Don’t Overlook These Boardroom Possibilities
As mentioned earlier, we think of “getting on a board” as gaining a seat with a corporation, private or public. But there are many intriguing boardroom opportunities outside this fairly narrow band. You may build your chops with a nonprofit, a venture fund’s portfolio firm, or the intriguing but underexplored private equity field.
Some of these are viewed more as apprenticeships—board experience that primarily delivers “seat time” and connections. Others are less conventional opportunities too often overlooked. But all are valuable and crucial milestones along your board-wannabe journey.
Joining the board of a nonprofit often seems an obvious career plus, particularly for rising board wannabes—visibility, practical boardroom experience, great networking, and often a cause that moves you. But one rule applies for nonprofit as well as corporate boards—asking first if this is a club you really want to join. What questions should you ask (and answers you should receive) before pursuing that nonprofit board seat?
- What are your motivators? If it’s a charitable or cause-related nonprofit, is the mission one you believe in? Probably yes, but also do some digging into the entity’s structure, funding, strategy, and leadership. You may like the cause, but discover this group’s priorities and implementation just aren’t your style. “Know what you want to accomplish as a board member with them,” advises Gayle Gifford, founder of Ceffect nonprofit board consultants.
- After learning what to expect from this nonprofit, clarify what they expect of you. Charities, civic and cause groups often assume board members will deliver on fundraising, either personally or by lobbying others. Problems arise if you join the board without asking (and them not telling) and then discover yourself on the hook for more than anticipated. “The good nonprofits say upfront what their expectations [on financial support] are,” says Karen Eber Davis, who heads her own nonprofit consulting firm and writes on nonprofit management issues. “But if that information is not given, be sure to ask.”
- Of course, more than money is expected of the nonprofit board member. While you’ll want to know about board and committee time demands, dig even deeper into other commitments. Events, fundraising, member relations, affiliated group meetings, and conferences are major elements of nonprofit service (and, of course, your time is gratis). As with the above point, learn as much as you can on the way in.
- Folks with corporate and venture board background may view the nonprofit world as a safe oasis from the liability concerns that dog public company governance. But that “corporate veil” isn’t absolute. Courts in the United States have proven willing to find nonprofit directors liable for egregious oversight gaps (such as the 2015 Lemington Homes case in Pennsylvania). Nonprofits that handle large endowments or government funds, or that fall behind in tax liabilities have particularly vulnerable directors. Again, ask about exposures as part of your due diligence and query whether D&O coverage is offered, or if it would seem a wise addition.
- Another nonprofit checkbox item—the quality of governance the current board offers. Is it a large board (as nonprofits often are), which can mean clumsy, bureaucratic oversight? What is the committee structure, and how often do they meet? Are samples of recent agendas and minutes available for you to review? Can you sit down over a cup of coffee with the board chair to discuss governance goals and needs?
- Finally (and here’s the big payoff) don’t be afraid to frankly weigh how serving on the board of this nonprofit benefits you and your career. “This is a perfectly legitimate reason to be there,” says Eber Davis. Part of the board recruiting process should include “saying to potential board members ‘how can we help you in meeting other people?’ The board should let new directors know they’re here to help them.” Who are the other board members? How could you add them to your network? How can you do well by doing good?
Q: “I’m a partner with a regional venture capital firm and have served on the boards of several of our companies over the past few years. Recently, I received a call from a networking friend asking if I’d be interested in joining the board of a nonprofit. This isn’t just a small organization either—it’s a well-established arts foundation that’s been an institution in our city for decades. It’s quite an honor, and I support the cause, but I have zero experience on the board of a nonprofit. What do I need to know to avoid bringing too much of my VC background into their boardroom?”
A: Serving on the board of a nonprofit will indeed require some different skills on your part, but often the differences are subtle and easily missed. First up is the question of who the stakeholders/shareholders are you’re there to represent. As a venture partner serving on the board of a company you’re invested in, you have a clear visual on whose interests (and investments) you’re protecting. But in the nonprofit world, “the headache comes from being aware of the organization’s many various stakeholders,” observes Laurie De Armond, a nonprofit practice leader with BDO.
