Tips for Founders: Building and Managing a High-Performing Board

By Cat Thoreson
June 19, 2023

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Why founders should think about their board strategy before they raise funding.

Building a high-performing board is crucial for the success of a company. The boardroom plays a significant role in shaping the direction and growth of every company, and especially of a nascent startup. To help founders navigate this important aspect, Dr. Deborah Hemingway, Managing Partner at Ecphora Capital, presented insights into building and maintaining an effective board during this month’s installment of BioBuzz’s Entrepreneur Seminar Series. 

The seminar, which was held at City Garage Science & Technology Center, is home to Ecphora Capital, The Launchport, RPM Tech, BioBuzz and many others, is the second presentation of BioBuzz’s Entrepreneur Seminar Series, Board Readiness and proved just as powerful as the first, Getting Ready for Your First Round of Funding. 

The seminar’s attendees, who ranged from early growth stage founders to storied Baltimore CEOs, were as regarded and impactful as the content that Hemingway delivered. All benefited from Hemingway’s humor, hypotheticals, and, of course, knowledge of high-performing boards, the significance of which cannot be overstated. 

“So often the success, or not, of companies is determined in the boardroom. Even companies with promising ideas and strong momentum can be stopped in their tracks if their boards do not operate as one,” said Nick Stewart, Partner at Duane Morris LLP. “[Hemingway] conveyed with precision what founders and investors alike have to consider as they build the body that will help guide the company to future heights. This is an immense value add to our early-stage ecosystem.” 

Before we dive in further on how to build and manage your board, it’s important to level-set on what a board actually is. And no, it’s not this… 

Perhaps surprisingly, what the board is is not a trivial matter. The board we’re referencing has several definitions. While they all unanimously establish a board as a group activity (bolded below), the function seems starkly different (bolded and italicized):

a group of people constituted as the decision-making body of an organization. (Oxford University Press)

is an executive committee that jointly supervises the activities of an organization. (Demandbase)

a group of people who represent the interests of a company’s shareholders. (BDC)

a group of persons having managerial, supervisory, investigatory, or advisory powers (Merriam-Webster)

So what really is the purpose of a Board?! 

Hemingway, who agrees with the board as a group activity, proposes the board’s primary responsibilities as being four fold: Strategic, Accountable, Investigatory, and Decisive (SAID). These responsibilities include assisting in establishing the company’s mission and strategic plan, evaluating and supporting the CEO, providing oversight for financial, technical, and legal matters, and making decisions in the best interest of shareholders.

Now that we’re level set and have a clear understanding of the purpose of a board, let’s explore three key tips for founders when it comes to building and managing their boards.

Tip #1: Set Up Your Board… ASAP  

Contrary to common practices, Hemingway advises founders to establish their board of directors as soon as possible. While C-corps are required to do so upon formation, even LLCs can benefit from early board setup. By creating a board before it is a necessity, founders can gain several advantages:

• Develop comfort and confidence in conducting board meetings.
• Establish and refine the boardroom culture and rules.
• Benefit from ongoing practice and experience before facing critical challenges.
• Screen and evaluate independent board members to ensure a good fit.
• And, most importantly, gain diverse perspectives and guidance in building the business.

Hemingway paints a vivid picture of the board’s role regarding the benefits of the board’s perspective and guidance… 

As a founder, you’re swimming in the vast sea of entrepreneurship. At first, it feels like you’re in calm and clear waters off of a tropical island. However, as you venture further, you encounter waves. And more waves. And then the sea starts to get rough. Really rough. Some waves you successfully navigate over or through, while others crash down on you. They are tossing you about, wearing you out. Eventually, you become overwhelmed, unable to see what’s happening around you, and seemingly at the mercy of the waves crashing all around you. Interestingly, and thankfully, your Board members are not in the same boat. They are not being tossed around. Because, actually, they are not in a boat at all. They are in a helicopter. They’re observing from above, witnessing your struggle as waves continuously engulf you. And from this perspective above, they can see beyond each wave. They have a clear view of where you were, where you are, and where the destination is. They can see to guide you through the chaos, wave by wave. They help you navigate, avoid the most dangerous waves, and maintain your sanity (and hope) along the way. And then you land on shore. 

So establish a board early and use them! 

Tip #2: Set a Term Length From The Start 

The composition of a company’s board of directors undergoes changes over time, as the company progresses and evolves. The board typically consists of a combination of founders, investors, and independent members. The presence of these different perspectives and expertise can contribute to the overall effectiveness of the board. However, to prevent voting deadlocks and promote decision-making efficiency, Hemingway advises an odd number of board members, such as 3, 5, or 7. While boards of one do exist, she doesn’t recommend them for the same reasons as setting up a board in the first place. 

Hemingway emphasizes the importance of independent board members and their role in providing diverse perspectives, cultures, backgrounds, and viewpoints. This diversity can help identify blind spots, challenge groupthink, and bring new ideas and insights that might not have otherwise been considered.

Regardless of the specific composition of the board, it is crucial to establish certain expectations, compensation arrangements, and term lengths from the outset. While the duration of board member service can vary widely, ranging from months to an indefinite period, it is generally wise to define a definite term length with independent directors, typically spanning two to four years. This approach provides the company with the necessary flexibility to adapt to changing circumstances while ensuring that the board composition remains aligned with the company’s stage of growth. 

It’s also essential to acknowledge the possibility of situations where a board member may need to be removed. By establishing clear expectations and guidelines right from the beginning, the process of transitioning or removing a board member can be smoother. Clearly defined roles and responsibilities, performance expectations, and codes of conduct can help guide the board’s functioning and enable swift action if necessary. This emphasis on setting expectations and addressing potential challenges proactively contributes to the overall effectiveness and integrity of the board’s operations. Some directors may be difficult, if not impossible, to remove: 

• Founder – medium difficulty; option: move to board observer
• Investor – extremely difficult; option: replace member with another from VC firm or investor group
• Independent – easiest; option: shorten term; don’t renew

Setting term lengths for all board members and other expectations from the start can ensure that a company’s board of directors evolves over time to adapt to its growth and changing needs. By proactively addressing challenges and maintaining board integrity, companies can maximize board effectiveness and drive sustainable success.

Tip #3: Strategically Color Your Board Room 

In its simplest terms, color psychology has become a popular area of color theory that assigns emotional and psychological connotations between colors and emotions.

When it comes to communication, color is unbeatable. Unconscious or otherwise, color can evoke emotions, inspire reactions, and change modes of thinking. It can excite or soothe your mood, raise or lower your blood pressure, and even whet your appetite! Whether it’s innate or learned, it’s undeniable that color has a vital impact on how we go about our lives. 

Hemingway also suggests the use of colors as labels to identify the atmosphere of a given environment. This is not a literal color, but instead a description of the emotional mood of a given situation. In this case, recognizing and naming the atmosphere of the boardroom can have a profound impact on the productivity of the boardroom. 

What “color” does Hemingway recommend for the boardroom?

If you guessed blue… you’re right! Trust, wisdom, and confidence all make for positive associations and set a mood of a calm and professional boardroom. This is the best environment as it is most conducive to productive discussions. 

When selecting board members, it’s crucial to recruit individuals who will contribute positively and align with the desired strengths and attributes of the board and maintain the color of the boardroom.

By following these tips, founders can build and manage high-performing boards that provide invaluable guidance and support on their journey to success. 

Founders looking to establish or optimize their board structure can connect with Hemingway on LinkedIn or reach out via email at deborah[at]ecphoracapital.com.