Governance: getting the timing right

Since setting up the Story Mint, I have known that we will, at some stage, be setting up a Board. The timing for this is important. If we leave it too long, we will become like a projectile that has lost its propeller.   Do it too early and confusion will reign as people see all that needs to be done and apply various conflicting solutions.

I always imagined we had to be at a point where the business could afford to pay each Director, so given the state of the business, the time is a distance away.

Recently, we had an excellent and very timely seminar presented by Kevin McCaffrey, who specialises in setting up Boards and advising them. He also has a great deal of experience working with start-ups.

He pointed out that a common characteristic of start-ups is that they rely heavily on other people and their generosity to get things done. I am very familiar with this characteristic. None of us are paid, yet we work long hours. We do this because we all believe in what we are doing and above all, know the potential of the business. So the people who roll their sleeves up and get stuck in now will form the core group of people who become part of the business long term, if they want to. At this time of struggle, they show such belief in what we are doing that they are involved, not because of the remuneration package, but because their values and vision aligns with the company and the team.

As I have said many times, I truly appreciate the way people have caught my vision, rolled up their sleeves and helped to turn the dream into reality. That is a truly humbling experience.

The point Kevin stressed many times was to make sure that people are engaging with the business for the ‘right’ reasons and are in it for the long haul regardless of whether or not they are paid.

There are four models for companies:

1. Agency – these are listed companies
2.  Stewardship – these are co-ops
3. Resource – Board is considered as a resource for the company
4. Stakeholder – political

As a start-up, we belong to the third group. However, he also said that there are various kinds of start-ups. We are a high tech start-up which means we have to go at the speed of light and have a global focus and ambition.

As we move through that process, we have several gates to go through:

First: the owner operator owns the IP and the resource is that IP and people. At the start, there is little separation between owner and manager, but that begins to happen as the company becomes more established. There comes a point where the owner has to step back and let a manager take over. If they stay, they often become absorbed in detail instead of letting those who have less emotional collateral invested in the business get involved. This is a very risky phase because it is easy to put the wrong person in who doesn’t understand the intricacies of the business.

The owner has to be dispassionate about this appointment, but also wise. The best way to select this person is to involve them in the business on a voluntary basis and observe them at work. Their thinking and their commitment to the values of the company will say a lot about how they will carry the company forward. They also need to have experienced taking an idea to the point where it is making money.

At this stage in our business, this is the priority - but it is also a point at which bad decisions can be made because of the desperate need to get money coming in.

This blog began with a discussion about setting up a Board, but the way to lay the groundwork is to set up an Advisory Board first. This is what I want to do. Advisory Board members usually agree to go on the Board because they believe in the Company not because they will earn vast amounts in director’s fees. It is a great test of their commitment.

I thought the following quote from Kevin was on the money (forgive the pun) – ‘in a small company all directors have to be stars.’

So the key for a successful company lies in the following preconditions:

• People who are so committed to the company and its values they are prepared to roll up their sleeves and get stuck in
• People who have experience in the right fields so that all skills fit together like a jigsaw
• People who are at the table for the right reasons
• A Company with has a commercially viable product
• Everyone is clear about their roles
• Everyone is ambitious for the company and
• Everyone is clear about its direction.

‘It is,’ he said when he summed up, ‘all about value creation’.

I say, ‘hear, hear’ to that!