How an Entrepreneurial Thought Process Elevates Boards
(Originally appeared in the January 10, 2018 'Across the Board' publication, a Board Director, Board Advisor and Business Newsletter reaching 24,000+ thought-leaders and visionaries in over 65 countries with articles focused on leadership, strategy and governance topics - sign up here)
There was a time when an ‘entrepreneurial spirit’ was frowned upon within disciplined Board circles. The very definition of being entrepreneurial included traits ‘reserved for private company Boards,’ definitely not for public company Boards where a more refined and corporate approach was the norm - and expected. After all, public Boards were teaching private Boards the ropes, right? The ‘this is how its been done forever’ public Board rules were supposed to be the golden policies for any other ‘lesser’ private company Board, no? Not so much any more. In actuality, it turned out there is an equal sharing of concepts and ideas between public and private Boards – in both directions... and you will now hear more frequently the request of public Boards looking for 'entrepreneurial' candidates as they change their understanding of the true benefits to be leveraged from an entrepreneurial thought process.
Modern entrepreneurial Boards are now frequently described as ‘progressive’ and considered a good thing in both the private and public sectors. A public Board 'progressive'? Public Boards, and the companies they serve, historically have been accused of changing at a sloth's pace. How could such a previously entrenched belief seemingly be overturned in such a short amount of time? One reason can be chalked-up to the speed of change in every industry regardless of business size. Some Boards proactively recognized the need for a more progressive thought process to stay relevant. Enter the entrepreneur. Another frequently undisclosed reason? Fear of disruption. The realization that a 2-person, entrepreneurial, private startup can become a major threat to a multi-national public company in a short amount of time has rattled many cages… and has forced the acceptance of a new entrepreneurial spirit in the boardroom.
Also, "don't overlook private equity (PE) Boards" when it comes to their entrepreneurial and progressive influence on Board norms, states Mike Lorelli, Operating Partner at Falconhead Capital. "The raw stats show 3,611 public companies in the U.S. vs. 16,800 private equity portfolio companies" - the sheer volume of Board Directors in the PE space, along with their time-associated pressures on investment, cash-on-cash return and hold period, demand an entrepreneurial viewpoint.
Some public Boards still operate in the ‘old-school’ bubble today, even when they somewhat realize that the survival of their company depends on ‘entrepreneurial’ ideas and approaches, but changing the current culture is sometimes viewed as too large a feat to undertake, not to mention accomplish, in some companies. Avoiding this needed trait within a Board is a mistake and can prove costly. A key takeaway: know that extremely effective Boards, and the companies they serve, foster and build environments that equally share governance, strategy and entrepreneurial-spirited approaches in the DNA of their culture.
Mark A. Pfister Independent Director | Outside Director | Strategist | Board Macro-Influencer | Speaker | Author