Cultivating Great Boards

Clear roles and commitment to mission make good boards; vision creates great ones

reprinted from NBIA Review (National Business Incubator Association- more at nbia.org)
—by Ellen Gerl

David Cattey remembers well his first day on the job at the Business Technology Center in Columbus, Ohio, more than 13 years ago. A plumbing contractor was tearing up the parking lot to repair a ruptured water line. An incubator board member stood in the trench, overseeing the operation.

“I realized right then the organization was put together wrong,” says Cattey, the program’s fourth executive director in its then six-year history. As more proof, he learned that the board treasurer came in twice a month to sign checks. Cattey knew that wasn’t the role of the board of directors either.

“If the expectation is that they’ll be in the trenches, you won’t get the right people,” he says. “I want people with vision, people who can challenge us to move to the next level beyond where we are.”

Cattey and other incubation professionals know that effective, strategic-thinking boards can make a difference in a program’s success. Unfortunately, they don’t just happen. For Cattey, reshaping the board’s role meant, among other things, communicating his management philosophy: “My style is that I’m not going to let them micromanage this organization.” Today he enjoys a board of directors that’s very involved at a strategic level and whose role includes advocacy for the program on city and state levels.

At the Santa Fe Business Incubator in New Mexico, detailed “Articles of Governance” spell out what’s expected of board members and staff. Although the organization had a solid set of bylaws, a board member with experience on a number of national-level boards suggested the incubator go a step further. Marie Longserre, president and CEO, says the document has helped head off problems. “It’s been invaluable in managing expectations and creating good working relationships between board members,” she says.

The process of cultivating a great board may involve making roles clear, altering board composition, bringing everyone in line with the mission or establishing open lines of communication. What’s more, it’s an ongoing process. Boards – their roles, composition, even size – may change as your program matures. The original board mix that was a perfect fit for your program’s development phase may be miscast for its operational stage.

If you are a board member or an incubator manager creating a new board or trying to jazz up an existing one, you’ll find guidance from others who’ve been there. Here are tips to help you build the best board of directors possible.

Clarify Board and Staff Roles

Most incubator managers agree that the day-to-day operation of the incubator is the responsibility of staff and that the board’s responsibility lies in setting broad policy to guide staff actions and assure the viability of the incubator. Yet who hasn’t heard the tales of incubator boards that constantly second-guess CEO decisions or the run-amok board member who tries to advance his or her personal interests?

Serious misalignment between incubator managers and their boards most likely results from unclear expectations from the start. Sandy Bourne, president of the Pasadena Enterprise Center in California, says her board stays on track in part because the document “Board Members’ Responsibilities” cements their roles in writing. The document defines the board’s overall role to ensure the organization succeeds in its mission and lists some 22 dos and eight don’ts. Among the dos are two that encourage visionary thinking: “Do focus your attention on providing broad policy guidance” and “Do keep the big picture in mind when participating in decision-making.”

Like other incubator managers, Bourne is finding that a changing environment means a different emphasis for her board: “With the collapse of the economy, our board’s purpose is increasingly to generate more funds,” she says. Accordingly, prospective board members learn up front that they’ll be expected to take an active role in fundraising, a role that typically requires more hands-on activity than policy making alone.

The Santa Fe Business Incubator’s “Articles of Governance” outline the board’s expectations of the CEO and vice versa. And, with limited staff resources, the nonprofit looks to its board members to “guide the organization and be part of the activities,” Longserre explains. The board document explains the time commitment this requires: “10 hours of work per month and service on at least one committee.”

In short, don’t assume your board understands its role. Use bylaws, handbooks and one-on-one orientation to stress members’ charge as policy makers, not managers. As author John Carver writes in Boards That Make a Difference (Jossey-Bass Publishers, 1997), “Directing an organization can be like rearing a child. Controlling every behavior is fatiguing and ultimately impossible … governing through policies is the effective way to operate.”

Stay Focused on Mission

A board and management with different goals for the organization spells trouble. Perhaps some of your board members helped develop the program’s mission statement, but chances are a number missed that discussion. It’s the gold standard upon which they’ll weigh decisions and make long-range plans. Achieving buy-in is essential, according to Hope Player, CPA and senior consultant with Business Incubation Support Services International in Rochelle Park, N.J.

