Nancy Phillips is the Co-Founder and a Managing Partner at Rallyday Partners. Previously, Nancy has been Founder or Executive Leader at TSC, ConferTech International, ITC, RMI.net, Intrepid Communications, and ViaWest. In this guide, Nancy clarifies the role and responsibilities of the board, and what an ideal board relationship looks like for first-time CEOs.

What is the role of the board of directors? What powers and responsibilities does the board have?

Role 1: Legal duties - the board is a legal construction to oversee the CEO and company; its mandate is outlined in your company's bylaws, stock agreements, or articles of incorporation. The duty of the board members is dictated by two core responsibilities, both are table stakes to execute:

• Duty of Loyalty - board members shouldn't have a conflict of interest, as the board is designed to protect the company and shareholders. Board members must offer disclosure and transparency if they have any potential conflicts of interest.
• Duty of Care - board members must do the work to prepare for meetings and take care with decisions to improve the long-term viability of the business. They have to read the board docs and have a legal obligation to be careful with the input they give. Board members must read updates, understand them, make notes, and be prepared for the board meeting. They should be looking around the corner to mitigate issues and balance and support the best interests of the stakeholders, which include shareholders, employees, and customers.

Role 2: Accelerating the company's performance - a properly built and leveraged board will be able to add value beyond compliance, to help with derisking your strategy, unleash the potential of talent being brought in, and more. The board can be leveraged to:

• Act as a valued set of advisors - the board exists to elevate the CEO, the team, and the company's performance through best practices and wise input. They can add subject matter expertise and experiential capital, to supercharge an organization to go beyond where the operating team could otherwise go.
• Support the operating team and company's growth - the board can assist in the personal and professional growth of the management team and company. They might help work through strategic discussions, offer advice on ongoing initiatives, or open their Rolodex to create connections for sales, talent acquisition, and more.
• Stress-test long-held beliefs - board members should come from a place of intellectual curiosity and a growth mindset. They have the ability to have real freewheeling, sometimes crunchy conversations with the CEO. This creates the flywheel effect of helping the CEO improve performance.

Role 3: Serving as the CEO's boss - CEOs report to the board of directors and it's a balancing act for board members to seNe the CEO in their development while understanding that at the end of the day, the board must have a degree of neutrality to make sure that they're acting as a fiduciary to stakeholders.

What are the different touch points between the board and the CEO/operating team?

Hold formal board meetings four times a year - the typical Rallyday board meets quarterly, four times a year, but board engagement goes far beyond board meetings.

Between board meetings, touchpoints between the board and CEO might look like:

• Intermittent emails and calls - CEOs should have unfettered access to board members. The board should be a call away from helping as a thought leader.
• Mentorship coaching - the board and the CEO or functional leaders may connect on a regular basis between meetings for mentorship.
• Working sessions - if a board member brings deep subject matter expertise, they can collaborate with the operating team on tackling progress in that area through working sessions.
• Approval meetings - if the operating team is working on an investment with a material impact on the company outside the budget that was approved, the board will get involved to approve the investment. These are often unplanned on an ad-hoc basis.
• Strategic sessions - our portfolio companies traditionally run strategic sessions a couple of times per year. They may bring in board members as guest speakers or industry thought leaders.

Note: the board should not be a distraction to the CEO-board members should have a sense of when engaging the CEO makes sense, without overburdening the CEO with board conversations.

What disposition should the board and CEO approach each other with?

Seek out collaboration and input - the board can become a really powerful tool if the management team prioritizes collaboration. To maximize the board, the management team should be proactive about collaboration. For example, if a product rollout is approaching the CEO or GTM Head might go to board members to gather feedback and perspective. Informing the board of ongoing considerations gives them meat to be able to apply their experiential capital to.

It's a balancing act for the CEO between delegation and taking ownership - CEOs often feel like they know what they're doing, and don't want the board to think they lack an approach with a definitive view. It's more helpful for the CEO to be open to the board's input and come with a spirit of curiosity and collaboration.

How can the board find the right balance in guiding the operating team without being overly prescriptive?

The board should help the CEO focus and think through problems - the board shouldn't be getting too deep into the weeds, or dictating exactly how the company should operate. If the board is spiraling into unimportant minutiae, domineering as the loudest voice in the room, or dictating to the CEO what needs to get done, they're not fulfilling their role as productive and collaborative board members.

It requires a purposeful shift for former operators on the board to listen vs. tell - most independent board members are former operators of businesses: former CEOs, CIOs, CTOs, etc. They have a lot of experience and learning behind them, but they need to shift their approach to influence, guide, support, and listen first vs. tell.