Your arts organization, for example, likely has some airy language in its charter about supporting the arts environment in your city. But what does that mean in practice? You serve the nonprofit itself as a fiduciary, but you also must represent local arts groups seeking funding, the major donors who must be kept happy, and the greater community. Plan lunch with your friend to discuss how the board juggles the politics of all these stakeholders.
Financials will be different too. Cash flows, gross margins, and so on may be universal terms, but nonprofits involve unique money matters. How reliable are funding sources? Are there covenants or legal restrictions on how funding is used, and if so, how much is limited? What is the cash position (an arts organization likely has less volatile cash needs)? What are net asset classifications? Again, financial metrics and their importance will differ greatly from your experience, so learn the new rules of the road.
While you’ve doubtless had to navigate boardroom politics with your venture investments, you’ll find the nonprofit world brings unique issues. Sitting around the table, you may see a major early funder who, at 90, now nods off at board meetings, an empty chair for a community leader who’s considered a major “get” for the board but never has time for it, arts representatives who endlessly bicker over crumbs of funding, and maybe an eminent board chair who loves the arts but has little interest in details.
“Sometimes nonprofit boards have too many people with a perspective that relates to the mission, as opposed to operations,” notes De Armond. This would be a good opportunity to bring your business savvy into the boardroom (but not by announcing “this is how we do it at my company!”)
Finally, sort out the board’s relationship with management. While you’re still the boss’s boss, it’s likely that a major arts foundation has a professional manager who knows the ropes far better than the directors. This is a time when your VC-learned ability to know when to stay out of a good team’s hair will cross-apply.
Private companies (family firms, closely held companies, private equity/venture capital, etc.) remain one of the big mysteries of business. They cover a huge spectrum, from startups, to spinoffs, to some of the world’s biggest firms (Cargill, IKEA, Samsung), and they far outnumber publicly traded ones.
For the board wannabe, private company boards are a big mystery too. What they do, who gets named to them, and how these talents get chosen are obscured in a cloud that makes public company boards seem transparent. Even standard board-seeking advice (“network network network!”) loses some of its value (what exactly are private company board “networks?”). What do you need to know when aiming your résumé’ at private company boards?
“Private company boards aren’t as hung up on you having previous board experience,” notes Jim Zuehlke, of Cardinal Board Services. Whether it’s a family business, a young tech startup, or private equity, the targeted career skill and experience you can deliver is what matters—not boardroom seat time. This means that identifying and pitching your Unique Selling Proposition is even more crucial for private board contenders. Zuehlke recently placed a woman on the board of a billion-dollar construction firm (her first board) because she had a unique background in specialized construction skills.
These factors help make private companies good apprenticeship and skill-building opportunities. Maybe you’ve built a strong résumé of skills in closely targeted areas but lack the boardroom seasoning or CEO title that give you a lift into the public boardroom. The latter two are less important for private boards, say the experts, and you gain the board experience you’ll need for the bigger leagues.
As with most apprenticeships, though, you won’t make the big money. “I think this is for people who love private companies, because you’re not going to get paid a lot,” notes Tyler Ridgeway, who heads executive search at Kreisher Miller in Philadelphia. (On the other hand, directors at private companies are easier to reward for any advisory and consulting work they provide, or with finder’s fees.)
How does the board wannabe get her foot in the private boardroom door? Consider the network and meeting venues for those you’re targeting. Entrepreneurial and executives’ groups in your area. Family business associations, classes, and advisors. Business incubators, venture capital and private equity forums. As always, make sure executive search firms know of your interest. Googling “private company advisors” or “family business consultants” will give you a lifetime of potential contacts. Business schools regularly offer programs for private business owners, and this would be a great place to mingle.
Diversity pressures are having surprising impact on private company boards. “There’s an enormous drive for this, particularly from women’s groups,” says Ken Hogenson, of mid-market invest bankers RBI Advisors. Women in families are tired of being left out, and the next generation of women execs seek a boardroom advocate. “Women family members and the female execs both want peers in the boardroom,” notes Zuehlke. Private companies that reach out to recruiters and advisors to help find board talent (admittedly not the current norm) are as likely as private companies now to start their job description with “we need a woman candidate who . . .” Smart women wannabes make private companies a top target.
