3. Board Management

Corey Ferengul: 00:00

Alright. It's time to open the g Suite. I'm Corey. Mike. And today's topic is board of directors management.

Corey Ferengul: 00:08

It's one of those activities that every CEO has that nobody in the company understands except maybe the CFO, and nobody realizes just how much time it takes. So Mike, if I say, how do you manage your board? What's first thing

Mike Shannon: 00:20

to come to mind? Well, you're right. Nobody knows this is a whole job category. Right. So for me, I'm looking at, about a decade or so start up period.

Mike Shannon: 00:30

So there's different stages of that. Sure. I think the first board meeting I ever had was, like, 50 minutes Right. With, you know, our first two board members. We were the last thing to

Corey Ferengul: 00:40

committee meetings longer than that. But anyway, yeah.

Mike Shannon: 00:42

Clearly, the last thing up the the priority list as we should have been. And then, you know, we were typically doing hour to 90 minute meetings in those early days. By the end of being say, like, I don't know, somewhere north of a few million in revenue Right. You were on this board. We were doing, you know, 4 or so hour meetings.

Mike Shannon: 00:59

So just to clarify the different stages from, like, early kinda seed, precede, to post series a and start to scale, it definitely evolved. Sure. Just to clarify the stages. Stages that you were managing boards?

Corey Ferengul: 01:12

I mean, I I've managed directly boards in 100 of millions of revenue. Been on public boards. Also been an employee managing public board at the, you know, built multi $1,000,000,000 market capital.

Mike Shannon: 01:24

Yep. So Yep.

Corey Ferengul: 01:25

Okay. So very different spots than you.

Mike Shannon: 01:27

Yeah. So answering the question, you know, when somebody asks what what does it mean to manage the board, I mean, the the meeting is, like, the nucleus of it, but around that is, you know, the whole cycle of communications that that lay the stage for having an effective board meeting. What I had to go through definitely a learning curve on was realizing that no matter how, like, impactful, high profile the individual, whether it's board member or like a, you know, super angel type with Mark Cuban on our cap table, he joined a few meetings. The onus was on me as founder or CEO to facilitate the environment by which we were able to extract the insights, your network, or whatever value from the board. And so, you know, just kinda like lay the stage that way beyond compliance it was how do I facilitate an environment that you as, you know, a CEO of your own right who's coming in to my arena for a short period of time even if it's 4 hours, how do I lay it up that you can be impactful in that that setting?

Mike Shannon: 02:30

So You you have a really important point in there, you're a facilitator at the meeting because I find a

Corey Ferengul: 02:34

lot of CEOs think they're the main presenter.

Mike Shannon: 02:36

Yeah. Not

Corey Ferengul: 02:37

really. They don't have to be. Yeah. Facilitator? Absolutely.

Mike Shannon: 02:41

Yeah. That was when we were post series a, you were on this this board. I remember having a few of those first meetings. They were higher pressure than we'd had before. This was a 4 and a half hour meeting.

Corey Ferengul: 02:51

Yeah.

Mike Shannon: 02:51

We have been doing hour to 90 minute long meetings.

Corey Ferengul: 02:54

And it was a 120 page deck, Eric.

Mike Shannon: 02:56

Yeah. Right. The long deck. I remember Troy on our board, lead investor, giving me feedback after saying you're doing too much. Right.

Mike Shannon: 03:03

Open up the meeting, give the state of PacPac as we called it at the time, high level CEO color, but then get out of the way and let the individual functional owners Yeah. Also have the stage, be able to share, you know, their perspective as being closer to it, and then let the board opine in. I was, like, steam rolling through the whole thing as, you know, the big presenter, and it wasn't as productive. Yeah. The board meeting is

Corey Ferengul: 03:28

not a stage for the CEO. I think it's really important thing. And and in my mind, the board meeting is a part of board management, but it is maybe 30 or 40% of board management. There's 60 to 70% of the job that is outside of that board meeting. Yeah.

