Great Silicon Valley boards know that fast growth requires experienced people, and some of the best-experienced people are those who have failed and learned. Those people are highly desirable. A great Silicon Valley board understands that.
It works like this: Silicon Valley is entrepreneurship on steroids. Companies scale here like nowhere else. Businesses rise and fall faster than anywhere else in the world. Everything is magnified: differences of opinions, the searching and finding of capital, selling and merging, and new theories of management, along with expanded egos and, yes, greed. They all come forth in Silicon Valley. And, many of the personalities (on the boards and in the C-suite) are bigger than life — or at least bigger than life outside Silicon Valley. This leads to a very energizing environment . . . and, some very lively board meetings.
In Silicon Valley, people are encouraged to swing for the fences and to “dent the universe,” as Steve Jobs liked to say. It's a place where failure is embraced because everyone knows that the taking of huge risks and the building of disruptive companies and disruptive industries that everyone in Silicon Valley craves to do have a much higher probability of failure.
Not afraid of being different
With that as a background, Silicon Valley board members think and act differently, and much of the boardroom advice comes from an entirely different perspective. Ideas, advice and practices are ever evolving to match the ever-increasing pace of the Valley. Some of the practices work and greatly enhance the companies they guide. Some do the opposite, but just like their companies, the boards in Silicon Valley are not afraid of being different.
Like everywhere in the business community, great boards provide governance, guidance and grit. Ineffective boards get hung up on micromanaging, meddling and minutia.
In my experience, boards can be either great or bad depending on the extent to which the members are self aware and mature. The best boards in Silicon Valley understand and are part of the culture of the company. They thrive on the constant reinvention of the companies they serve, and don't get upset with change. Even major change.
Most importantly, the members of the best boards seem to understand that when you realize you don't know it all, you can be a really good board member. And they seem to be able to laugh at the fact that bad decisions do make great stories.
The good and not so good
Here are three mandates that boards must master in dealing with unique Silicon Valley conditions and that set apart good (sometimes great) boards from bad boards:
• The need for rapid scalability of the companies: In Silicon Valley the dominant theme is “Go big or go home.” Great boards handsomely reward those that succeed — most often with a large amount of options which align the interests of management with those of the investors. And, they constantly and optimistically encourage the top managers to “swing for the fences.” They also grasp the knowledge that entrepreneurism isn't a stage of a company, it is a style of management.
Great boards set mutually agreed-upon goals, and then let management manage. Bad boards treat managers not as partners but as if they are solely salaried employees. They give compensation packages heavily weighted to the salary portion of the management's pay, and ignore the need for the alignment of goals that a heavy dose of options can provide.
Bad boards constantly change the objectives and overload the executives with so many differing objectives that the executives can't possible execute all of them well.
• An unusually high sense of urgency: Often capital in Silicon Valley, especially venture capital, is impatient. There is a limited time frame of the VC funds, and a need to get high returns for their investors in the typical 5-to-7-year fund life.
Great boards have this sense of urgency. They tend to satisfy the need by encouraging the adoption of the latest techniques of management that speed up companies — things like Design Thinking and Agile, and they encourage investment in technologies that will facilitate rapid growth. They don't just put a Sword of Damocles over the CEO's neck. And great boards are supportive of companies reinventing themselves. They empower and encourage the CEO. Great boards don't meddle.
Bad boards have a tendency to make knee-jerk reactions to short-term problems. This is especially true with regards to their CEO and their CEO's authority. Bad boards meddle at the first sign of trouble. They make management decisions at the board level, eviscerating the CEO's authority, which can lead to a rather quick exit of the CEO and turmoil in the management and managing of the company.
• The inclusion of a lot of very smart and highly educated board members: When you look at the CVs of the board members in Silicon Valley you usually see more degrees than you find on a thermometer. That's the good news. In some cases that comes up with great contributors who have an inordinate number of important contacts. But it can come at a steep price.
The great boards limit the number of board members so that meetings can be efficiently scheduled. They are invariably filled with not just brilliant people but also mature people, able to ensure proper representation for different investor constituencies. They want long-term alignment and trust so they can deal with inevitable differences of opinions. They certainly don't want their valuable CEO spending time managing a rogue board member.
The bad boards are generally too large to be efficient and have a lot of people who look alike, have the same background, the same gender, and the same ethnicity. Their roster is filled with a surfeit of representatives of an alphabet soup of rounds of financing (friends and family, common shares, A, B, C, D and more.) The difficulty of getting so many members in the same place at the same time requires meetings where more than a few members are only able to attend by phone. And the members seem to be rife with big egos, focused on power while requiring everyone to be deferential to them.
Huge growth, huge risk
So while Silicon Valley boards urgently want success, they are smart enough to smile at failure. They do so because a great board in Silicon Valley believes in huge growth and understands that such belief comes with huge risk, and that often means failure. In Silicon Valley, boards believe that the lessons of failure are valuable. Board members may have diverse backgrounds, but a good Silicon Valley board comes to one consensus big-picture voice that, most importantly, supports their CEO. â–