Board work is not only about fulfilling obligations but, at its best, a valuable asset for startups. Through efficient and professional board work, a startup can embark on a growth trajectory and outpace its competitors.
The board of directors is an essential legal entity for a company, but it can also provide numerous business benefits. According to the Finnish Companies Act, a company needs a board of directors from its inception. In practice, the board is appointed by the general meeting and guides and directs the company's operations.
"The board has decision-making authority, responsibility, and control over the company's strategic matters, but it does not engage in concrete actions. The board provides the operational management with sufficient autonomy and a peaceful working environment," explains Roope Pietilä, a business coach at the Startup Factory.
For many startups, board work initially focuses on fulfilling legal obligations. However, the board plays a significant role in the development of a growth-oriented company. According to Pietilä, professional and active board work is where the future of a startup is shaped.
"An competent board increases the company's value through leadership, business development, and process improvement. Well-organized and appropriate board work is significant, especially from an investor's perspective or in the context of a corporate transaction."
Where can you get assistance with board work? The Certified Board Member (CBM) course organized by Chambers of Commerce provides a solid foundation for board work. The CBM course offers support and insights into board activities and development.
"An competent board increases the company's value through leadership, business development, and process improvement. Well-organized and appropriate board work is significant, especially from an investor's perspective or in the context of a corporate transaction."
Pietilä also mentions The Startup Factory's Incubator, which offers comprehensive business coaching to startups originating from Jyväskylä, providing them with the necessary tools for effective board work.
Typically, in a young startup, the same individuals are owners, board members, and in operational management roles. In this case, there is a risk that the board becomes too involved in operational activities, instead of focusing on overall management.
"For many startups, it can be a significant step to add the first independent or external member to the board. However, professional board members can be found through organizations like Hallituspartnerit ry or owners' networks."
When, for example, an angel investor or venture capitalist representative joins the board, the nature of board work undergoes significant changes.
"The transformation often occurs gradually as board work professionalizes. Founding shareholders may step down from the board, which is a normal and even recommended progression for startups."
Typically, a growth-oriented startup's board consists of 3-5 members. As the business continues to evolve, board members may change, and the number of members may fluctuate.
In an ideal situation, the company's board is formed to execute its owner strategy. The strategy provides a framework for the direction the company aims to take. Since people drive company development, board members should be chosen based on their diverse backgrounds, expertise, and experience.
"The board is a working group that collaborates towards a common goal. Therefore, personal chemistry is important. The board chairperson plays a significant role in leading board work."
Ideally formed, the board can support the startup in various areas such as marketing, strategic planning, internationalization, or contract law.
Although each board member has personal legal responsibility for the company's operations, certain members may have specific areas of responsibility within the board work. One person may be responsible for coaching the CEO, while another may oversee financial management.
"At times, individuals involved in operational activities may have blind spots. In such cases, external board members can provide fresh perspectives to the company's management. Sometimes, an external person's viewpoint can save the entire future of the company."
"Good board work is an asset for every startup, not just an obligatory burden. Every company should understand the added value a board can bring. However, it is not always easy to evaluate it in advance."
Most often, board members bring valuable and confidential networks alongside their expertise and experience, which startups can leverage.
"Through personal relationships, startups can open doors to investors, customers, new employees, business partners, or suppliers."
Appropriate and high-quality board work attracts investors. It is in the investor's best interest that a startup's business adheres to the law, is on a sustainable foundation, and is well-managed. Many investors are willing to contribute their expertise to the company through board work.
"Good board work is an asset for every startup, not an obligatory burden. In any company, one should understand the added value that a board can bring. However, it is not always easy to evaluate in advance," believes Pietilä.
What should be considered in good board work? It all starts with the board's shared working order and practices. The board's work is guided by an annual cycle and work plan, but in growth-oriented startups, situations can change rapidly.
"A startup's board should ideally meet 6-12 times a year and additionally as needed, in case of unexpected events or changes in the operating environment. There should also be opportunities for dialogue between board members, the CEO, and the owners between meetings."
Secondly, board members must understand that board work is guided by the strategy created by the owners. The board should be aware of the owner's strategy and its changes. The board can evaluate its own actions and their benefits in relation to the strategy.
The third principle of board work is balancing between past analysis and future planning. The board should prioritize the future and monitoring the operating environment, enabling it to respond to future megatrends such as artificial intelligence.
Fourthly, Pietilä recommends documenting board meeting minutes and other materials comprehensively. Proper documentation is not only essential for organizing the company's business activities but also an important part of risk management.
"Lastly, the board must remember to conduct risk analyses. Examples of risks that can impact business operations, which can be anticipated through good board work, include the COVID-19 pandemic, cybersecurity issues, Russia's attack on Ukraine, and an energy crisis."
Since startups develop rapidly and their business environment is constantly evolving, adaptability in board work is rewarded.
"In recent years, a significant trend in board work has been that remote board meetings have become the new normal due to COVID-19. Less time and money are spent on travel, making it easier to involve international members in board work."