How to Hire an Independent Board Director

A Hierarchy of Needs

Tons of SaaS companies are opening up seats for independent board directors these days. I see several drivers of this:

  • Diversity as a Goal: There's an increasingly common objective to improve the diversity of the board. It's arguably easier to find underrepresented folks among operators than among VC investors, so adding independents to the board is often the best route to improving diversity.

  • Hot IPO/SPAC Market: Late-stage companies are staffing their boards ahead of going public.

  • Need for Business Skills: CEOs are increasingly technical and are looking to get help from business-minded partners, which I wrote about when explaining the rise of the COO role.

  • Increased Founder Power: CEOs want to allocate a greater percentage of their board seats to people who are actively adding value, for the same reason that they're shifting their cap tables toward angels. The abundance of capital has given founders a greater ability to do this.

  • Decreased VC Capacity: Given the massive increase in the capital that VCs need to deploy, and the resulting increase in competition, VCs need to focus more of their time on sourcing new investments versus fulfilling their board obligations. VCs are increasingly offering to allocate their board seats at early-stage companies to independents.

Even though CEOs are typically keen to add independent board directors, I often find that they're stuck not knowing what to look for. This is one of the reasons why so many board recruiting searches go on and on for months. 

Here's what I recommend to CEOs: Follow the "Hierarchy of Needs" for an independent board director. Although the analogy to Maslow's Hierarchy isn't perfect, this pyramid is similar in that it starts at the bottom with the most basic needs and ends with needs that contribute to your board's "actualization." 

One point that I should make upfront: I am taking it for granted that you’re already looking to solve for diversity on your board. As noted above, this is a huge trend, for real business reasons. If you’re still on the fence about this or looking to check a diversity box but don’t quite believe in the value, I’d definitely recommend doing more research, because the data is clear. This post assumes that you’re already prioritizing diversity in your candidate pool.

With that…on to the Hierarchy of Needs!

1. Hire for Your Stage

I previously wrote about how to hire employees for your stage; the same goes for independents. Plan to refresh your independents as you progress from stage to stage (and there should be some kind of term limit for board directors). This allows you to hire independents who can best help you with your current challenges. 

If you’re a late-stage venture-backed company, you’re probably looking to fill board seats ahead of going public. You may be interested in replacing the directors who joined at an early stage with board directors whose experience is more relevant to a large company. You may focus on candidates who are appropriate for particular committees (e.g. the Chair of the Audit Committee requires a certain skillset), who have experience with particular aspects of the company’s strategic plan (e.g. “go-to-market leader” is a common profile for a candidate), or who otherwise lend credibility to the board from the perspective of public market investors.

By contrast, if you're running a growth-stage company, you may be tackling challenges like these:

  • Aligning your executive team → Hire an Operations leader who has rolled out an OKR process from scratch.

  • Adding a top-down growth model to your bottom-up strategy → Hire a Revenue leader who has built an enterprise team. 

And if you're running a Series A or B company (I find that companies are increasingly bringing on independents this early), you may be dealing with challenges like these:

  • Involving humans post-sale in a primarily product-led growth environment → Hire an independent who has built a Customer Success team to do just that.

  • Building out your executive team → Hire an independent who has a strong network, ability to evaluate talent, and understanding of the ideal org chart for your type of company.

Consider your priorities for the next 1-2 years, then hire someone who can advise on those. Moreover, ask them whether they’re willing to connect directly with your executives who are implementing those priorities, and whether they will use their network to help you on those.

It used to be that only former founders were considered proper board candidates. But former founders often can't help you with the types of challenges above. Why?

  • Their experience may be dated: they might not have led companies during an era when those problems were common. 

  • They may have the same skill set as you: often technical or product-oriented.

In many cases, you may benefit from a COO persona on your board, for all the reasons I discussed with Tomasz at Redpoint during our recent fireside chat.

2. Hire for Strategic Thinking

Even if you're not hiring someone who has been a CEO before, you're ideally hiring someone who can think like one

Board directors will be offering input, even voting, on the most strategic decisions. Try to recruit someone who has the context and strategic thinking ability to make those decisions.

Strategic thinkers have a more global perspective on the company. They demonstrate characteristics like these:

  • They have been exposed to many areas outside their own functional expertise. 

  • They understand how teams at a company are connected: e.g. they have seen how an apparent issue in one functional area can expose a root issue in another one.

  • They have offered input into decisions that affect all stakeholders: investors, employees, customers, partners, and communities.

  • They have experienced major company events: funding rounds, acquisitions, even IPOs.

You can test someone's ability to think like a CEO through questions like these, which I also mentioned in my blog post on the rise of the COO role:

  • "Describe why your past company has been successful."

  • "Describe what your company strategy is going forward, and why."

Good answers to these questions reflect the candidate's understanding of the complexity of what generates success and failure. Ask them "why" as a follow-up question many times.