Mike Shannon: 03:43

Right? And and on the point of it's not the CEO's stage at the earliest days of a startup, I felt like it was the CEO's interview. So I'm I'm feeling like I and it's just it's all self inflicted, but it's like, okay, I don't know if anybody thinks I know what I'm doing or Right. Know what I'm doing. So I better come in and talk to

Corey Ferengul: 04:03

somebody about it. For sure.

Mike Shannon: 04:04

Yeah. Yeah. And so that's, like, the biggest thing. Could you have enough confidence actually to step back and facilitate this trust?

Corey Ferengul: 04:11

Enormous point. Right? You demonstrate to your board that you're really there to prove that your management team's got this under control. Yeah. That your management team are people the board can trust because they're gonna have talked to you a whole lot more.

Corey Ferengul: 04:21

They're gonna know a lot more about you. You want them to have comfort and confidence in the company. Yeah. And the company has to be more than you. Yes.

Corey Ferengul: 04:29

And and really, a good board meeting is a time for your people to shine. Now there's an aspect where I can go too deep into board meeting management. There's an aspect at at times, I've let too many executives present in a meeting and the board gets a little annoyed, and so this went too long. But I also had a reason to do it, like, well, this person wasn't in front of the board, didn't feel good, and, you know, and sometimes you're you're not the board's like, what are you trying to accomplish here? And it's like, it's actually not for you this time, someone else.

Corey Ferengul: 04:54

But Yeah. Interesting. We we can get more in-depth on on the on the board meeting itself another time. But outside of a board meeting, what else is involved in managing and for you Yeah. With the board?

Corey Ferengul: 05:05

Yeah.

Mike Shannon: 05:05

The the worst thing, you know, and everybody says it's not new insight. The worst thing that can happen is a surprise comes up in the board. Right? So Yeah. There's individual stakeholder management of the players that are going to be around the table.

Mike Shannon: 05:18

So you know we've talked about bad news traveling fast

Corey Ferengul: 05:21

Yes.

Mike Shannon: 05:21

Right? I historically would you know show up to the meeting and all the information comes out, right? You probably got an email at midnight the night before in our long deck. Right?

Corey Ferengul: 05:31

Right.

Mike Shannon: 05:31

You you learn to grow past that

Corey Ferengul: 05:33

Yeah.

Mike Shannon: 05:34

And make sure that if there is something substantial that's going to be discussed, you started to get a 1 on 1 call from me. Right? Yep. I would call others on the board and no surprise is occurring, especially if it's bad news. But even if it's, like, you know, strategic kinda, like, new insider direction.

Corey Ferengul: 05:51

Let's Look, I do enjoy dropping a little bit of a, hey, we just closed that deal in the middle of the board meeting. That's a good call. Yeah. Yeah. Sure.

Corey Ferengul: 05:56

But it doesn't change the trajectory of the meeting. It doesn't change anything. Right? Yeah. But but in a really important aspect to that, if you're going to set the stage in advance, it means you gotta do the work earlier than the day before you're sending the deck.

Corey Ferengul: 06:09

Right? So and and more times than not, bad news comes out of a financial model. It comes out of something's wrong with the numbers, we're ahead on expenses, we're behind on revenue. Those those are the 2 most typical bad news areas. It could be something like a lawsuit or something.

Corey Ferengul: 06:21

And rarely are the, you know, the things that you can plan typically come out of a financial model. The things you can't plan timing wise, they show up when they show up. But that means you've gotta be I would always set a schedule on the on the board meeting, so I always gave myself time to communicate in advance. Right? So how do I go and tell the the board what I'm seeing and here's and and then we have time to think remedies.

Corey Ferengul: 06:45

Yep. We have time to think about how to deal with it before the meeting as well. And so we go into the meeting more prepared. Another big aspect to outside the board room is figuring out what you're getting from each board member. Board members bring different skills.

Corey Ferengul: 06:58

Right? I the boards I sit on today, I typically am the independent director. Yeah. Which means I'm kind of a confidant for the CEO. I'm not representing an investor class, and so I'm the person they go to.

