Myth #2: Directors should only know what you want them to
Is it better to tightly manage what information directors receive, and only reveal the information that you believe will pitch the company in the best light? Everything is PR after all, right?
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While this might sound like a great strategy on the face of it, it’s doing three things:
Adding pressure to you as the founder and your management team to manage your startup’s performance in a smaller tent than you need to - the board is there to support you;
Not allowing directors to do their job or utilising them to their fullest potential. It could even extend as far as preventing you and your directors from fulfilling your fiduciary duty obligations, such as acting honestly, in good faith and with reasonable care; and,
Potentially the most value-eroding aspect over time: culture comes from the top - with everything you do as a founder, your company culture will follow.
Let’s explore #3 specifically, because all else flows from there:
Firstly, the foundations of great relationships - between and within a board and management team, and with investors - are integrity, transparency, consistency and reliability, all of which when executed well leads to building trust and confidence in each other and in you as the founder and the management team, enabling you to build and retain value in your company over the long term - the whole point of this game.
But if we are treating our board interactions like constant PR campaigns, where we don’t value integrity and transparency, and ultimately don’t have trust at the board level, you can be sure that these standout attributes aren’t prevalent elsewhere in your startup either.
How do we know this?
We know this because culture comes from the top, and it’s you and your actions as a founder and management team that drive it. As you scale, can you imagine what might happen if you’re taking the glossy PR approach rather than the real talk version with your people, your business and your board, when you face serious issues? We can think of a few public examples, and we learn from one of these in our Startup Board Course: Theranos.
On the flipside, when your execution does embody these foundational values, it can mean the difference between a startup doing well and a startup shooting the lights out. It can also mean that if your startup fails, it’s not failing on the basis of suppressed information or lack of experience or poor ethics, relationships or culture, but on some aspect of commerciality that was always bound to happen. And, what is more, if it does fail like this, or shoot the lights out because you were an absolutely incredible founder for the company in this way, guess who will want to listen to your next pitch? No doubt your existing board and investors who you have proven your credibility as an operator to, and who will want to support you in the future. It’s a win-win-win that can make the difference between a good founder and an amazing one.
We go into more detail on why you’d not want to run your board like a constant PR campaign in our Startup Board Course, but to sum it up:
It’s always a good idea to be truthful and transparent with directors,
It’s always a good idea to do what you say you are going to, even if you’re saying that the plans need to change or that the plan isn't going to plan!
It’s always a good idea to communicate regularly and reliably, even if it’s brief, and
It’s never too early to flag an issue, or even a potential one.
Your directors are there to support you and the company, and by building great working relationships with them and your investors built on these foundational values, you’re allowing them the opportunity to do just this. This is where the magic lies.
If you know TDM Growth Partners and Jacqui Purcell, their Governance Operating Partner and ex CFO of fast-growing Australian tech startups, Culture Amp and Deputy, you’ll know that TDM’s thesis includes a strong focus on people and culture, for these reasons and many more.
On this, Jacqui shares:
Jacqui Purcell of TDM Growth Partners
“I think that sometimes there’s a false belief that everything that goes to your board needs to be filtered, sanitised, and polished with a marketing spin because, for early-stage companies, your directors are often your investors too. What we find is that actually flipping this mentality, and being clear, transparent and matter of fact about the business is the best way to start to build trust and good relationships with your directors and investors.
From there you can cultivate psychological safety and vulnerability - the key ingredients to continue to foster these relationships and ensure you can have safe, honest conversations at the board level. Oftentimes people are afraid to show vulnerability with their board, but the best impact happens when founders are vulnerable, particularly on things that are new to them or that they’re learning how to do. It’s only then that you can get to the real crux of the good, the bad and the ugly of the business, and where directors can be of most help.
The best founder CEOs I’ve seen are those that just tell it how it is - they’re clear about when things are going well and explain the successes and why they’re having success, and they’re equally clear when things aren’t going well, and sharing the reasons for it, and what they are doing about it.”
We talk about all of this and more in our Startup Board Course, with our next Cohort kicking off in March 2024 - find out more here.
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