00:00hi everyone welcome to the a 6 & Z
00:02podcast today's episode continues our
00:04ever ongoing board management series and
00:07focuses on how to get the most out of
00:08your board especially when it comes to
00:10independence why do you need them how do
00:13you bring them in we share a lot of
00:14practical advice for both CEOs and board
00:16members on how to decide on the position
00:18and functional fit how do you adjust had
00:20you on board and so on the conversation
00:22took place earlier this year as part of
00:23our annual directors College at Stanford
00:25University and is moderated by a 16z
00:27managing partner Scott Cooper in
00:29conversation with general partner and
00:31success factors founder large dal guard
00:33and executive coach and former investor
00:35and Mitchell both Lars and Ann served on
00:38company boards all the way from private
00:40company stage to IPO you know there were
00:42two founders CEO and I was a third VC
00:46board seat so it went through being a
00:48private company board for seven years
00:50and then for three years I served as an
00:52independent director and chair the
00:55Nominating corporate governance
00:56committee so over those 10 years you
00:58think of it almost like an organization
01:00that had to mature and develop almost
01:01like it was a startup board and that
01:03meant that we operated like a startup
01:05board the material is a discussion the
01:08dynamics and the meetings and then as
01:10the company matured we as a board had to
01:12also evolve and grow up and mature with
01:15our processes and that involved bringing
01:16in other independent directors which we
01:19did as you know I'd say it was two years
01:21before an IPO and then right before the
01:24IPO maybe three months before an
01:26additional audit share and then after
01:28the IPO we also substantively changed
01:30the board to again move feces off the
01:33board as well you have to think of it
01:35it's a lifecycle almost like you would a
01:37company bars maybe just give us a little
01:38bit of sense from evolution you know
01:40getting up time evolution on the success
01:41factors side yeah I started the company
01:43so it was only me no board
01:48I was just adding board meetings with
01:50myself they were very dynamic and then
01:55yeah I took it public seven years later
01:57and I was the CEO for the company while
02:00I was public for 17 quarters four and a
02:02half years and then I sold it to a CFP
02:05for a four billion and and I was on
02:08I made the mistake I would say of having
02:10all investor similar to
02:13was in the beginning board members there
02:16is this forcing function and IPO which
02:17are by regulation you're forced to
02:19change your board and bring in
02:20independence what would be the reason to
02:22bring an independent on and then what
02:23would the role that you would want to
02:24see that individual serve as a member of
02:27a board that is probably largely gonna
02:28be a founder and VC dominated Gordon
02:31many respects in terms of number of
02:32seats I think it really allows the CEO
02:35to have a trusted additional partner
02:39hopefully the venture capitalist is the
02:40trusted partner it's a different
02:42scenario what a venture capitalist has a
02:43stake versus what an outside director
02:45has a stake an outside direct that can
02:48now many founding CEOs don't want that
02:50objectivism but I think they learn over
02:53time how valuable that could be if they
02:55found the right outside director the
02:56question here is like so what is the
02:58independent doing that's a value in that
02:59boardroom what's very valuable for the
03:01independent is they can actually help
03:04surface a lot of this or hidden
03:06assumptions in the boardroom so if you
03:08have multiple investors and multiple
03:09cost spaces and multiple rounds you know
03:12maybe one investor wants the company and
03:14you grow faster and burn more money and
03:16the other board member wants the company
03:18to slow on the brakes because they
03:19haven't they don't have enough reserves
03:21and their fund I mean there's a lot of
03:23hidden agendas the other thing the
03:24independent can do is be there to
03:26provide real feedback to the CEO on how
03:29the CEO is doing because often what
03:31happens in these boardrooms is the
03:34venture capitalists and the close
03:36discussion the CEOs are just not getting
03:38a lot of feedback they're not getting a
03:40feedback after every board meeting maybe
03:41in bits and pieces but an independent
03:43can very skillfully solicit around the
03:46room understand what's going on and be
