Board Meetings (Rule # 18)

May 31, 2010

Most CEOs with outside investors face the ongoing challenge of board meetings – How to organize them, what content to provide to board members, who should attend, what type of agenda to have, and perhaps most complicated,  how to “manage” the board itself.

My friend, George Von Gehr has written about board meetings in his book, “The Effective Entrepreneur: Fifty-nine rules to Create Value Throughout the Life Cycle of Your Company” (Amazon Link) and, with permission, reprint here Rule 18 – Structure Board Meetings.  Here’s George’s background in a previous post.

“Unless the board meeting schedule is mandated by investors, schedule board meetings with a frequency that reflects the pace of company activity.  Since many board members make their major contributions through discussions outside of board meetings, a better approach may be less frequent meetings — meetings held quarterly or semiannually — supplemented by status updates every four to six weeks via conference calls.  The board must be nimble so that conference calls and meetings can be scheduled easily as needed.

To preserve optimal focus and maximize contributions of the board members, the meetings themselves should rarely exceed two to four hours.  Materials should be sent out ahead by e-mail, especially indicating what decisions are to be made at the meeting and what the overall agenda will be.  This approach allows board members to prepare and to ask for additional information in advance; hopefully this will result in more effective decision-making at the meeting.  Board members expect regular updates showing progress and major decision points in the macro issues under consideration.

Presentations at board meetings should be made by a variety of company managers in order for the board to become familiar with a broad cross-section of management.  A major problem is that managers’ presentations often vastly exceed their allotted time; one way to conserve the schedule is to limit the number of PowerPoint slides presented.

Some board members occassionally argue vehemently, over-focus on unimportant issues, miss meetings, or disturb the board’s concentration by taking phone calls.  Action needs to be taken to correct counterproductive conduct.  The chairman or another board member must take the lead to preserve the CEO’s neutral stance.  The issues under contention must either be resolved, the board member persuaded to behave differently or be removed altogether.

Most companies keep brief minutes of these meetings.  What is important though, is to document, in the minutes, the basis for major decisions such as stock option pricing, senior management compensation, and financing.”

I posted a related entry on “Optimizing Board Meetings” in December, 2008.  Additionally, there are a number of interesting discussions and article on this and related topics on ExpertCEO at the links below:

Improving Board meetings

Maslow for CEOs

Firing a board member

“In The Spotlight” (ExpertCEO) articles

There are other discussions about this and related topics you can find on ExpertCEO by searching for “Board Meeting” on the site.

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Announcing the new – ExpertCEO 2.0

April 24, 2010

We are excited to announce the launch of our next-generation site, with a new look, greater flexibility and other enhancements.  Many of the new features evolved from our member’s suggestions; our goal is to build a community that makes their world a little less isolated and their day-to-day challenges easier to confront.

Here are some of the highlights you’ll notice on this site:

ExpertCEO Content Now Visible to All Site Visitors

We’re now ready to scale our membership in order to meet the needs of more executives with a complex range of questions, Greater visibility will also enable us to respond to the needs of sponsors who desire broader exposure for their messages,

Participation in discussions, posting of questions, and viewing of member profiles will remain the privilege of members, and our membership criteria remains unchanged.  They’ll continue to have the option to ‘post’ by name or anonymously.

Knowledge Base Now Available Free of Charge

Knowledge Base content is open for viewing by all site visitors.  The inaugural KnowledgeBase topic focused on CEO Compensation; other relevant topics, such as Board Effectiveness, are coming soon.  You’ll be hearing more from us on the content we want our users to contribute to the site.