One last note for the private business wannabe—though you might view this as just a step on your ladder into a public company boardroom, the private businesses themselves do not. Their need for your expertise is their first and last priority, and your onboarding effort is most effective if you view the private business with the same urgency. “Why wouldn’t you want to serve on the board of a private company?” says Stacy Feiner, psychologist and business coach. “Think of how heroic they are!”
Seeking a role with advisory boards is another step into the corporate boardroom (and one that some wannabes come to prefer).
Q: I’m a divisional VP with a global health care firm, and I am looking for my first board of directors’ role. I’ve done some consulting work in my particular field, and I hoped this might lead to board opportunities, but so far it hasn’t. However, one of these consulting clients asked me for recommendations on a temporary advisory board they’re putting together for a joint venture startup. I admit I hadn’t thought about this until now, but would serving on an advisory board myself aid my long-term corporate board goals?
A: Yes indeed. Advisory boards offer a great apprenticeship for eventual boardroom wins. However, some board wannabes favor advisory boards over moving on to corporate boards due to the lower liabilities and legal responsibilities. There will typically be less pressure and time away from your career.
“The advisor typically allocates about 50 hours a year, while a corporate director role is more like 180 to 200,” notes Mark Pfister, whose Integral Board Group consults on and convenes advisory boards. Advisory boards tend to be more outcome-focused than a legal board of directors and aim at specific results, like shaping a startup, rolling out a new product, strategy, tech trends, and so on. This means you’ll be selected for a specific skill, and successful outcomes help advertise you (and that skill) for other boardroom opportunities.
Indeed, the board of advisors itself is a terrific board-seeker opportunity. Other members form an ideal onboarding network with their own connections, and serving with them offers a valuable audition on how well you handle yourself in a boardroom (learning how to do the latter is another strong benefit). Nurture these contacts and make sure they know of your board interest and skills.
Make further use of your advisory board experience by keeping a “board diary.” In the course of meetings, jot down on your copy of the agenda topics discussed, points you made, major decisions, outcomes, and other tidbits that should go into your dedicated board résumé. It’s much easier to compile these as they happen than to recall them later, since most advisory gigs are short term.
Finally, your advisory board stint can help put your board education on a paying basis, though modestly. Fees are usually small, and with the startup you’re looking at, you’re likely to be paid in equity. Not great rewards—but what other boardroom school pays your tuition?
Or, think about contacts you have in the venture capital or private equity field. Do they know what a great board prospect you’d make? They should—because this is one of the hottest board-wannabe opportunities.
Q: I’ve served as the CFO of a major company that’s been in a turnaround situation for several years. We recently spun off a subsidiary, and I had some contact with a private equity firm involved in the deal. I liked the way they operate, and private company governance intrigues me. I’d like to approach some of these firms to let them know my interest in serving on the board of a PE company, but how do I proceed?
A: I spoke with John Geer, president of Private Equity Partners, Inc., in California, and a long-time PE investor and consultant to the industry, for some pointers on PE governance.
“So much of [PE board] recruiting depends on circumstances at the moment, at being the right person with the skills the fund feels it needs.” Geer finds that folks with CEO experience and strong P&L background have an edge when PE funds populate their companies’ boards, but your own background can be of value—if you do careful targeting of funds, partners, and the companies they work with. “PE partners always want someone on the board who can add value to the deal.”
Suppose a fund invests in a company dealing with massive inventory issues. They’d love to have a proven just-in-time supply chain specialist to drop onto the board and help rationalize production. Global supply chains, targeted marketing, targeted tech, and yes, turnaround CFO experience. It’s a matter of inventorying your outstanding strengths, identifying firms with portfolio companies that could use just those skills, learning which partner puts deals together, and getting (and staying) in contact. Research and persistence are keys to the PE boardroom.
