Board members overestimate value by 20%. Board expert Mannie Gill explains why

For early-stage startups a board of directors can be a huge asset. Board members can bring experience that helps the company expand to other markets, they can fill in skill gaps missing from the executive team, or even provide mentoring to young founders.

But often, startups are finding that they’re not getting the value they were hoping for from their board of directors. In our Startup Snapshot report “Inside the Boardroom”, investors report that they provide 20% more value than startups believe they are actually getting. In fact, we found that across all categories investors believed that they provided more value than what the CEO reported that he or she was receiving.

Initially, it’s difficult to understand why this phenomenon is happening and what startups can do to create the change they need. To get a clearer picture, we interviewed Mannie Gill, Founder of Renovata, who has more than 20 years of experience recruiting boards. After helping hundreds of startups, Mannie’s able to reveal valuable insights as to what’s going wrong and what startups need to consider so they’ll get the value they were expecting.

Our data found that directors are reporting that they add more value than what the startup thinks is provided. Why do we see this happening?

This could be happening because of a mismatch of expectations. If a CEO is expecting a board member to transform their organization overnight, it’s not going to happen. However, if the CEO recognizes that they have very specific gaps in their organization and a board member can come and help over a period of time, then I think the expectations are probably set and matched. But I think this really is about setting expectations upfront. The board member is not going to come and say that it’s not the board member’s responsibility to change the entire trajectory of an organization. That’s the management’s responsibility. The board member can aid and help in very specific situations.

It could also be because of a lack of communication. A lot of CEOs are certainly hesitant to open up to the board because you have the investors sitting on the board. Even with the independent directors, they feel as though the independent directors are there to look after the interests of the shareholders and not necessarily look after the interests of the management team.

How can startup leaders get better value from their board of directors?

Keep in mind that being a CEO is a very lonely place. And CEOs tell us all the time that it’s very difficult for them to really be transparent and share everything that they’re thinking with board members. This is often why they have external coaches and mentors who they can have a fully transparent conversation with.

But I think the board can do a lot to help in this situation. This is an education process to help the CEO understand that the board is there to help. They can sit down with the CEOs and really explain to them what their role is, what their job is, where they can help, and how they can help.

Empathy helps in this situation as well. You need to encourage the CEOs to open up. And at the end of the day, this is about developing a trusting relationship with the board.

What can startup CEOs do to develop trust with board members?

This probably happens early on. It helps to build a personal relationship between the two individuals and try to take yourself out of the business context into a little bit more of a social gathering. Try to understand each other’s goals and drivers and find alignment because if you can find alignment for the sake of the business then that helps to build that bridge of trust between the two. From there you can start building and start sharing transparently.

A lot of the most critical relationship building happens most definitely outside of the boardroom. It needs to happen in an organic and authentic way. Both individuals need to recognize that they’re there for the benefit of the organization, and there’s nothing personal in this, but we’re trying to make the best decisions that we can so that the organization and the company can thrive. If you’re able to build that type of relationship then it bodes well for the future of the company.