For companies, boards provide a foundation for growth

When people think about company building, they often think about high-performing management teams and hard-charging founder-CEOs who are assembling the business brick by brick.

But when disaster hits or scandal strikes and organizational challenges come to light, it’s the board of directors which ultimately come under fire. In the world of venture capital, there is nothing more fundamentally important for an entrepreneur than building a strong board of directors.

Recently, I hosted several executives and KPCB portfolio company CEOs for a discussion on the importance of boards. In this latest episode of “Ventured,” I had the opportunity to moderate a panel that included my fellow partner John Doerr, Stripe COO Claire Hughes-Johnson and Twitter Executive Chairman Omid Kordestani.

It was clear from the discussion in the room that boards matter for founders and CEOs: they are the foundation for company growth. Executives who are on boards or interested in being on one can gain varied experience and contribute to the development of more successful organizations.

Boards also matter because systematically, strong corporate governance forms the backbone to creating diverse, sustainable and scalable businesses that make an impact in our world. Here are some excerpts from our discussion.

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Founders and CEOs should prioritize building their boards
Entrepreneurs may prefer to focus on the daily tasks of launching products, hiring employees and putting out fires, rather than thinking about their boards. Yet entrepreneurs benefit greatly from relying on a cadre of experienced advisors, operators and investors to ask the tough questions and challenge the CEO and management team.

As my partner John Doerr said, the value of a good board member is in the art of asking the right question, one that the CEO or management team hasn’t considered, to help the CEO look around corners for the business. The board also forms a support system for the CEO, to amplify that leader’s voice.

As a result, successful entrepreneurs have made board building as much as a priority as hiring their senior most executives. Board recruitment cannot be a secondary focus; rather, CEOs must actively search and recruit the talent they want.

Design the composition of your board slowly and thoughtfully
Putting together a board requires thought and planning around each company’s specific needs. The composition of the board should reflect the company. After all, different CEOs have different needs.

The CEO needs to consider how many board members a business needs, when to start searching for them, and how to organize them into committees that maximize their skills. That can be hard to do at the same pace and time frame that founders are raising capital and dealing with several other priorities.

For example, it was important to Google founders Larry Page and Sergey Brin to have an intellectual board, one that brought ideas and challenged ideas. So, in addition to the founders, Omid Kordestani, investors John Doerr and Michael Moritz, the Google board included academics.

It took the Google founders more than a year to recruit Stanford President John Hennessy to their board. Over time, it complimented that board by adding operators, such as former Genentech CEO Art Levinson.

Put your board to work
Venture-backed companies often start out with small boards comprised of the founder or co-founders and an initial investor, but as the company grows, so does the board of directors. Those board members need to come to meetings prepared, attentive and ready to engage in discussion, so they can uncover issues at the company before they become problems.

Amazon founder Jeff Bezos set the tone with his board early on. An hour before each board meeting, he allowed the board members to sit around together and he would circulate a piece of paper with the things that mattered to him, which served as an agenda. He also required that certain materials needed to be read in advance of the meetings.

Because boards tend to grow conservative over time, every year, the Amazon board gave a report of an organization that was diminished by the “institutional no”– doing more analysis and take fewer risks. This became a deep part of the Amazon board’s experience and reminded the board to “go for it” and find ways to say “yes” and take risks.

Work to overcome your weaknesses
Boards should always be on the lookout for ways to improve the business. Claire Hughes-Johnson spoke about her experience joining the Hallmark board as the only tech executive. Soon after joining, the board leveraged her experience and conducted a full survey on all information technology across all of the company’s properties.

It was extraordinary for a company over a century old to have the foresight to bring on Claire and leverage her unique expertise.

Boards today are also trying to include more perspectives, skill sets and experiences to reflect their audiences, signal the importance of diversity to the company, and ultimately increase the performance of the businesses overall.

“You get greatness through diversity,” Omid Kordestani said.