Other PE intelligence from Geer—expect a three- to five-year commitment on your part (hedge fund boards churn faster). Make sure the partners know about your interest and savvy early (by the time you hear about a position they’re taken in a particular company, the board is already set).
Expect four, five, or maybe six meetings a year—“more meetings than that and there are probably problems with the company.” Finally, don’t expect to get rich quick on the PE board. “You’ll get expenses, and maybe some options,” notes Geer. (However, you’ll also gain some highly valuable vitae for your next board prospect.)
A specialized possibility for the board wannabe is the family business. As a board opportunity, family firms are a good news/bad news issue. The good news is their ubiquity. Something like 90 percent of all U.S. businesses are either family owned or still have substantial family involvement, and they scale all the way from your corner ramen restaurant to Walmart. The downside, of course, is that the great majority of the small fry have no boards, or boards limited to relatives. However, the sheer number of family-held businesses that are large enough to worry about their governance (and more of them are) makes their boards a venue no board wannabe should ignore.
Q: A contact at my bank (I’m the legal VP and corporate counsel) is a good friend, and an officer at his family’s contracting business. This contact told me that the founder and other family members in their business would like to upgrade their board of directors, including addition of an outside, nonfamily member. You can see where this is headed—they want to know if I’d be interested in joining. I have some board background, but I also realize that the board of a family firm will be different, especially if I walk in as the first outside member. What should I think about (and ask) before deciding?
A: While it’s always smart for a board prospect to have an advance sit-down chat with as many of the players as possible, when the board is private and family owned, this tactic becomes more crucial. At family businesses, the governance and board rules are pretty much whatever the founder and family say they are, and you need to “clearly set out what the expectations are for you and your role,” says Keith Baldwin, a senior partner with Davis, Wright, Tremaine, and a specialist in family business matters. Sometimes a founder or other senior family member is seeking an advocate or rubber stamp to deal with boardroom politics (though from your description it sounds like this family sincerely wants to up its governance game).
Try to interview family members for intelligence on what you’re walking into. Has this board had independent members in the past, and how did that work out? What is the current state of family/board relationships, and are you being tapped to heal a dysfunctional situation? “If you’re walking into a war zone, you want to know about it,” Baldwin notes. Of particular interest to your field—what is the company’s litigation history, and are there any pending actions (seeking a lawyer for the board could be a clue to concerns on this).
Once you have a high-altitude take on the family and its board climate, dig in on specifics of strategy, the company’s competitive universe, and so on. Look internally at the state of succession planning for leadership, management, and the board (often a weak item for family firms). Check out the current status of governance—how is the board organized, how professional are its procedures, does it have proper board meeting pack, agendas, and minutes (again, a common family biz weakness).
For your own interest, ask about D&O coverage, meeting schedules, travel time, and your expected compensation. “The family will get what it pays for and, if a board member is a bargain, they likely won’t respect him,” cautions Baldwin.
Finally, make sure that you’re clear on what the family wants from you as a director. You can help them professionalize board practices, succession planning, and overall governance, but does the family really want you to? Also, as an attorney, whenever a legal question comes up, will all eyes in the boardroom turn to you?
Board-Seeker Action Items
- List the nonprofits/charities/associations/civic groups you are a member of or support. Then, review this list and consider if you’re willing to be more involved with any for governance purposes. If so, which contacts could help make it happen?
- Look at your charitable giving amounts for the past year. Then, consider that, if you joined a nonprofit or charity board, you’d likely be expected to contribute. What level would you be willing to give as a part of a board role? What sort of a “cost/benefit” analysis could you apply?
- Review your earlier networking list and cull out names related to the venture capital or private equity industry. Investigate the sectors they invest in for board needs related to your skills, investment strategies, and pending investments or exits.
- While reviewing this list, look for contacts in such sectors who’d be willing to schedule lunch with you for an information chat on their specialties, like PE company governance, family firms, and so on. This wouldn’t involve pitching to them but instead background briefing.
- List some specific talents you could bring to a private/venture/family/turnaround company board. Work-out skills? Finance connections? Banking experience? Acquisitions? Dealing with founders? Recruiting?