03:48that trusted point person back to the
03:50CEO like what's on your mind why are you
03:52worried about the growth rate why are
03:54you worried didn't know why are you not
03:55worried about the growth rate so those
03:56would be two tangible things so you've
03:58got a minority person here in the in the
04:00on the independent side who basically
04:03has a vote that maybe in many cases
04:04doesn't matter if at all given some of
04:06these constructs so I'm just trying to
04:08get a sense of if you assume that your
04:10vote is not really the reason you're
04:12there how do you go about doing these
04:14things how do you take that leadership
04:15role on the board given that you don't
04:17really have the hammer any more of I can
04:19actually swing votes or make a
04:20difference from an actual corporate
04:21governance perspective it takes very
04:23long time to find a very good person for
04:26so you don't want to rush that the way I
04:28did it right before the IPO you really
04:30want to take the chance to get to know
04:31them and it doesn't mean that they
04:33become your best buddy it just means
04:35that they're gonna be functional for you
04:36I don't think that you can have somebody
04:38be independent if they only love you I
04:40think they have to be in love with your
04:41business but I think it's dangerous if
04:43they're smitten by you and sort of
04:45bowled over because then they don't
04:46become independent yeah and then the
04:48final thing which be worth listening to
04:50you know like speak up with your
04:52experience and show that it matters I
04:54still remember my second board member
04:56saying stuff in a board meeting that
04:59stunned me because I just been
05:02completely in the family with the
05:04previous board members he's a PhD in
05:06physics he basically said I don't think
05:09we're listening to what's being said
05:10here we're just bowling over it could be
05:12just heared one more time and it was in
05:14fundamental transformation of the board
05:16thermodynamics that one issue he just
05:19had a very valid point said it very
05:21firmly he transformed our board meetings
05:23we've been talking a lot about kind of
05:24the board dynamic and from the vantage
05:27point of the board members maybe we can
05:29talk a little bit of Brown the vantage
05:30point of the CEO so and particularly
05:32when you think about the types of board
05:34members that you've had on your board
05:36you had VCS certainly I'm sure and then
05:38obviously as you mentioned you had a
05:39dependence is the relationship different
05:41it's pretty intimidating to be around
05:43you've thrown your whole life into this
05:44they haven't and so it's big a risk for
05:47you personally than it is for them
05:49whereas my external board members for
05:52some I can't really explain reason I
05:54just took them less serious and I wish I
05:57had taken them more serious but over
06:00time I saw the value of they they had
06:02because I spent a lot of time with them
06:04and in particular the trust that they
06:06began building with me and how they
06:09understood me it's important there's
06:11some respect there's some understanding
06:13there's there's some trust but you have
06:16to have relationship where it's okay for
06:18you to say this is not okay yeah but how
06:21do you deal with whatever kind of
06:22institutional intransigence there is
06:24against that either from the founders
06:25themselves saying hey look I don't want
06:27to potentially dilute my control over
06:28this thing or the B C's in many cases
06:30you know selfishly saying hey look again
06:31we're here we like the fact that we
06:34control this board the idea of
06:35independent cop does in some cases
06:36either from voting perspective change
06:38the balance of power or
06:39changes the nature of the conversation
06:41so how do you overcome that agenda and
06:43help people understand the value of the
06:45independent and convinced either a you
06:47know in transient CEO or a difficult VC
06:49member that there's actually value in
06:51bringing in new perspective do you
06:53really think people are contesting the
06:55sort of value of it or is it what you
06:57know so if you put it in priority number
06:59right nothing gets deployed yeah that's
07:01not so what are the injections they're
07:03making orally not actually mention it's
07:06that's not gonna help sales that's not
07:08gonna help customers I need to go raise
07:11another round I you know that's the
07:13dynamic and so it's very much
07:14survivalist it's to strategic and
07:18long-term to think like that they're you
07:21know new strategies execution that's the
