Lessons from private board searches, Q&A with Robert Tercek, registration now open for PCGS 2016 and more.
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8 Lessons Learned from Private Company Board Searches
I work with closely-held and family-owned companies across multiple markets with a broad range of management sophistication. Over the last 25 years of succession and governance consulting, I have helped boards find directors. Independent director positions are hard to fill. Private company shareholders usually develop their own list of candidates, using key advisors, associations and friends. A search process typically involves people they personally know.
My lessons below are from working with their process to help them.
Lesson #1: The typical search selection process favors people who are well networked and have friends on boards who will invite them when an opening exists. Trust is so important here. If you don’t have a network, don’t expect to get on a board quickly.
Lesson #2: It takes time and money to build a network. If you are seeking a board seat, you need to plan on spending over 300 hours a year in networking, and $7-15,000 over three years to build your network, educate yourself and find the right boards. Attending one conference is over $2,000 for registration, airfare, hotel and meals. Buying lunches and breakfasts add up, too! Professional association dues can be even more. Not investing in networking is why so many people can’t find a board seat to fill.
Lesson #3: Your resume or CV can be a tool for boards to deselect you. You need to have a board CV, not an employment history. When I share this observation with those not selected, some are shocked and others offended that their CV was rejected by shareholders. In the meantime, there are thousands of CEOs retiring every year who seek those few available seats. This is a very competitive environment. You have to ask yourself if you are making a strong investment of cash and time to succeed.
Lesson #4: Interview skills are another key to selection, as much as your network! When I witness highly qualified director candidates interviewing with savvy shareholders, it can be striking how bad their interview skills are. I’ve had shareholders tell me candidates’ backgrounds were excellent, but their personality and interview skills were a turn-off. As one chair put it, “Jack, this was a great experience for me as I now realize how important the interview process is for determining fit and chemistry, not just talent.”
Lesson #5: Know your market and your fit. There are five primary groups or levels of director experience typically found on boards of closely-held companies: people are current or former officers of the company, including family, who attended board meetings; family board members who don’t work in the business; company founders and CEOs who may preside over a board that includes family members or internal employees; professional advisors who have or have not worked in the business; professional board members, those who are former executives, who usually sit on many boards as a full-time pursuit. I am sure there are other profiles, but for the typical private company board member, these are the common groups or levels.
Typical private companies with boards have a minimum of about 50 but may exceed 5,000 employees. Obviously, there are more companies with 50-500 employees than there are with 5,000 or more. The needs and levels of sophistication are also different. For those seeking a minimum board retainer of $25,000 with $3,500 meeting fees, the number of opportunities shrink tremendously as compared to searches with $7-12,000 retainers and $1,500 meeting fees. Those who want the big bucks need to invest big bucks in networking. There is a 1-to-1 correlation between investment in networking and the retainer. So, it is important to know the board's composition, typical board compensation, and position yourself as a fit to their condition. If you don’t figure this out, you will be frustrated.
Lesson #6: It is not how smart you are as it is how collegial you are with others. Some highly successful people come with an attitude that shows up in spades in the interview process. A comprehensive interview process can be somewhat brutal and for some a key lesson of why it is so tough to get on boards. While it will be clear how smart you are, once you open your mouth, your ability to express collegiality, charm and connection with the interviewers will help differentiate you.
Lesson #7: There is turnover in board seats. I have colleagues who called me to say they were winding down their board memberships because it was time to move on. That means there are opportunities for people to find open board seats. It is important to understand the target board’s composition to help frame your fit and chemistry. Are you replacing someone’s profile or adding to the talent pool?
Lesson #8: National searches mean the trust issues have to be settled very quickly. Risks rise when you don’t know someone. If you do get a lead, offer at your own cost to fly out to meet them. Or suggest a convenient “meet you halfway” airport to arrange an in-person meeting. Headhunters get paid by the client, so they want resumes. Many companies find directors “for free” through their own networks.
If you are seeking a board position, educate yourself on governance best practices, join several networks that will expand your circles of influence, and spend money to improve your network. If you are not spending at least $3-5,000 a year on this, are you investing enough to succeed?
Jack Veale is founder of DirectorsMarketplace.ORG, an online community of carefully selected private company directors whose members seek open board positions. The website provides online training to boards and their fiduciaries. Jack is a fellow of the Family Firm Institute and founder of the Connecticut Chapter of NACD. He recently authored "Creating Strategic Innovation," and has been forming or advising boards for over 25 years. Jack is also founder of ESOPMarketplace.com, TrusteeMarketplace.ORG, FamilyBusinessMarketplace.com and PTCFO.com. Jack can be reached at firstname.lastname@example.org.
Why Should you Join a Board? A Q&A with Robert Tercek
Chairman of the Board, Creative Visions Foundation;
Author of “VAPORIZED: Solid strategies for success in a dematerialized world”
Spent a 25-year career serving as an executive for MTV, Sony and OWN, and as an entrepreneur in disruptive startup ventures.
What board do you currently sit on?