Easier Navigation

  • Enhanced Search Capability:  We’ve implemented a new algorithm that not only makes it easier to find the particular article , but they will be presented with related items that may be of interest.
  • Discussions Organized by Topic:  When Discussions are viewed, notice that Discussions are now grouped by Category (think “Topic”), as well as by recent activity.  To initiate a conversation, go to the relevant Category and click the ‘New Discussion’ button.
  • Notification Option by Topic: Per members request, they can now ‘subscribe’ to discussions by Category, even if they aren’t a direct participant, you’ll receive notifications of new activity on that topic.  For more information about this area, take a look at the FAQ located on the “Help” tab of the Discussion area.
  • Discussion Preview:  Members can now preview a discussion or comment before posting it, something members have repeatedly requested.
  • In the Spotlight by Topic:  Same weekly content, but now organized by topic, rather by the type of media in which it originally appeared.  Searchable by topic, as well as keywords.
  • Groups & Ask the Expert:  We have streamlined other areas of the site as well. Rather than separating discussions into smaller Groups, the Discussion area will be the single source for all Discussions – making it easier for you and other members to comment upon.  Additionally, “Ask the Expert” has been incorporated into the Discussions area where the experts will directly participate in discussions rather than having members go to a separate area of the site.

Background

ExpertCEO has built a vibrant community with high quality and thoughtful discussions.  In order to scale our site and to increase the participation from other members of the community, we felt we needed to open up many aspects of ExpertCEO to the outside world.  We believe our new structure has done this in a way that both protects the privacy of our members who post questions and retains the credibility of the comments and answers.

And we needed to be more “nimble” in our ability to enhance and modify the site and its features in response to member feedback.  In essence, we needed to be like a startup .  We decided to move to an Open Source product called “Joomla” .  This technology has enabled us to set up the site with minimal programming effort, and to dynamically configure it in response to user feedback.  The breadth of add-ons (extensions), has also enabled us to provide comprehensive features without resorting to expensive and inflexible programming resources.

As with any change, there will almost certainly be a few bumps along the road.  We appreciate your patience and welcome your feedback (info@expertceo.com).  One dividend of the new open-source site architecture is the ease with which we can implement changes going forward, so don’t hesitate to let us know what you like, and how you’d like to see us improve.

We hope you find these changes make ExpertCEO site more useful, and that you share it freely and frequently with other executives you believe will benefit.

Regards,

Ken Ross

Founder and CEO

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CEOs REMAIN PESSIMISTIC ABOUT Q3 ECONOMY

August 4, 2009

Yet Majority Expect Their Own Results to Improve

SAN FRANCISCO, Calif. – Aug. 4, 2009 – Despite hopeful signs that the worst of the recession is behind us, most CEOs, remain skeptical that the economy will improve in the current quarter, according to a recent poll of small to mid-size companies.  In a just-completed survey conducted by ExpertCEO, 62% of responding executives say the economy will not improve in this year’s calendar Q3.  Among CEOs of companies with annual revenues above $50M, the pessimism is more pronounced, with 91% expressing skepticism about economic recovery in the current quarter.

Just under half of the participants met or exceeded their forecast results for the quarter ended June 30, 2009.  A similar percentage of respondents recorded June quarter revenue growth, as compared with the same period in 2008.

Despite their downbeat predictions for the overall business climate, 55% of surveyed CEOs are optimistic regarding demand for the solutions their companies offer, anticipating greater revenue in this year’s September quarter than the same period last year.

ExpertCEO (www.expertceo.com) is a private on-line community where senior executives can confidentially exchange ideas with peers, locate trusted resources, ask questions of experts across a range of disciplines, and quickly solve real-world business problems. The site combines social networking technology with concepts proven by CEO membership organizations like Vistage and YPO. The sample size of this survey was 96 CEOs, with the majority of respondents heading technology and Internet companies.  Most are privately held firms.

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Rule #15 – Make Staff Meetings Productive

July 25, 2009

One of the functions that has always frustrated me has been management staff meetings.  Who should attend?  How frequently should they be held?  What’s the agenda?  How to control “bickering”?  How to make them more productive?