07:24philosophy I think also at least you
07:25know I think people think about
07:26self-preservation - right which is yeah
07:28if I control this board if if I bring in
07:31other people on night to the benefit of
07:33some great guidance but that also could
07:34be somebody who tips the balance of
07:35power at some day against me I think
07:37that's very true I think if an
07:40entrepreneur I was one they don't like
07:41working for anyone and so now there
07:44comes a person all of a sudden it takes
07:47away the sense of control that they had
07:49in this whole big gamble they did in
07:51their life of taking a chance of
07:52actually taking a risk on building a
07:53company from nothing I also know in my
07:56practice coach CEOs and one of the
07:58things that keep hearing from any of
07:59these CEOs is how frustrating they feel
08:02in their boardroom you know they're
08:04frustrated by their board meetings
08:05because they want these meetings to go
08:07well but they just don't know how to get
08:09the most out of these meetings and it's
08:12almost you can just feel it when you
08:13when they look at their calendars and
08:15they see a board meeting on it so I
08:19think the way you can sort of sell this
08:21or position this is ultimately you know
08:23CEOs are great at wanting to optimize
08:26all parts of their business the board is
08:28another part of their business they just
08:30need to optimize and they're gonna have
08:32a lot more fun working with their board
08:34if it's running well ultimately a board
08:37you know the the factory of a board is
08:40it is a decision-making body the CEOs
08:42are doing their best to put together a
08:44board package of 150 slides or less but
08:48the reality is they're trying to tell a
08:49story and a bunch of people around the
08:51room are trying to take that story and
08:53with some decisions why not just make
08:55that person an advisor for example or
08:57why not make that person a board
08:58observer like I'm just I just want to
08:59just you know from your perspective does
09:01it change does it matter what the title
09:03is and whether they're actually a board
09:04member and have you know voting interest
09:06or can you get all the benefit of the
09:08independent by saying hey you know be my
09:10advisor be my coach let's do stuff but
09:12let's do it outside the context of a
09:13board meeting well I think you just
09:15mentioned a way that could be a great
09:16Avenue into auditioning for a board role
09:20don't they give a lot of free advice
09:21when they were looking at board roles so
09:23I think one one way in a start as a
09:26board advisor get to know the CEO I mean
09:28you mentioned that the trust
09:29relationship is so important so how do
09:31you get to know a company how do you get
09:33to know a board well how do you get to
09:34know that CEO well and build can you do
09:37a project can you work on something can
09:39you start as an advisor
09:40it's very particularly fits your first
09:42board it's very easy to fall in love
09:44this must be it now I'm getting that and
09:46it's your ego drives your
09:48decision-making even you won't admit it
09:49now I'm on my first board this is
09:51exciting maybe not so fast you know it's
09:54a 10-year marriage and you might want to
09:57take some time to have some additional
09:59meetings and some background checks that
10:02I may be blind and not just say here it
10:04is that's my board opportunity but is
10:06this actually the one that's right for
10:08me and am I gonna be my best self on
10:10this board let's just assume that we get
10:12over all the turtles and we say great
10:14like we're gonna add a person how do you
10:15think about what you're how you
10:17interview that person and what you're
10:18looking for so are you looking for
10:19industry expertise are you looking for
10:21somebody who you know maybe has a skill
10:23gap that you don't have how do you think
10:25about the constellation of things that
10:26might make an appropriate independent
10:27board member well so so I mean they make
10:30it easy for you and one of them audit
10:31committees so they have to have a
10:33finance background right right so that
10:35that's a no-brainer so I hire 2x CFO's
10:37for that I wish I had listened more to
10:39the advice I'm giving and think more
10:41about how they would fit into the board
10:42I hadn't taken a company public before I
10:44thought that I was gonna just be with my
10:46venture capitalist board members forever
10:48didn't really occur to me that there
10:51wasn't another world of having people
10:53and then once we got to that position
10:56then I'd listen to all the advice I got