RT: I’m the chairman of a board on a foundation called the Creative Visions Foundation based in Malibu, California. It’s a really cool organization. Creative Visions provides fiscal agency for activists all over the world. At any given moment there will be somewhere between 80 and 100 projects happening around the world. And they’re done by creative activists, people who want to make a positive change in the community or world they live in. But they’re not set up to run a charitable organization. They don’t want to do the fundraising, or to deal with the paperwork and government compliance. So our foundation provides that for them. We free those people who want to make a change in the world.
Did you serve on any other boards previous to your current role?
RT: Yes, there were a couple of companies where I served on boards. Never on a public company board. I’ve been involved in two private company boards.
What do you look for in joining a company’s board?
RT: Doing business successfully is really personality driven. And so I have to find the things that appeal to me that are going to work for me, and capture my interest and really engage me. When I look at a company that I want to get involved with, the first thing is chemistry. Do I like the management team? Do I really enjoy hanging out and spending time with them? If you’re in a startup business, you are going to spend more time with that management team than your family, so you better like them. If there’s any part of it that rubs you the wrong way, or is distasteful, or you are not 100% sold on, then you have to know that going in because it won’t be a fit and won’t last long.
The second piece for me is, “Am I passionate about the subject matter?” Every company has some area of focus. If I’m spending that much time and attention, I’m going to become very familiar with the subject matter and I better care a lot about it. That’s going to sustain my interest.
For someone who is a prospective director, this is a litmus test. As a prospective board member, they’re looking at you to see what you can bring, what strategic benefit do we get from having you in our organization. As a director, you need to ask yourself what you are getting out it. And the answer isn’t only money. There’s a lot of ways to make money, and better ways to make money, so it can’t be about that. You have to be attracted to it. How can you make this company more successful?
In your experience, what should the dynamic be between directors and management?
RT: Directors need to challenge their management teams to think through the problem. Directors oftentimes can be too passive. They let management manage, and let management lead. You can’t get too involved in the detail about running the business. That doesn’t work so well as a board member. You can’t substitute for management. You should hold managers accountable. I think directors should be acting as eyes and ears and looking at the broader horizon of the landscape that is out there. Then come back to the management team and hold them accountable and make sure they have good answers.
What is the biggest difference between serving on a private company board and serving on a public company board?
RT: In a public company, a huge amount of what happens on the management level is compliance. In many respects your hands are tied. You can’t get too cute with forward plans and can’t get too cute with the way you report and so forth. You are pretty strictly measured and guided, and there isn’t much wiggle room there. The whole purpose of being private is that you’re not necessarily accountable to the market. You don’t have to report out, and compliance is a whole lot less of an issue. So you have tremendous freedom.
What is your main reason not to join a board?
RT: If it’s not a place where it’s an opportunity to add value, I wouldn’t do it. Some people consider it an honor [to be asked to join a board], but I view it as a responsibility. As a prospective board member, you have to ask yourself frankly, “Can I do this? Can I make a difference?” You have to hold yourself accountable to your own priorities and principles.
How can companies improve on their process for recruiting new board members?
RT: Some companies have a process for onboarding board members, just like you onboard a new employee. They teach them how to be good board members. Surprisingly, some companies don’t have this process. That’s a really gigantic oversight. There should be an orientation, there should be a welcome package, [amd company leaders] should talk through what the process is.
-- Rob Chakler
Registration is now open for the fourth annual Private Company Governance Summit, May 11-13, 2016 in Washington, DC.
Session topics include:
- The Board’s Role in a Crisis
- Dealing with Conflicts of Interest on Private Company Boards
- How to Interview Director Candidates
- Cybersecurity and the Private Board
- Preparing for the Board Meeting
- Private Company Capitalization, Liquidity and Shareholder Return
Expert briefings on:
- The IPO/M&A-ready Board
- Onboarding independent/non-family directors
- Board liability and risk
- Board strategy
- Board diversity
- The dynamics of family members on the board
- Private board committees
- Director and board evaluations
- The board’s role in talent oversight and development
Ultra Mobile, a nationwide mobile carrier developing first-of-its-kind mobile phone services and unlimited international communications, has been named Inc. Magazine's Fastest Growing Private Company in America for 2015, according to a PR Newswire press release.
Over the past three years, Ultra Mobile has recorded revenue growth of 100,849 percent, with 2014 gross revenue of $118.2M, earning the company the number one ranking on the prestigious list.
Ultra Mobile focuses on cost effective talk, text and data offerings, with unlimited international calling to 60 countries. The company sells over one million SIM cards per year; available in 7,000 independent wireless stores and over 25,000 retail stores including Target, 7-Eleven and CVS. Customers can recharge their plan at over 60,000 stores.
Smaller companies continue to devote fewer resources to and lag behind their larger peers in CEO succession planning, according to a survey by The Conference Board in the latest edition of CEO Succession Practices.
Companies with annual revenue of less than $100 million were the only group to report reviewing succession planning only when circumstances warrant (due to retirement, sudden death or illness, or another emergency), while among all other size groups and across all industry groups, the majority of companies reported that their boards review the CEO succession plan at least annually.