“You must understand the mission – that we’re here to create jobs,” says Player, a cofounder of the New Century Venture Center in Roanoke, Va., where she formerly served as a board member for more than 10 years. She says the board orientation program is one way the incubator staff brings new members into sync on mission.

Center staff employ other creative ways to keep a focus on mission as well. For example, all board correspondence, even minutes, includes the program’s mission statement. Each new board member receives a gift, a Plexiglas stand sporting the incubator mascot – a chicken’s head popping out of an egg. “Cute, but not something you would be ashamed of,” Player says, adding that the conversation piece gets people talking about the incubator’s mission. Another incubation program prints its mission on the back of board members’ name cards used at various meetings. And many incubator lobbies showcase their programs’ missions.

Select the Best People

How do you find the right people for your board? First, understand that boards have “life cycles,” Cattey says. The Business Technology Center’s original board had key organizational acumen, but the board needed different skills when “we decided to reinvent ourselves with a larger facility more focused on high-growth, high-wealth-generating companies.”

Current board members, who represent major investors in the incubator’s capital campaign, have the ability to raise big bucks and connect incubator clients with major industry players. For instance, Cattey says, one board member in the financial sector linked a client with a major accounting firm’s national office charged with studying the health-care industry. Its staff collects information about the state of the industry, impact of legislation, best practices and trends. During conference calls, the client learned how buying decisions are made and who influences them, among other useful marketplace tidbits. “With this information, they were able to package their product with appropriate functionality and direct their marketing efforts in a more focused manner,” Cattey says.

Only your organization can decide on the appropriate cast of characters. Do you need fundraisers, people whose reputation adds credibility or a board composed with client consulting needs in mind? Still, incubator managers point to some common attributes board members should have – among them are commitment, business expertise and resources. A diverse, representative mix also is desirable, albeit harder to accomplish, they say. Here’s one point on which the incubator managers agreed: politicians do not make the best board members. That’s because they often don’t attend meetings and because of continuity problems that arise as voters elect new representatives. Some incubators choose to make elected officials ex officio members to keep them involved on a nonvoting level.

Bourne asks board members to seek people with a passion for giving back to the community. They found two such individuals among former clients. “We grow our own,” Bourne says. In a similar vein, Player looked for “folks who understand and buy into the mission.”

One problem incubator boards face is recruiting good board members representative of the community served, a problem magnified when the incubator’s mission is to serve low- and moderate-income clients, says Stan Taylor, a founding and current Pasadena Enterprise Center board member. If they’re successful at what they’re doing, he explains, “that means they already have two jobs and don’t have time to devote to this.”

It is a conundrum: Board members who can bring your program credibility or dollars may not be the best ones to empathize with needs of the start-up firm, whether being started by an entrepreneur rising out of poverty or someone with more life skills. “You need people who can understand that you have chosen a clientele that most of the rest of the world is not pursuing,” says Tim Lavengood, director of the Technology Innovation Center in Evanston, Ill. “People who have the kind of reputation that can help you raise funds may not be the same who understand that process. It’s the rare person who can sit in both worlds.”

Rare, but fortunately not impossible to find or cultivate. Player is optimistic that you can locate “champions” among those already involved in community affairs. “From there, it’s a matter of education about the incubator and what it wants to accomplish,” she says.

Longserre and several other managers say they try out candidates by having them serve on a committee or as an advisor to a company. “It’s the finest way to learn how they work with others and how dedicated they are to what we do,” Longserre says.

Cattey says crucial to attracting the best people is to provide directors’ and officers’ insurance that will protect them from possible legal actions. He believes its $3,000 annual cost is worthwhile. In addition, his program is considering more costly “errors and omissions” coverage.

And lastly, consider writing a board member job description to guide the Nominating Committee or others involved in recruiting new members. Rick Moyers, executive director of the Ohio Association of Nonprofit Organizations, says many nonprofit organizations recruit new board members in a “willy-nilly way” with little due diligence. “Would you hire a staff person without a job description?” he asks.

