4 reasons why board reporting matters

I initially published this post in my weekly(ish) newsletter "Drinking from the Firehose." Sign up here for more: https://firehose.substack.com/

Leading a good board meeting is a skill, often developed over years of observation and practice. Unless a founding CEO has previously served on a high functioning board, the first few board meetings with a new company are rarely productive. Some CEOs may present a “book report” style presentation, in which they list all the accomplishments that quarter, but with no call to action or key decisions framed and highlighted. Others may provide too little information, leaving board members with no context from which they might provide guidance.

Still others might second guess the necessity of reporting to the board at all, other than what the rules of corporate governance require. Board decks take concerted effort to compose — not just from the CEO, but from other members of the team. Early stage companies have few resources to devote to tasks not deemed operational. Does the value of that advice you get from the board outweigh the extra work required? Or, perhaps more bluntly — is the report there just to keep your VCs happy?

My view is that CEOs should themselves be motivated to set up a basic reporting cadence and create informative board reports. Here’s why.

First, your board can’t be effective unless its members understand your business. As CEO, you hopefully selected financial partners and independent board members who are smart, experienced, thoughtful, and collaborative. None of that experience or brains is valuable without context. With a few exceptions, most non-executive board members aren’t present in the company day-to-day. Companies like Netflix have gone out of their way to loop board members into operating meetings, but that’s not going to be possible for many startups. Without context from reports, your board can’t help you see around corners to avoid worrisome trends or spot new opportunities without consistent reporting and structured discussion.

Second, boards do become more valuable as they scale, but they also become more difficult to manage. Imagine a board with N members. Metcalfe’s law states that the number of edges in a graph scales like ~N^2. That means that, if each board member needs to converse with each other board member to resolve an issue, the number of conversations grow as a power law. CEOs, therefore, need to actively manage their boards over email and in the boardroom. The best way to do that is with a presentation that gets members on the same page and structures the conversation around a few key topics and desired outcomes.

Third, business relationships are based on both trust and accountability. Trust without accountability is blind faith. The CEO needs the trust of the board to make key decisions and operate the business day-to-day. But, without accountability for the results of those decisions, that trust can be short-lived. Consistent board reporting is a great way to be held accountable. In addition, an accountable CEO sets an example for her team that she will, in turn, both trust and hold them accountable for their results too. Ideally that cultural norm flows from the board on down throughout the organization.

Fourth, if you believe that planning is important, you should also find value in consistent reporting. Sure, early on, when you’re trying to iterate quickly and establish product/market fit, you’re flying by the seat of your pants. However, once you settle into a repeatable go-to-market motion, you should start planning for the future. Otherwise, you have no way to make decisions regarding allocation of capital — human, physical, or financial. You may not even understand the long-term consequences of decisions you’re making today. The nice thing about a planning process is that reporting is a byproduct. I encourage CEOs to use the annual planning process as an opportunity to revisit or revamp the board metrics, reporting cadence, and the structure around board meetings. Ideally, reporting should be a rollup of your current business telemetry, so the way you present to the board mirrors internal metrics.

Managing and reporting to one’s board are critical skillsets that CEOs must develop over time. They’re obviously essential if you want to take your company public, but the benefits can come much earlier in your company’s lifecycle. Generating board reports isn’t (just) a service to your VCs. It’s a muscle that helps you make key strategic decisions and perform critical governance functions for your growing enterprise.

— Thanks to Rachel Jarrett of Zola, Matt Weiler of Daily Harvest, Lauren Cooks Levitan and Jeff Kolovson of Faire, and others for reviewing a draft of this post.