I have always felt that the primary objective of these meetings is to facilitate communication amongst the various members of the executive staff.  My style has always involved open communication, so I usually am knowledgeable about the status and issues of the people that work for me.  However, I am continuously amazed at how little informed the staff members are of each other’s status and issues.

For some sound, timeless advice, I again return to George Von Gehr’s new book, “The Effective Entrepreneur: Fifty-nine rules to Create Value Throughout the Life Cycle of Your Company” (Amazon Link) and, with permission, reprint here Rule 15.  Here’s George’s background in a previous post.

“Staff meetings often suffer from lack of productivity because they:

  • Are too frequent
  • Last too long
  • Are contentious instead of problem solving
  • Lack consistent structure

Since immediate problems are addressed as they occur, staff meetings should be less frequent than most managers expect.  Once can experiment with the frequency, but weekly may be too often.  Less frequent scheduling encourages attendance.

Fixed agendas help provide structure and may minimize argument.  Most arguments result from company politics and/or narrow functional, business unit or divisional views.  To maximize productivity and efficiency, it is the CEO’s responsibility to remove politics from these meeting and to foster cross-functional or cross-divisional cooperation.

Most emerging companies typically have more opportunities than people to support them, so setting priorities for the use of resources – human and other – is a frequent task at these meetings.  In addition, it is imperative to establish who “owns” or is responsible for each major initiative resulting from the priority setting.  Ownership facilitates tracking and results in the owner feeling responsibility.

These meetings should also be time-constrained so that attendees can plan their days.  Such planning also encourages a crisp trip through the agenda.  If special topics need longer treatment, then notice should be given.

An important periodic topic for this meeting is progress on both the annual operating budget and the longer-range strategic plan.  It is critical to recognize inflection points for each of these plans.  If it appears the operating plan cannot be met, then the causes for the shortfalls are essential discussion points and may require a longer, supplemental meeting.  The strategic plan may not be a normal agenda topic at all meetings, but when market disruption of a technological or competitive nature occurs, this event should be explored.

Beware of unrealistic operating targets accompanied by overbearing pressure to reach them, especially when these targets and pressures have major effects on compensation.  These sorts of plans were the seeds for an entire garden of fraudulent account and high bonus payments at Fannie May, Enron, Sunbeam, Tyco International and many other companies.” [KR Note – add Lehman Bros. and AIG]

My experience indicates that weekly staff meetings are the right frequency, and they should be conducted with a strict time limit of about 2 hours or less.  Work and meeting time can easily expand to fill whatever time is allotted.  The other thing I have found effective is to have each participant submit an email to the group with his or her weekly status, issues, etc.  That way, most minor, operational items can get taken care of via email without wasting time at the meeting, and the participants have some time to consider questions and discussion topics prior to the start of the meeting.  Lastly, I have found that it is effective to have a major topic to be covered at each meeting and this should be laid out in advance – product status, annual budget, a new system implementation or whatever.

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Predictable Revenue – Every CEO’s Holy Grail

January 28, 2009

Predictable (and growing) revenue is the holy grail of every CEO.  If a CEO can achieve and sustain this goal, the company will most likely prosper, and the executive can focus on other critical priorities, such as strategic planning and team building.  Without visibility into the revenue stream, too often the CEO is stuck fighting fires and dealing with irate investors/board members.

Aaron Ross consults on sales force effectiveness, manages a blog that focuses on creating predictable revenue, and previously managed a highly successful inside sales organization at Salesforce.com.  The following advice, excerpts and paraphrases are taken from an interview of Aaron conducted by Phil Fernandez, CEO of marketing automation vendor Marketo. (full disclosure – Aaron is my son).

 

Phil: The function of marketing …

Aaron: Marketing leads and magnifies what happens in sales. If marketing and lead generation are working together, sales will follow. If marketing & lead generation aren’t coordinated, sales will struggle. Unfortunately, although things are changing, there’s still a lot of thinking that “to increase revenue, the first thing I need to do is add salespeople.” In The Fatal Mistake Boards and VP Sales Will Make In 2009 Planning, I discuss how lead generation causes new customer acquisition and salespeople fulfill it.

