the Board can support startups. I’ll then take a closer look at the tactics that empower them in a subsequent post.

Ram Charan told me provocatively: “If you are thinking short term, and not building long-term, then your short-term will become shorter.” Without proper long-term planning, your firm and your team will not be relevant — and that will happen sooner than you think.

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This starts with the business objectives and the metrics chosen to measure progress against them. The authors suggest including key medium and long-term metrics or indicators, rather than short-term operational KPIs on current performance. The authors even go so far as to suggest for public companies to stop providing short-term earnings guidance and instead focus only on progress towards long-term goals.

The authors argue that long-term thinking encompasses a wide range of perspectives (and as readers know from my previous writing, I agree). And it is as much the Board’s role as the CEO’s to think beyond current execution, ensuring the company stays true to its long-term vision.

One crucial part of taking the long-term view is recognizing a company’s responsibility towards multiple stakeholders. The book explains how shareholders themselves “occupy a hybrid niche in business ecosystems. They are buyers, customers who have entrusted retirement and income and life savings to an investment company. They are also owners…It falls on Board to make sure ethical responsibilities are done.” A stakeholder view is not in opposition with a shareholder one. As Bill explained it to me: “We are having the wrong debate. It is not financial or impact. It is about And.”

Many companies have aspirational vision statements. This long-term and metric-driven view will equip the company to stay true to its vision. It creates a virtuous cycle of sorts. After all, you are what you measure.

To power this, both short and long-term metrics need to be agreed to and reported on. This means both operational and financial metrics, but also impact & ESG metrics.

In all startups, talent is the key resource. It is the team that ultimately conceives the new directions, seizes opportunities, and makes the companies agile. It is the team that manages risk. And recruiting is often a limiter to growth.

Since talent is so fundamental to strategy and execution, it can be an area for Board support. Of course, this doesn’t mean that the Board needs to be driving hiring strategy or HR policies. That is firmly the CEO’s and the company’s job.

But CEOs can (and should) engage Board members to foster greater visibility into the company’s talent. Sidecar Health (an investment from my firm and where I am a Board member), did just that with its Board. The company recently onboarded 6 new senior executives and held a special session for board members to meet new hires and learn about their backgrounds, and vice versa. The relationship goes both ways. As Patrick Quigley, Sidecar Health’s CEO told me: “We can move faster if our senior leaders can leverage the breadth of experience and networks of our board. That’s why we strive to unlock the potential of that direct connection.”

Building relationships between key talent and the Board can also be necessary. As the authors explain, 2% of the staff likely drive 80% of the outcomes. And so, it is the Board’s role to understand who those 2% are, and how best the company can recruit, retain, and grow them.

The Board can support recruiting by helping ‘win’ the candidate. But to do this, they need to be able to tell a compelling story.

The Board can push the company on keeping the right culture. Turning a blind eye to cultural challenges will cause problems over time, just look at the case of Uber where the Board did not pay sufficient attention to the issue, until it was too late. Culture is a key strategic issue because not getting it right is critical to avoid. One role here is to support an annual corporate cultural audit (which is more likely feasible among the larger companies). As Bill builds on the point, “from a fiduciary perspective, it is an absolute responsibility. Where there is a cultural failure, there is almost always a talent and leadership failure.”

And because talent is so critical, reporting metrics to the Board is also important. What is the conversion of hires? What is the retention? What is the growth? What is working and not? If it is part of the conversation, it can be reported and improved.

The Board should serve as a sounding Board for the CEO. One approach is not just to opine on strategy, but also structure an outsider’s view to bring different perspectives.

In this vein, the authors talk about the counterintuitive advantages of activist investors in public companies. Not because they are necessarily pleasant to work with (many CEOs might exclaim the contrary) but because activists challenge accepted wisdom.

Even in startup land, where activists hedge funds are not part of the world, Boards can bring highly valuable outsider perspectives. And in highly regulated industries like financial services, which also have multiple financial providers beyond equity, like debt for lend-techs or regulatory capital for insurance companies, this is all the more critical.

Outsider views can be structured for decision making. As Dennis explained it to me, Warren Buffett took this approach for all M&A deals, engaging two sets of bankers and consultants as advisors. One would argue the case for and the other against. Because there were economic interests in favor of doing the deal, structuring the opposite supported having the right views in the room. He credits this avoiding key pitfalls more than once.

Broadening the company and the Board’s thinking can be built in through diversity. This starts of course with gender, but also socioeconomic and cultural diversity. For financial inclusion startups for instance, bringing underrepresented customers into the conversation can be beneficial.

The Board’s role is not just to manage growth, but also resilience. This is important for all startups, but in fintech it is paramount. When you’re dealing with people’s money, life savings, etc., the responsibility is larger than for a generic consumer app or software solution. Often fintech entrepreneurs are “Creators”, building something new, that hasn’t been done before.

There are a range of events that can arise and cause calamities – cyberattacks, bad actors and fraud are key risks in fintechs. Have these been thought about and addressed? It also has to do with the resilience of the business. Do you have the resources to survive? Are you thinking like a camel, and making sure resilience is built into the business model?

The Board can play a key role in risk management. Risk management of course doesn’t mean risk avoidance. That’s impossible in a startup which is risky by nature. But it is about understanding what risks the company is taking, the tradeoffs to mitigate them and the options over the long term.

This process starts with an understanding of the risks the startup is taking (and those they are not taking). There are tradeoffs in every decision, which cross-cut against other objectives like talent. For instance, as the book explains: a company can choose to pay under market, with the understanding that it will lead to greater churn. Or the company can pay over market and decrease churn. Is the company willing to take that risk? For everyone? Who are the 2%? What is the risk for them specifically? This is a strategic question that can be aligned with the Board.

The Board can be a valuable asset to support entrepreneurs if channeled properly. They do not, and should not run the company, but can complement, support and amplify the CEO in their work. I’ll explore actionable practices to support Boards and make the most of them in fintech startups in the future. Stay tuned.

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