10:58you should have somebody who has a
11:00finance background okay check and you
11:01should have at that that is not the way
11:04I would build the port today today I'd
11:07how do we work together this is our
11:10challenge these are the things we're
11:11trying to do this is what's important
11:13for us this is the one this is why my
11:16biggest fears how do you feel about
11:18those fears like I would ask somebody
11:19those real fears very bluntly because
11:22they're gonna come out anyway and so
11:25that's that was just a mistake I made
11:28and I think I suffered for it you know I
11:30would have much rather taking the time
11:33taking the time I didn't take the time
11:36it was literally like I hope I'm gonna
11:38close this person and then I have my
11:40board and then I can go public you know
11:42because I honestly I didn't really want
11:44to go public but my board wanted to go
11:45public and so I was had a great sense of
11:48duty of doing things that I mean
11:51obviously I got a lot of runway building
11:54your own company the way you want it and
11:55so I felt the return from me to them the
11:58tax was that I listened to them when
12:00they wanted to go public and and they
12:02want to do that a lot earlier than I did
12:03I'm the Xoom board I chaired the
12:05nominating Corporate Governance
12:06Committee and so that job is you're
12:08supposed to you have to recruit and hire
12:10in independent directors so we went
12:13about our recruiting process different
12:15in a different way which was we started
12:17by I did a 360 and I interviewed all the
12:20I didn't outsource that to a search firm
12:22I actually took that on myself because I
12:24wanted to hear how each board member
12:26described their view of the culture and
12:28their view of what would make this a
12:30higher performing team and what came out
12:33of that were actually criteria that I
12:35don't think anyone would have on their
12:36own realized we were looking for it
12:39would be great to have board members
12:40where we could think about the
12:41functional needs of the business so we
12:43thought about it in terms of how
12:45security is really important so then we
12:47went and we recruited not from someone
12:49from our domain or our sector but just
12:51someone who could bring in into the into
12:53the board security compliance
12:55perspective the other area we thought of
12:58is the business had a strong consumer
12:59component so how could we think about
13:01marketing and consumers how could we
13:02think about someone from in a different
13:04area in a different market who could
13:06just bring a fresh perspective in so it
13:08was the opposite of looking for industry
13:11domain recruiting and it was much more
13:13driven to this I'd say orthogonal
13:17thinking as well as people who shared a
13:19common core values so
13:20actually played that long we actually
13:22could namely these are our core values
13:24as a guard yeah and then when we went
13:26out to the search firm to search from
13:28then had that criteria in their mind
13:30when they started introducing candidates
13:32yeah so that's just you know some boards
13:34are high ego some boards are low egos
13:36some razor combative it's a
13:38collaborative like what kind of board
13:40what kind of what's the dynamic in that
13:41board I was so focused on getting the
13:45people who had been big in my industry
13:46before so that I could advertise that
13:49now I had them I I'd much rather have
13:51the one who wasn't the biggest today but
13:54the one that was the right fit with me
13:55that wanted to go and fight the battles
13:57we had how do you think about the
13:59onboarding process for an independent
14:01and you know how is it or should it be
14:02different from a traditional VC or
14:04somebody else who comes in the board
14:05what I have found is that most sports
14:07don't think about their onboarding
14:09process because it really doesn't fall
14:11to it being any of the directors
14:12responsibility you know the nominating
14:14corporate governance chair like my job
14:16is to go find the directors but nowhere
14:18does it say like I actually have two on
14:20board them and it's not the CEOs job
14:22either and so it sort of falls through
14:25the cracks so it's one of those
14:26processes that really I would say you
14:29need to almost advocate for yourself as
14:31well there were a couple of things we
14:32did on the Xoom board when we on-boarded
14:35to directors that were just tips I'll
14:36pass along one was we we really wanted
14:40the new directors to go through
14:41orientation like a new any employee