Phil: Your blog is called “Build A Sales Machine.”  What does that mean?

Aaron:  A “sales machine” is an organization that sustainably generates predictable revenue. It begins with repeatable lead generation programs, continues with consistent sales processes, and is sustained through ongoing customer success. This means the organization understands the causes, effects and measurements of the different processes related to lead generation, closing and renewing, and can consistently execute them. It’s simple to say, hard to do :)

My team at Salesforce.com could confidently predict the people and investment needed to increase revenue by a certain amount the next year. It took quite awhile to create the conditions for that kind of predictability. However, once we got it going, it was like a flywheel and just kept on turning. The first $1 million was much harder than the next $100 million!

The single best piece of advice I give to executives is to break the sales process into well-defined roles: 1) qualification of inbound leads; 2) outbound prospecting; 3) closing deals; and 4) account management/renewals. This will increase conversion rates on your leads and your ability to work with sales teams on executing programs, improve tracking and measurability, and increase the overall flow of leads through sales to revenue.

Phil:  What role should marketing play in the sales machine?

Aaron:  1. Track leads in your funnel but don’t over-measure. A CEO/board caring too much about detailed marketing activity metrics is like a CEO or board caring about how many calls salespeople make per day, instead of caring about opportunities generated (if yours do, have them read “Stop Measuring Calls Per Day.”)

 2. Less collateral is more. Salespeople will always say they need more materials, which they receive and throw over to prospects, who never read it. Be thoughtful in what and how much you create, to avoid collateral and program clutter. Remember – everything you create will need to be maintained!

3. Invest in sales lead generation. Leads that salespeople generate on their own tend to be higher quality than marketing leads, but because these leads come in much lower volumes and marketing has the budgets, organizations under-invest in spending on tools to help salespeople generate leads.

4. Lead prioritization & lead scoring: All leads are not created equal, and lead categorization or scoring is critical to sales productivity.

Phil:   On the working relationship between sales and marketing…

Aaron:   The problem is the lack of a bridge between the two functions.  The same sales-marketing frictions have existed as long as sales and marketing have existed, even though solutions (common goals, communication, etc) are well-publicized and discussed ad nauseum.

My belief is that most companies also need a ‘structural’ solution, in the form of a junior sales team that sits between marketing and sales. This team reviews and contacts all new leads, and then passes qualified ones to the quota-carrying sales reps who close them…

Phil:  Any last reminders

Aaron:   Even though business seems to move faster than ever, that’s just the activity of business. Sustainable (predictable) revenue results are taking longer to create. So, be “aggressively patient” rather than “aggressively impatient.” Focus on continually doing bite-sized experiments that you can execute and iterate in hours or days, while being patient for revenue than can take several weeks or months.

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Hail To The Chief (Executive)

January 14, 2009

With the nation’s attention on next week’s inaugural events, speculation around President-elect Obama’s agenda for his first weeks in office is the focus of presidential scholars and leadership experts alike.  Whether elected or appointed, every new CEO must gather information, understand challenges and opportunities, set priorities, and communicate with a variety of constituents during their first 100 days in office.  I’ve taken the helm more than a dozen times as a founder, “hired” CEO and interim CEO, and over the years I’ve developed a new CEO’s to-do list that’s proven effective in achieving these goals, which I’ll summarize below.

 

Executive-staff Interviews

  • Listen carefully – Learn about their strengths, weaknesses and issues (you’ll also hear a lot about other members of the executive staff).  Try to ferret out names of others, lower in the organization, who are especially well-respected.  These latter individuals can be key to future organizational changes.
  • Identify common themes – people, products, technology, etc.
  • Go back and do it again, trying to organize your thoughts and interview points based upon what you learned the first time.