The board is first and foremost a service role - former operators shouldn't want to become board members because it's their next financial windfall.

They should be joining in service to the organization, and honored to be part of the company's next stage on the growth journey.

What misconceptions do CEOs often have about the board?

Misconception: The primary purpose of boards is for reporting - CEOs often spend too much time thinking about reporting on performance metrics with the board, rather than asking the operating teams to get into the core strategic conversations and decisions that can help the company grow.

• lnstead → Focus on addressing company risks and opportunities going forward - use meetings and communications with the board to address key strategies and questions the company will be facing.

Misconception: The CEO needs to have everything figured out - boards don't just want to be told that everything is fine. It's okay to show up with questions-the board understands that building a business is hard and complicated. It's never just up and to the right.

• lnstead → Come with what you're excited about, neutral about, and disappointed about - we have a CEO who does this, and it's a great way to set the tone for the discussion. It's a waste of your board's collective expertise to show up and say everything is good and you have it all figured out.

Misconception: It's better to hide bad news - the board wants to know what's going on in the business. They don't want to just hear the good news.

• lnstead → Be transparent to allow the board to help - great boards have trust to help them move at the speed needed to help them accomplish the objectives they've set. If you don't have that, things will break down. The more transparent a CEO is, the more the board can step in to offer help.

What misconceptions do board members often have about the CEO?

Misconception: The CEO already knows exactly how to work with a board - most PE and venture firms assume the founder or CEO knows what's expected by the board. The board should spend time helping the CEO understand what the board means. Otherwise, the board can be a black box.

• Instead → Design an agenda and expectation around how time can be spent valuably- the board can contribute feedback to the CEO on how they should spend the time in board meetings, and the type of content they want to address. So often, board members aren't on the front foot with preparing for board meetings, asking great questions in meetings to add the most value, and taking the initiative to walk a CEO through how to best interact with a board. The more initiative board members take, the faster and more productive the relationship will be.

Misconception: The board runs the company, not the CEO - the board is there as a resource to help the company tackle challenges. They are the CEO's boss, but they need to give the CEO room to operate and make decisions.

• lnstead → The board should support the CEO in running the company­ the board oversees the CEO but they don't dictate the CEO's every decision. The board can help the CEO determine the strategic direction of the company, but shouldn't drive every day-to-day decision.

How do you build trust and accord between members of the board and the CEO

A CEO should seek the same level of trust with their board as with their leadership team - trust is foundation-if you don't have it, the board relationship will break down. In order to build trust, it's important to have transparency, alignment, and shared values and objectives.

Think about chemistry and personality fit when building the board - this is true whenever you make a key hire. Seek people who you want to be in the trenches with, that you would want to do a road trip with and seek out time on their calendars because you appreciate their feedback and insights.

Spend time getting to know each other - you can't just do one interview with a board candidate and figure out whether you can trust each other. It comes with time and repeated interactions. Going out to dinner or a breakfast around a board meeting can help build shared experiences to get to know your board members on a human and personal level.

What are tips for maximizing the value a company gets from its board?

Getting the most out of your board requires careful human capital construction - think about where the CEO and operating team are strong, and where they have weaknesses that can be supplemented by a board member.

Orient new board members - we took one of our most recent board members through the company's onboarding process, just like any other employee. It helps build shared experiences, grows understanding of the product, and introduces them to the team.

Make it about more than reporting - the least productive boards have the CEO and operating team show up for three hours and simply report out rather than actively seeking input from the board. Instead, make sure the board reads the reporting before they get in the room and use the time together to brainstorm ideas and strategy. Also make sure to carve out time to spend socially.

What are common pitfalls of board dysfunction?

A lack of trust and understanding - this precludes the ability to solve problems together. Lack of trust and understanding of roles and responsibilities are at the heart of dysfunction. Start with the notion of radical transparency. Set the expectations upfront around what is expected from each member, CEO, and take a one-team approach to the duty you have all signed up for.

A dynamic where the CEO (or board) must be right - if the CEO doesn't seek out new perspectives and thinks dogmatically, they will start at a deficit that's hard to recover from. The board is a thought partner, not a necessary evil. The CEO needs to have a growth mindset and the humility to understand what they know and don't know, along with extraordinary intellectual curiosity. If they don't, the conversations to get the right answers become incredibly difficult.

If these patterns emerge, the chairperson should course correct - part of the chairperson's role is to be highly engaged between the operating teams and the board members to make sure the board functions at a high level. Boards should be scored at the end of the year; run a 360-degree review on the board's performance to grade them like the operating team to ensure that everyone is held accountable for performance.