Make Board Work Meaningful

Given that board members are awesome, noncompensated resources, why would you want to waste their time? Overloaded meeting agendas, multiple committee assignments or paperwork overkill can fatigue the best board and prevent it from having big-picture discussions. What’s more, serving on the board stops being fun.

Ask your board members why they serve. For Taylor, the reward is the feeling of accomplishment from having helped some residents who became incubator clients lessen their dependency on government support. Plus, he says, developing a personal rapport with staff and clients is “kind of fun, too.”

Review your governing structures against overall mission: How much does each activity contribute to the creation and growth of incubator companies? Can some committees be combined or eliminated? Consider creating ad hoc committees for those tasks with a set goal and end point. Similarly, set agendas that allow time for thinking about the future. At the Santa Fe incubator, six standing committees include executive, governance, advisor affairs, finance, fundraising and client selection. The executive committee meets two weeks prior to full board meetings, sets the agenda and discusses what information needs to be disseminated in advance.

Informal NBIA surveys suggest that most programs hold full board meetings on a monthly or quarterly basis. For Cattey’s board, quarterly meetings suffice and also work to discourage micromanaging, he says. The Pasadena Enterprise Center’s board, which used to meet bimonthly, recently went to a monthly schedule in light of ramped-up fundraising efforts.

Longserre says that with all the work to be done, it’s easy to forget that board membership has a social aspect, too. A recent party hosted by the board chair gave new and old board members, staff and clients the opportunity to meet informally.

Choose the Right Numbers

The rule of thumb, most managers say, is to have no more and no fewer board members than you need. For instance, Lavengood’s program has a five-person board, which he says makes achieving a consensus easier. “A small board is able to be more bold and creative,” he says. Choosing the right individuals is critical, however. One reason the small board may work so well for the Evanston incubator is that it enjoys strong fundraising support from the Evanston Technology Foundation.

For many, a mid-range size works best. The Santa Fe Business Incubator has a mid-range board size of 12 to 15 people, but obtains an even broader community representation through its 12 ex-officio, non-voting members. They represent various incubator partners such as a community college, national laboratory and local economic development agencies.

Boards with strong fundraising goals tend to be larger. The Pasadena Enterprise Center’s 11-person board is expanding to gain more members who can tap into the community’s financial resources. “We may go as high as 19,” Bourne says.

Although large boards can be cumbersome, Cattey admits, he wouldn’t trade his 27-person board’s status in the corporate community and financial support for a smaller one. “It’s the price you have to pay.”

Create Open Communication

As in any relationship, good two-way communication between management and a board creates trust. Board members must feel confident you are providing them information needed to make sound decisions and that they won’t be learning about incubator problems from the newspaper or their golfing partners. On the flip side, you can head off potential problems if they’re comfortable calling you with concerns. A well-informed board also is less likely to micromanage.

Another good reason to keep the information flowing is that the board’s job includes evaluating the manager. Board member Taylor says that developing a sense of the effectiveness of the incubator manager is related to “the reports and the rapport.”

Managers have found creative ways to make their boards feel part of a winning team. In addition to sending materials in advance of full board meetings, the New Century Venture Center’s manager sends weekly e-mails to each member, according to Player. The simple, consistent messages alert the board to seminars, meetings or prospective clients. A well-educated board can better address questions that arise in the community, she adds. Look for opportunities to acknowledge their efforts, too. Bourne sends each board member birthday wishes with special thanks.

Longserre says having a client make a short presentation at each board meeting about how the incubator is helping his or her company grow keeps the board in the know – and focused on mission. Inviting members to regular client luncheons and seating them with clients at an annual event honoring clients also encourages board-client communication, Longserre says.

Replace Ineffective Members

A board member who doesn’t attend meetings regularly, micromanages or appears to have a hidden agenda hinders an otherwise effective board. But how do you get rid of the sour grape? One suggestion is to include a provision in the board bylaws that allows the full board to remove a member for poor attendance or other reasons. Although no board likes to invoke this power, Bourne says her board did vote off a member who was coming to meetings but staying only long enough to review financials. It seemed his motivation for joining the board was to scope out the incubator, which he saw as competition for a real estate operation he was planning.