Short-term Budget/Cash Flow

  • Understand the company’s short-term financial status – Cash issues will take priority over everything else if there are short-term problems.  If you have breathing room (or positive cash flow) so much the better.
  • Focus on immediate actions, if necessary

Products

  • Understand current offerings/programs/services.
  • Get demos from current product managers.
  • Identify key product priorities.

Customers

  • Meet customers – listen to their concerns and priorities.
  • Note: Make sure you do this after you’ve gained a basic understanding of the people, products and issues.

Keep an Open Door (and an Open Email Box)

  • It’s amazing who will wander in and unburden themselves with issues and concerns.  This is a great source of information to cross-reference against executive-staff interviews.

Communication 

  • Communicate frequently and often with investors, customers, board members and employees.  It goes without saying that all of these stakeholders are nervous and anxious for information from a new CEO.

President-elect Obama has had 11 weeks to prepare, and as he takes the helm, he’ll be employing some of these very same techniques.  For example, we can already see his focus on budgets and cash flow, though, unlike any of us, he can “print money” to overcome it (in the short-term).  And he is focused on taking the immediate actions he believes are necessary to remedy the problem.  Like any CEO, he needs to persuade various constituents to support his efforts.  Regardless of our political leanings, the nation needs Obama to succeed, so let’s hope his “getting started” list stands him in good stead. 

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The New Dynamics of Venture Capital

January 5, 2009

A few weeks ago, Scott Duke Harris of the San Jose Mercury News wrote an article titled, “Will Undone Deals Be The Next Big Thing in Silicon Valley?”.   The article evolved from a conversation about two recent ExpertCEO posts. The posts were entitled “VCs Yanking Funding” and  “Series A Deals Getting Undone”.

A friend of mine, who is a general partner of a top tier venture fund, related another “busted financing” anecdote.  His firm is a shareholder in an early-stage company that, like many others, found itself unable to find a new investor when it sought financing about six months ago.  The existing investors agreed, instead, to raise an “inside” round, to be parceled out in two tranches, the second of which would be triggered by the company’s achievement of three milestones.  The first tranche was funded, as expected, in late summer.  Subsequently, the company met 2 of the 3 milestones, and the investor syndicate agreed to loosen the criteria of the third milestone, making way for the last tranche to be paid out.  However, one of the investors also decided to require the company to make a final presentation to its partnership, prior to closing.  The presentation took place in mid-December, but ultimately, the partnership elected not to participate in the final tranche.  This unfortunate surprise left the remaining investors with two options:  put in more money than they had planned to support the company, potentially indefinitely and in the face of a no-confidence vote from an existing, top tier investor, or drop out, leaving the company high and dry.  In the end, the existing investors opted for the second option.

 

Issues Faced by VCs are Similar to Those of Venture-Backed Companies

Many venture capital firms are either experiencing or are fearful of facing their own cash shortfalls (just like their portfolio companies). Their source of funding (their limited partners) have been hard-hit by the market’s precipitous decline.  Venture funds collect or “call” cash periodically as they need it.  As these capital calls are issued, some venture firms are finding that their limited partners are either unable or unwilling to meet their contractual commitments, leaving the funds with fewer resources than they’d anticipated. 

As a result, venture firms, which typically “budget” funds for each of their investments, are being forced to rethink these plans (again, just like CEOs) – because of the possibility of the reduced size of their funds, as well as the probable need for greater total investment in each portfolio company than was budgeted.  And liquidity events will be few and far between due to a less forgiving stock market and a reduced pace of acquisitions at lower valuations.

Facing these new realities, many venture funds are carefully re-evaluating their portfolios, deciding which companies to support with their scarce cash and which to “abandon.”  To conserve cash, venture firms must categorize their investments.  They are requiring those with existing revenue streams, where expenses can be cut to quickly achieve positive cash flow (the Sequoia Capital approach), to survive on their own, while supporting those that are promising but pre-revenue.  Others will be allowed to fail or forced into a sale.  These issues are well chronicled in the following two articles.

