The 5 Steps to Board Meeting Enlightenment in PE-backed Companies:
In case you missed any of the steps in the series you can find them here:
Step 4: You Get What You Brief For!
Despite taking up a colossal amount of time and energy, portfolio company board meetings don’t add enough value for many board members and management teams. In this series, we share ways of breaking this unproductive cycle. So far, we’ve recommended rewriting the agenda, breaking the monthly board habit, and shared tips on preparing a high-impact CEO’s report. This article looks at the importance of providing a clear brief to the management team.
“Too often you are just imparting information about what has happened in the last month.”
~ Portfolio company CEO we interviewed for our research
Information, alongside individuals, drives the board meeting. You govern on the basis of what is in front of you, and what is in front of you is often not very good at telling you what matters.
Our research shows that 86% of PE professionals and 70% of NEDs feel there is far too much information in portfolio company board packs. Even worse, they believe their board packs do not present an unvarnished picture of the business or identify issues early enough — two key things that a board should be on top of to steer around any icebergs.
“We recently missed a rare acquisition opportunity because the board didn’t have the right information.”
~ PE professional we interviewed for our research
Be careful what you ask for
The problem begins with demands for more and more information — PE professionals often don’t know what to ask for, so they end up asking the management team for everything. This sets the wrong tone from the very beginning, giving management teams little reason to believe that the board meeting is anything more than a tax on taking the investment so, naturally, they prepare for it with that expectation in mind.
All they want then is to get through the board meeting unscathed, and so, to cover their backs, they put all manner of information in the pack: information that is data heavy, that lacks focus, and that often doesn’t go beyond painting a rosy picture of how the business is doing.
Preparing that volume of information not only takes up significant time and effort, it also leads to a bigger problem: board meetings start to mirror an uncomfortable interrogation as PE professionals go deeper into the data on what’s happened, trying to dig out the bad news from pages and pages of information.
“Monthly board meetings are just investor update meetings where the investor just wants to see that everything is on track and their money is being managed well.”
~ Portfolio Company CFO we interviewed for our research
For a member of a management team, this exercise is not only unproductive but can also feel uneasy — even frightening. They might never have reported to a board before, so having to do that without any real support or guidance looks no different from being given enough rope to hang themselves.
Because what they produced doesn’t answer the questions on the mind of the investors, they are then grilled on it. And what should be a value-adding board meeting between peers begins to feel like a job interview — where you are only one bad meeting away from unemployment.
“It’s like asking a team of walkers to ascend a challenging mountain, something they have never done before and they are asked to do this without any form of support, and when they’re half-way up this mountain, and it has taken longer than they expected, they’re often dismissed and someone else is parachuted in.”
~ Jon Andrew, former Value Enhancement Director, Inflexion Private Equity
What’s the solution?
Start by reviewing the forward calendar and the agenda to understand the reports and the data that you’ll require. For a given month, think about what you need to monitor and what you need to discuss, with a balance between the supervisory versus the steering role of the board. You can then start to articulate the questions the board would need to have answers to, to steer the business effectively.
To make this work on a practical level, the Chair and CEO must establish an efficient and effective cycle of communication with the management. Management teams have to be given clarity and visibility on the information needed to support the discussion on a particular topic — specifically, what are the questions on the mind of the board that should be answered ahead of the meeting? These questions would serve as a clear brief that the paper author should refer to when writing their report.
The journey doesn’t stop at this point. There then needs to be a clear mechanism in place for providing feedback to the management team, so they know what they need to do differently next time.
How do you make all of this happen without making it a huge time and resource sink? There are tools available for creating workflows that can reduce the burden on the management team and make the exercise actually worth everyone’s time and money. To learn more about how this works in practice, book a demo.
The next article in this series will look at the importance of keeping the data simple.