Other managers point to staggered term limits as a way to gently weed out ineffective board members. For instance, Player says with staggered three-year terms, one-third of the New Century Venture Center’s board changes each year. She stresses that it’s the board chairman’s role to speak with members “slacking off” and remind them of their responsibilities. Again, good communication often fixes the problem.

“We’ve also had a few board members come to us who had other time commitments affecting their incubator responsibilities and say, ‘What should I do? Can I have some other role?’” she says. Respect that wish and find another way to keep them connected, she suggests.

But Player recommends being bullish if your entire board hits a rough spot. When poor attendance started to plague her board, Player called a special breakfast meeting. “It was our come-to-Jesus meeting. We gave everybody the riot act that time,” she recalls.

Plan for Visionary Thinking

What does long-range planning involve? It’s a critical mentality boards demonstrate “by obsessively deciding what good is to be accomplished for which people at what cost,” writes author Carver. Put that way, it seems simple enough. But in reality, lack of time, pressing concerns like keeping an incubator afloat financially and not understanding the importance of this role put “exploration of vision” on many an incubator’s back burner.

To solve the dilemma, some incubator boards set aside special time for strategic thinking. For instance, Longserre’s board at the Santa Fe incubator participates in a half-day retreat with an outside facilitator that focuses on long-range planning, future issues and risks the organization faces. “It helps us prioritize what I need to be working on,” she says.

Other ways to prevent board myopia include taking field trips to other incubators in your region and encouraging board members to attend NBIA conferences. Both activities help members see their programs in a larger context.

A strong board is your incubator’s life support system. It breathes life into the incubation process in very real ways, enhancing the program’s and clients’ credibility, ensuring its financial viability and keeping in sight the reason for existence: growing companies. Like Bourne, who encourages her board to seek individuals with a “passion about the mission of strengthening the economic fiber of a community,” you can cultivate boards with the enthusiasm and vision to sustain your program into the future.

Board Resources

• Boards That Make a Difference: A New Design for Leadership in Nonprofit and Public Organizations, 2nd ed., by John Carver (Jossey-Bass Publishers, 1997)*
• Nonprofit Boards That Work: The End of One-Size-Fits-All Governance by Maureen K. Robinson (John Wiley & Sons, 2001)*
• BoardSource, former National Center for Nonprofit Boards, at www.boardsource.org
• Nonprofit Boards and Governance Review, a free online newsletter at http://charitychannel.com/nbgr.shtml
• The NonProfit Times, a free online newsletter at www.nptimes.com
  *Available through the NBIA Bookstore at www.nbia.org/store or (740) 593-4331.

Board Don'ts

With the help of incubator managers and board members, NBIA Review offers this short list of no-noes for those who serve on incubator boards.

• Don’t participate in board discussions or votes that deal with issues in which you might have a conflict of interest.
• Don’t accept incomplete information or vague answers to questions or concerns you raise.
• Don’t assume the role of incubator public spokesperson, unless the executive director or board chairman asks you to.
• Don’t allow other board members to pressure you into decisions.
• Don’t raise issues of personal concern at meetings, unless you have cleared them in advance with those responsible for establishing board meeting agendas.
• Don’t miss meetings.
• Don’t join a board if you do not have time to be an active participant in its activities and responsibilities.
• Don’t let the minutiae of board governance or incubator management decisions prevent you from doing your job of providing broad policy guidance and long-range strategic thinking.
• Don’t micromanage.
• Don’t just go to board activities, incubator seminars, open houses; help.
• Don’t expect to get rich doing this – the rewards are many, but not monetary.

Tips for New Board Members

A cofounder and board member of the Pasadena Enterprise Center in California for more than 15 years, Stan Taylor offers the following tips for first-time business incubator board members:

• Read and study the board bylaws and program’s mission statement. “Everyone needs to be on board with the mission,” he says.
• Listen a lot, particularly in your first few board meetings.
• Meet informally with staff members and clients. “Getting a grassroots feel is good,” Taylor says. “It’s not necessary to get to know each client personally, but you should understand the issues and problems they face.”
  

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