How boards can add value to startups and their CEOs

IT IS well known throughout the small and medium-sized business sector that the majority of new companies fail within their first few years. Many startups, in their race to scale up and hunt for investor funds, overlook the dynamics between their directors and their chief executive officer (CEO), and fail as a result. A cohesive relationship between the CEO and directors is essential for a startup to grow. But it starts with CEOs understanding their role vis-à-vis the board and vice versa, and for the company to strike a balance between the two power centres.

Startup CEOs are commonly also the founders of the company; they are often the "face" - spokesmen and key salesmen of their company. They are often obsessed with their vision and may refuse to entertain alternative views. Their narrow focus may be mistaken as relentless ambition and drive by potential investors who assume directorships of the startups, giving rise to conflict later on.

However, to successfully grow the business, a CEO needs to have an open mind. He (or she) should be ready to admit that he does not know everything, and that the board is there to advise and assist on legal, financial, corporate and other matters that he may not have too much experience with.