What a private board can learn from a public board

Welcome back to Above Board. We are honored to have Debora Tomlin with us again to share her insights. Debora serves on the boards of LiveRamp (NASDAQ: RAMP), Weave HQ (NYSE: WEAV), and Nexla. She formerly served as the CMO of Symantec, NortonLifeLock, and CSAA Insurance Group.

AB: Thanks for joining us once again, Deb. To kick this off, can you share what makes a private board different than a public one?

DT: I think there's more overlap than not. Everything we talked about in our last edition from a cultural perspective, how you want the board to operate, the norms- there's a lot of overlap. What is different is the skill sets and maybe the types of people who are on public boards and private boards. I have straddled both probably because I just showed so much interest in helping companies grow and scale.

With private boards, you have to be willing to be more hands on. With public boards, unless there's something that you really have to come together and solve, you don't have as much of day to day board interaction relative to private (specifically start up) boards.

On a private board, you might help give guidance, be really active in recruiting or lead generation, etc. For example, for a private board I’m on, I just helped hire the CRO and I mentor the leadership team. And so it’s more of an investment in the members of the management team. 

You also might have this with public company boards (I do act as a mentor to some of the leadership team members), though it’s less common in public vs. start up boards unless there’s a specific area that needs attention.

AB: What are the practices that a private board might benefit from doing that you've learned and seen from public boards?

I don't want to overgeneralize because I think it's different for each board. When you're founding a company or you're in the early stages, you are looking for product market fit, trying to find customers, grow revenue, etc. You’re not necessarily thinking about your annual operating plans, business processes, and scaling up.

My public board experience has shown me that even private boards can benefit from discussing questions such as the following: What's our three to five year strategy? Is our pricing going to work for us? What are other types of skill sets might we need to build out on our team? What dollar do we spend now that's going to get us the most value later? My later stage operational roles have taught me that you need to create this foundation; I have always had to have three to five year plans and have seen that even private company boards can benefit from discussing this.

I'm an optimist. I’m always thinking we're going to scale this business. So, I’m asking myself: once the flywheel starts to take off, we better have our system built because if we don't, I know how painful it is not to have that in place and to have to go back and retrofit.

AB: How do board members compare to management?

DT: A piece of advice I was given is to really understand the role of a board member versus management. As the board, essentially you’re the fiduciary for the shareholders with responsibility for hiring and firing the CEO and the company’s strategy and governance. And to the extent you have operational experience, that's fantastic to be able to help support management and mentor them, if interested.

I got very clear on what the role of the board was because I had to make that shift from an operator to a board director. Honestly, I didn't find it personally easy; I have to keep reminding myself that I'm setting expectations and supporting, not doing. I'm not in the management role. I get a lot of joy out of having the role as a director to champion the management team because I understand what it's like to be in their position. 

On the boards I'm on, the board members are very, very active in a good way. Everybody will jump in and is willing to lend the benefit of their experience to the management team. For example, if you have somebody that is an engineer by training, they'll support the head of engineering or help with recruiting and the interview process for that role.

And I find that's a lot of fun. It wouldn't be fun for me just to go to board meetings and rubber stamp everything. I like feeling part of the team and supporting the company’s culture and goals.

AB: What should earlier stage companies be looking for in independent board members? (Editor’s note: for a refresher on what an independent is, check out this prior edition of Above Board)

When you are ready to bring on an independent, I would make sure that person has the capability to help you think about that three to five year operational plan. What should we be doing to set us up for longer term success? You have enough people on the board who know the finance side of the business who can be pushing for the short term metrics. But, you need somebody who can be thinking about how to scale the business, make introductions to potential clients or partners, and provide access to people and skill sets you may need.

The best independents will help you think after you decide to proceed down a certain route along the lines of ‘we're doing this, but let's think about what are the three steps beyond that?’ We want this revenue today, but what does that mean? Does that mean we're going to operate in this vertical and that vertical? Does this mean we’re locking into this type of distribution? Are we going to go mainly direct? Does this mean it's a partnership channel? While this also comes from investors, independents can use their operational experience to give insight into these types of questions.

A strong candidate for this type of role might have come from doing this type of work before, whether at a consulting group or running strategy or as part of a C team for a bigger company before.

From what I've seen, it's when you're at about 10 million in ARR when you start to think about if you’re ready for an independent director.

AB: Should you prioritize a potential independent board member who has subject matter expertise or relevant networks?

DT: As Mike Baker said in a previous edition of Above Board, there are always ways to get leads and to get introductions. It's a small community and if there was somebody in a company we wanted to meet, we could go through our networks and we could find a way to get an introduction.

There's value to having subject matter experts. I think of great value are independents with experience that is different from what you have with your investors. For example, in my situation, I’ve had experience taking companies public as a board member, participating in splits and spins as a board member, and, as a member of management, selling part of a public company and then spinning out a division as a new public company. I've been on audit and compensation committees. Operationally, I have worked at scale, I've seen this play out, and so I can share from my observations what you need to do to prepare for it and where the pitfalls are.

Thanks for joining us today, Deb. We look forward to speaking with you once more next week to talk about comp committees.

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