14:43would like so if you're going to be a
14:45director of the company why not go
14:46through and be go through orientation as
14:49the employees do you'll then see a whole
14:51part of the business in that way the
14:53other is directors don't often get to
14:56get really exposed to the product so
15:00maybe if it's a consumer product you've
15:02used it but often directors hear about
15:04the product know about the product but
15:05they're really not getting their hands
15:07on with whatever the company is building
15:08and making so find a way as part of your
15:11onboarding to go to the factory floor
15:13and find and get exposed to the people
15:16building the actual product technology
15:18software so that you really understand
15:20the product so those were just two ideas
15:23that we felt were really important in
15:24the boards that I've been on we didn't
15:26do any of that I'm I'm sort of must have
15:30been to be a board member joining were
15:34quarters public and this person so just
15:36get shot out of a cannon and it's so
15:39trying to be part of what we're doing I
15:41don't even know how they all they were
15:42supposed to do that can imagine to be
15:46them nobody thought about it it's not
15:49you know and so and there's this or
15:51dynamic if you're a new director like
15:53can I ask for anything what can I ask
15:56for you know it's like start with a
16:00show me what who your team is and who's
16:02under you silly you have a sense you
16:04know another area that could be a great
16:06way to add value as a new director me
16:07know is asset Co as a new director Lee
16:09so who are you hiring for what are your
16:11key open spots you know not that you're
16:13gonna go fill those searches but then
16:15you're immediately aligned like let me
16:16collaborate let me know what what are
16:18the pain points you're trying to solve
16:20yeah because that's just an area where
16:22you will then day one be plugged into
16:24thinking what that CEO solve for as the
16:27CEOs building or oh my god
16:29as that onboarding happens and then you
16:31think about just kind of the day-to-day
16:32of the actual board operation are there
16:34are there best practices that either of
16:36you have seen been your experience that
16:37helped make both the board itself
16:40successful but also make sure that you
16:41can absorb the changing dynamic that
16:44comes with having people who are
16:45independents as I hear about your best
16:46practices what we do is just give them
16:49all the last board packages and that
16:51also shows a lot in their realm whether
16:55they actually care about what you're
16:56doing if they don't get through that
16:57when you talk to them it's like why are
16:59you know so I liked a lot the common you
17:02had about people coming with those fresh
17:05eyes you know like um I think it's
17:09really powerful we're seeing that always
17:11in our partnership that when one of us
17:12go in and look sat at a company we see
17:14completely different things and these
17:16are our peers we've done the same things
17:18we know the same things and so I think
17:21for the board member that comes in and
17:23reads all that stuff and that's a great
17:25way to get to know each other and you're
17:26like well I'm not hired yet how would
17:27you possibly think but I think at that
17:29stage you should be comfortable under
17:31NDA giving somebody this stuff cuz
17:32you're it's such a great test for both
17:34of you the other thing I do a lot is
17:36blind reference checking and I just both
17:39the CEOs and board members I think that
17:41direct reference yourself not the search
17:43from doing it you do I never I was
17:46every single person I hired and I had
17:49the first 800 person keep it personally
17:50I reference checking yeah yeah yeah you
17:53get very good at it you know you becomes
17:55very efficient so fix your blind
17:58references I try to ask questions that
18:02aren't expected because everybody's so
18:03rehearsed and typically the reason you
18:05can't call the reference you're given is
18:07there just the person is fantastic
18:09what's there of one issue they work too
18:10hard it's like we're wasting we're
18:14wasting both of our time right I mean
18:15it's like why we're doing this
18:17my favorite question it's in a New York
18:18Times article Lydia to me is what do you
18:20learn from your mom now people come in
18:22prepared are you gonna ask me about my
18:23mom that's a little unfortunate but it
18:27still works particular if you ask it
18:29while you're busy talking shop like
18:31metrics and what was your background
18:33what's my background and you all some
