Building a Strong Board - Part III: Onboarding and Transitioning Board Members
Start thinking about your board at the beginning of your search – your thinking will change depending on the business you acquire and your experience with your investors, but you can develop relationships throughout your search process that might factor into how you put together your board. The earlier you begin to think about the dynamic and fit, the better your board mosaic will be.
Board creation accelerates throughout the acquisition process. As you learn more about the business, you’ll learn more about what you need. Investor seats typically get set aside before independents – but make sure that these decisions are coordinated. Don’t forget you can also add independent directors to the board after closing. If you need 3-6 months to learn about the business’ needs, it’s more important to pick the right person than to get someone in on day one.
Electing & Onboarding
Investors are able to elect the board – the majority of the preferred stakeholders get to elect the board. Usually, the searcher recommends the initial board to investors. Investors decide to invest or not, and that’s their vote. If you’re adding someone later, the CEO and board do all of the work – it’s usually procedural to add a new board member.
We focus primarily on how to onboard a new member to an existing board. But the same principles apply to bringing the Board together in the first place.
Provide new board members with information and access, including:
Ensure two-way communication:
Transitioning
Board tenure for investors should be every 2-3 years. They don’t have to leave at the end of their tenure, but it provides a trigger for discussion. It gives both CEO and director a chance to raise their hands and say if a change is desirable. You might stagger the tenures across your directors so you never have a mass exodus.
Your board changes over time depending on what your business needs – you may create a board and two later, your company is facing a new world of challenges. Be open to that change and evaluate whether your board members still make sense.
Other catalysts for changing your board might include:
If you find yourself needing to transition a board member, and there aren’t any tenure limits, be direct and honest, and engage your other board members on the decision. Don’t make the call by yourself. Whether it’s other board members or investors, get advice and they can help you think it through. They might even help you facilitate that conversation.
Want more?
Reach out to us if you’d like to talk through putting together a strong board for your company. You can also check out the first two parts to this three-part series: Building a Strong Board - Part I: What to Look for in a Board Member and Building a Strong Board - Part II: How to Source, Vet, and Attract Board Members.