3. Hire for Communication Style

A candidate’s past experience as a board director is certainly valuable, but what’s more important is the communication style that is often developed through board experience but that a candidate can acquire in plenty of other ways. That communication style should involve:

(a) Supporting, not directing

Many hard-charging executives struggle to adjust to their new role in the boardroom. It's natural for them to express themselves in the same way they often do when they're in their executive team meetings: advocating a strong perspective and seeking a commitment to action from the group.

But a director who does this can disrupt your ability to manage your board. Imagine them expressing a strong opinion during a sensitive conversation about a topic that they don't necessarily know much about, or don't have the context for. This could derail the meeting and potentially lead to poor decision-making by the board, including on topics of the utmost importance, such as whether to raise more money or whether to sell the business. 

By contrast, a thoughtful director knows that their role is not to execute but rather to monitor (in the case of later-stage companies) or coach (in the case of earlier stage companies). They ask thoughtful questions. They listen well. They assume they know less than you about the topic at hand. They give the right amount of feedback so as to help but also not distract the company. They will approach you one-on-one, before or after the board meeting, to let you know any disagreement they have with your strategy. This gives them the opportunity to learn why they might be wrong and/or gives you the opportunity to change course on your own terms.

Learn about how your candidate has communicated with others in a coaching context. Have they advised CEOs before, perhaps as a formal advisor to the company, or within the context of a client relationship? Do they ask questions that lead you to the right answer, rather than simply directing you to take an action?

(b) Stoicism in difficult situations

You may go through tough times with your board. Those difficult situations could include:

  • Important executive threatens to quit.

  • Controller embezzles money from the company.

  • CEO decides to let go two-thirds of their staff.

  • Sexual harassment necessitates a strong response.

People who have not been exposed to difficult situations before (whether at the board level, within their company, or in their personal life) may not have developed the resilience to handle these circumstances and may overreact. Good candidates will temper their responses. They know it's not the end of the world. They may be able to advise how to handle the situation based on what has or hasn't worked in the past. They know that most (although certainly not all) issues can be rectified and how much the founder will benefit from continuous support.

Even if they are struggling emotionally with the situation, they will be thoughtful in how they communicate about it with you and the board.

4. Hire for Commitment

Given the benefits of leveraging independent board directors as light-touch advisors, you'll want to understand how much time they plan to commit to your company, and how that matches with your expectations. The best board candidates are often the busiest, so you may be happy speaking with them primarily leading up to, during, and after quarterly board meetings. On the other hand, if you're early-stage, there may be an initiative that you'd really like someone to dive into with your team -- even if you recognize that the purpose of a board director is not to replace an executive hire.

Consider also the candidate's endurance as a board member. It's often a negative public signal for your company when directors leave, so you'll want to ensure they're committed for the duration of the term that makes sense to you. Have they previously demonstrated resilience in difficult situations, or will they abandon ship at the first sign of things going poorly? Do they fully understand that liquidity events make take longer than expected to achieve?

You can build your confidence in a candidate’s commitment by ensuring that you’re aligned on the vision for the company. Share with them:

  • What defines success in achieving your mission?

  • What are the key drivers of the plan to build a $XXX million dollar revenue company?

  • What revenue growth and profitability do you expect to achieve?

In sum, choose candidates who are on the same page with you about the time commitment, the ups and downs of building a company, and your vision.

5. Hire for Independence

You're looking for someone who will be your independent board director, which by definition means someone who is not one of your VCs. At the same time, your VCs are often a terrific source of leads for board recruiting processes, through their executive networks. Your goal should be to take advantage of VCs' resources while also evaluating candidates for their independence. 

For example:

  • Has the candidate previously served on boards with one of your investors?

  • Is the candidate currently an executive at a company where your investor is also on their board, in which case your "independent" literally reports up to one of your other board directors?

In theory, these situations could compromise the independence of your board director and even effectively give one of your VCs double the voting power.

I don't want to overstate this point. These situations aren’t dealbreakers. They simply make it more important for you to learn about the relationship that your candidate has with your VCs. You can also ask them about their comfort with conflict. Can they express their own point of view while preserving relationships?

In addition, it doesn't hurt to tap your own network for candidates.

Bottom line: Hire someone who will put the company first, above pre-existing relationships they may have with other board directors.

6. Hire for Values

At Gainsight, we talked about our values all the time. We talked about them in board meetings, too. Every board director knew that if they advocated for a strategy that didn't honor our values, it wasn't worth having a conversation about it. 

Test your board director candidates for alignment with your values in the same way you'd test potential employees. Questions that start with "Tell me about a time…" are helpful. But reference checks are the best way to learn about someone's values, because I've found that someone's actions and decisions -- more than their words -- are typically accurate reflections of their values.

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P.S. Thank you to the CEOs and others who offered feedback on this post and thereby made it even more comprehensive!

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If you're a potential board director candidate, you can sign up for the Opportunity Seekers Club to learn about board roles that cross my desk. 

If you're a CEO, VC, or search firm looking to recruit an independent board director, I'd be happy to help you find one. In full transparency, I personally won’t take on more than 1-2 more board roles this year, but I'd be excited to help you find someone else. Email me at allison.pickens@gmail.com.

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