18:35slotted and what you learn for you my
18:36mom because you bring that to the
18:38boardroom and so I need to figure that
18:41out if I'm gonna sit at 70 board members
18:44and meetings with you and talk about
18:45really tough stuff what are your basic
18:48value said and how do you deal with the
18:49tough things in your life or the good
18:51things in your life you're listening for
18:53a sort of a mission a values connection
18:57yeah I think more than the checklist of
18:59what's on the resume it's like is this
19:01person gonna be able to share my mission
19:03my approach my way think yeah I'm only
19:05gonna do this if it I can try and make
19:07it legendary and so I'm not gonna make
19:09it legendary with people who are just
19:11there to tick boxes and and aren't part
19:13of a bigger thing and you know you learn
19:15to to do that work up front because
19:16you're gonna have some very tough
19:18value-based decisions that absolutely
19:20nothing to do with math at all okay good
19:22I want make sure we have some question
19:22um when things are when the dynamic is
19:25no longer positive on the board and some
19:27of the issues are getting played out in
19:29the press how do you continue to work
19:32together as a board and how do you
19:34prevent public perception and ego from
19:36entering the boardroom you actually can
19:40really see a lot about a board in a time
19:42of stress and so I can just hear from
19:45personal experience that in moments when
19:47things got tough I think a board really
19:49knows how can really know how to come
19:51together and problem-solve I think what
19:53you see in a moment like that is
19:54different directors they're sort of what
19:57they were brought to the board for their
19:59it's almost like your baseball team and
20:02you know who's playing what position and
20:03in a moment when there's a challenge
20:05it's like you look around the team
20:06you're like you've got it you've got
20:08you've got it go the deal is you don't
20:10you're sort of asking what happens to
20:13the relationship in a tough situation
20:14right I mean you don't build a
20:16relationship there you build the
20:17relationship before it has a lot to do
20:19how you approach it from the beginning
20:21and and you know once there's trouble
20:23it's too late to build the relationship
20:25we've got two beds left let's have a
20:27question wonderful how do you do that
20:29balance between determining when a CEO
20:32really needs support and when he or she
20:37needs somebody to really shake them up
20:40and move them in a different direction
20:41and and have that honest conversation
20:44and how do you best judge because
20:47especially as a board member
20:49you're you want to support them to grow
20:51the company but you also need to nip
20:53things in the bud before they show up in
20:56the press as a crisis so one of the
20:59great things about when CEOs and I think
21:01in the valley now many CEOs do hire
21:03coaches and probably in your portfolio
21:05you see it you know a group important
21:07part of that CEO is hiring a coach is
21:09that ability to do a 360 so with my CEO
21:13clients one of the areas I really focus
21:16on is saying look I'm here for you and
21:18to make you the best CEO you can be it's
21:20part of that let me call and speak to
21:22some of your direct reports and some of
21:24your board members I'm not asking them
21:26to fill out a performance survey I'm
21:28just asking to have a question about
21:30what they think of their mother but
21:34along those lines like what what do what
21:36could I find out on their behalf that
21:38will surface what are they doing well
21:40what are their blind spots you know
21:42where are they falling short and then I
21:44distill that so that the CEO basically
21:47has a game plan or to how to improve no
21:50ceo/founder started you know perfect day
21:53one and they weren't perfect year one
21:55and they weren't perfect year five like
21:56they have to evolve with their companies
21:59so for them to be successful like they
22:02have to constantly reinvent themselves
22:05as a leader so the only way they're
22:07going to do that is if in a way they
22:08have some self accountability and desire
22:13blind spots head-on to your point the
22:16way you approach it is by bringing data
22:18by bringing perspectives into that
22:21discussion so that you can bring
22:23respects from the people that the CEO
22:25counts on and trusts and then that forms
22:29that self growth plan alright so that's
22:32actually a great note thank you very
22:33much thank you Anna Mars for your life
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