👋 Hi, it’s CJ Gustafson and welcome to Mostly Metrics, my weekly newsletter where I unpack how the world’s best CFOs and business experts use metrics to make better decisions.
Welcome back to the third post in our series on everything you need to know about board meetings to be a POWER BROKER BABY!
As a reminder, here’s our syllabus:
Part I: Roles and Responsibilities
CEO
CFO
CPO / CTO
VCs
Strategic Investors
Board Observers
Independents
Corporate Secretaries
Committees
Part II: Materials and Metrics (LAST WEEK’s POST)
Templatizing your materials
The CEO’s Materials
The CFO’s Materials
Strategic Readout Materials
Reminders, Before You Hit Send…
Part III: Meeting Structure (THIS POST!)
Closed Door Session
13 Deadly Mistakes to avoid at your next board meeting
Subscribe now, or fail your board coup like Kendall Roy
A man who did not read Mostly metrics
Closed Door Session (Secret time!)
At this point the group is probably 2.5 to 3 hours in, and you’ve already covered:
The General Session
CEO Update
CFO Update
Strategic Topics
Topic #1 (30 min)
Topic #2 (30 min)
Topic #3 (30 min)
And now you begin a natural transition where people get kicked out of the room, trimming the participants down as it goes
Board + CEO + CFO
Typically go into the Closed Session with the CFO in the room
The CFO is here to cover items such as the 409a pricing, stock option approvals, and M&A offers
Note: If you are not on the board, you should not be in closed session
Board observers might stay, might get kicked out
The exception is the Corporate Secretary (Lawyer) who stays to take minutes
Board + CEO +
CFOCFO gets kicked out
Now the stage is set for topics the CEO might not want to talk about with their C Suite in the room
CEO might talk about how the team is performing, who needs to get replaced, what’s stressing them out the most etc.
Board +
CEO+CFOAnd then sometimes you have a session with just the Board members (excluding the CEO)
How did you think the meeting went?
How is the CEO doing?
Note: In a healthy, functioning company, this is pretty short, and perhaps not even needed.
A more detailed explanation from Jeffrey Busgang of Flybridge Capital:
When I was an entrepreneur, I was initially uncomfortable with this idea of stepping out of the room so that the board could talk about me and "my company.”
But I came to appreciate the value of the private session for both the board and the company. It's an opportunity for the board to gain alignment on the key takeaways, direction to give the management team, and also a forum to make decisions around compensation and bonuses, CEO performance feedback, financing, and generally build a functional decision-making unit. This session typically lasts for 30 minutes.
13 Deadly Mistakes to avoid at your next board meeting
Before we go, here’s a brain dump of 13 deadly mistakes you should avoid at your next board meeting:
Not budgeting for enough time
The total time should be between 3 and 4 hours.
This includes bathroom breaks.
Generally speaking, 3 hours isn’t enough time, and more than 4 hours is a marathon with lots of rambling… 3.5 hours is the goldilocks zone
Delaying the point
Whomever is presenting (with maybe the exception of the CEO) should get straight to the damn point
The CEO already hit on the good and the bad. We don’t need a VP to do the same.
Speaking of that…
Repeating the CEO
A lot of execs get nervous at board meetings and dance around topics / introduce themselves for too long
This usually takes the format of doing some version of “The Good / The Bad”, which the CEO already did
Hey CRO: We pay you to sell software - how much did you sell and who did you sell it to. Don’t read me War and Peace
Did you just say what I just said?
Forgetting about the pocket veto
Silence does not always denote agreement
You could have someone with voting or veto power say nothing during the meeting, but afterwards veto a decision you thought was made
That’s why it’s important to gauge everyone’s position on important things beforehand by meeting with them individually
Forgetting about the hard cost of board meetings
It’s a kinda hidden secret that VCs usually CHARGE their portfolio companies for their board member’s travel. OUCH!
Not inviting all the participants to the dinner after
It’s common to do dinner and drinks after the board meeting with everyone who came to town
The board loves this time to meet the other members of the exec staff and spend some time with them outside of a formal presentation
Some CEOs mess this up by thinking the board only wants to go to dinner with them and the CFO - when in reality, the board gets enough of you two and wants to talk to the other contributing team members and build a relationship
Overemphasis on the sales side of the house, and forgetting about R&D
Since the metrics are linked to valuation and the board is a shareholder, it’s common to over rotate on Go to Market updates and not talk enough about the successes (or failures) the team is seeing on the product side
I always go through our board deck at the end and say “Did we talk about the tech enough? After all, we are a technology company”
Not booking the next board meeting times
I know it’s painful, but while you have a captive audience, nail down a date for at least the next board meeting
I attempt to have the next four in the books at all times (but I usually fail and only have the next two or three)
Changing metrics from one reporting period to the next
It’s a big red flag if you drop a metric you used to report on from one period to the next without clear rationale
Companies don’t remove a metric because it’s just doing too damn well
If you are going to change the way you calculate
Forgetting to add a new metric that was requested last meeting
In almost every board meeting I’ve ever been in, a member will ask for a new cut of retention (it may be a different metric for you, like ARR additions, but by product or segment)
The best way to make them feel heard, and to look receptive, is to show back up with that metric next time
Not including an appendix slide with definitions and formulas for key metrics
Common metrics I like to clearly define and show the formula for include:
ARR
Net Dollar Retention
Renewal Rate
Put this in the back of the deck as a life raft for when those pesky questions come up
Overemphasis on the macro environment
Many board meetings fall victim to dwelling on the current macro situation - interest rates are high; interest rates are low; cost of labor is going up; cost of labor is going down…
While important to be aware of, you are reporting on and asking for feedback on your specific company; not the tech industry at large
VCs often instigate these conversations, as the macro is easily relatable across all their portfolio companies
This can lead to wasted time, discussing factors that you cannot control
Death by slides
Help your board help you by cutting down on what they have to review
They are not operators - they don’t need 74 operational cuts that you used in your E-staff meeting
Don’t get it twisted - sharing a long board deck is not “transparent”; it’s lazy, and burying someone in details
“If I had more time, I would have written a shorter letter board deck.”
-Cicero
Want more on board meetings? This series relies heavily on this awesome podcast I recorded with Dave Kellogg. He’s the GOAT of board prep.