The Wall Street Journal – Venture Capital Hits a Cash Call Crunch

Forbes – Venture Capital’s Coming Collapse

What Should Venture-Funded CEOs Do?           

The operational aspects of managing in this environment have been discussed at length (cutting costs, etc.).  A more complicated task for a CEO is how to manage his or her investors!  Assuming you can’t reach cash flow breakeven via the Sequoia route:

1.     Be creative when considering funding sources.  The organized venture community is one, but by no means the only option when seeking financing for your business.  Identify potential strategic partners or large customers with a vested interested in your success.  They can fund development, make large purchases, and provide cash in a variety of other ways.  One company I work with just received a 7 figure (cash) payment on a large product license from one of the big 3 U.S. automakers!

2.     Communicate often and frequently with your investors.  Level with them about your opportunities and challenges.  Let then know you expect the same from them.  Don’t be afraid to probe the extent of their commitment and understand their problems in a respectful way—you owe the diligence to all the shareholders. Most of all, be prepared for necessary financing parameters to change often.

3.     Don’t rule out acquisition as a potential avenue.  What was unthinkable just months ago could well be the best outcome for you and your shareholders.  If you’re flush with cash or have liquid stock to use as currency, acquisition opportunities will be more numerous than your ability to consolidate them—so prioritize!  And if you’re running low on capital, don’t wait to explore possible combinations.  The process is time-consuming, and many more potential marriages are considered than are consummated.

4.     Plan for the worst – hope for the best. Whether you’re seeking funding or a merger partner, assume the process will take longer than you think.  Read my blog entry titled “Crisis Management.” 

 

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The Power of the Peer Group

November 13, 2008

I invited one of my employees at ExpertCEO, Nathalee Ghafouri, to be a guest blogger.  Nathalee is ExpertCEO’s Marketing Manager and she is an integral part of our organization.  In this entry, she shares her passion for social networking and how it can apply to both the academic and professional world.

Back in high school, my sister used to tease me for having “study parties” to prepare for AP physics exams.  She called me a nerd, and

Whether for executives or students, peer groups can be powerful.

Whether for executives or students, peer groups can be powerful. From: Flickr UBC Library Graphics.

maybe I was, but I also knew that without those “study parties” I would be lost.  I knew that I could handle the concepts of physics, but that I was awful at the math.  By meeting with my classmates, I could explain the theory, and they could explain the calculations.  It was all about give and take.  I’ve understood the value of peer groups for a long time, so I am really passionate about building the community at ExpertCEO, an online network for senior executives and the community that inspired this blog.

Harnessing the power of the crowd is one of the chief tenants of Web 2.0 and even as we progress into Web 3.0 (or whatever is next), user-generated content is no passing fad.  The world has definitely realized that the combination of peer groups and the Internet makes socializing easier and more fun-hence the explosion of social networks-but business networking online is just starting to become the norm.  With LinkedIn profiles now ubiquitous, Yammer being named the king of the TechCrunch 50 and more and more companies taking advantage of Facebook and Twitter, the time is right for senior-level executives to put the trend to work in their everyday decision-making.

To go back to the study group example, imagine you’re at a physics study group, but of the five people there, no one knows how to solve a certain problem.  If this was 15 years ago, you’d be stuck without an answer, or you’d have to wait for the teacher’s office hours.  But with the rise of communities on essentially any topic, I’m confident that today you could find the answer by asking a peer online.  The power to share knowledge is infinite.  It’s this concept that drives ExpertCEO-if you can’t get the answer from your intimate peer group (or maybe you’re embarrassed to ask), you can capture the wisdom of the crowd.

Using advice from the site, ExpertCEO members have improved cash flow, avoided legal trouble and gotten advice on how to weather this current economic storm.  The power of the peer group has been proven by students and is working for ExpertCEO members.  Can you put it to work for you?

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