Corey Ferengul: 07:08

And so I'm not ready to tell the whole board this yet, but, here's what I gotta deal with. Yeah. And you're there to brainstorm with them.

Mike Shannon: 07:14

Yep.

Corey Ferengul: 07:15

But now it's a little bit of cone of silence between you, the independent director, and the board mem and the, CEO, and you're like, alright. How do I help this person work through it Yeah. So they can build up to communicating and working with the others. Right? That's one role.

Corey Ferengul: 07:28

There's another role someone be a subject matter expert in your area. There's another role someone may be really good at finance, really good at numbers. You know, you mentioned Troy Engelbert. He is a snap with the numbers and understood the mechanics really quickly. Like, you knew you could go to him for that.

Corey Ferengul: 07:41

So I always found and I've made this mistake before. Actually, on my last board, I had a gentleman who understood our industry a lot better than I used him for. Yeah. I probably should have used him more. Right?

Corey Ferengul: 07:49

So so breaking down the skill sets that the board members, that will dictate how you go to them Yeah. Beyond just here's a board meeting, here's a cadence.

Mike Shannon: 07:59

Yeah. And it's easy to get caught in this mentality, I think as a CEO. At least, you know, for me, like, when we start off young, first time founders, all this, that these are the bosses. Yeah. These are the bosses in the big room, and we're reporting in, and, like, hopefully we get an okay report card.

Mike Shannon: 08:16

That's not what this is about. Right. To your point, there's a role for each member of the board. Like, they're there for a reason, there's some kind of expertise, talent, whatever they bring, whatever. And so, yeah, that took me a while to understand, like, okay, it's not even just, like, one board.

Mike Shannon: 08:30

It's understanding each individual, and,

Corey Ferengul: 08:31

again, how do you facilitate an environment where Corey can be

Mike Shannon: 08:32

as impactful to us with the sliver of time Yeah. Across the rest of your year that you have on our company.

Corey Ferengul: 08:42

And that's the impact even outside the board meeting. Yeah. Right? It's Right. It's, hey, we're gonna have to work through this.

Corey Ferengul: 08:47

So, you know, for me, effective board management and I I had a great mentor when I was at a company that came known as Roby, name change and such. He was terrific about knowing I need this person on the board. I need to talk to them at least twice in a quarter because, you know, they're gonna just feel unsettled if I don't, and he's gonna help me manage these other people on the board. This woman on our board, she's gonna be happy to come to the board meeting as long as I send her a note in advance and let her know this. And and and it was understanding how they want to be communicated with, and then when he should reach out to one of them.

Corey Ferengul: 09:18

We had a situation where we're going through big strategy change, and he was, like, alright. This is the first thing you're gonna work with, and you're gonna keep him and the board up to speed, you know, and he had outsourced that. He he was the CEO and he outsourced it to meet a couple other executives because he knew that that would help.

Mike Shannon: 09:33

So you're rolling your sleeves up as

Corey Ferengul: 09:34

Yeah.

Mike Shannon: 09:35

Board member.

Corey Ferengul: 09:35

As, you know, and and so Let

Mike Shannon: 09:36

me ask you this question because we're coming at it from, you know, early start up stage Yep. And, you know, later stage at least as CEO. But you've you've been on both boards Yep. Later stage as CEO, board member as the earlier stage. What are some of the key fundamental differences of what changes as you go up the stages?

Corey Ferengul: 09:56

Fiscal responsibility. I mean, if you're a public company Yeah. You are people are signing, you know, forms that say I go to jail if this is wrong. Right? So Yeah.

Corey Ferengul: 10:04

There's just a different level of scrutiny. Audit committee meetings go longer. Comp committees committee meetings go longer. HR is way more involved in board meetings at a public company than at a private company. At least they should be.

Corey Ferengul: 10:15

I will say it doesn't happen all the time. Right? You know, so that's that's just the rigor of all of the mechanical stuff. There's more lawyers involved documenting everything.

Mike Shannon: 10:26

Whole compliance category become the kinda lion's share of the board purpose at that point, or is it still what I'm talking about of my extended team?

Corey Ferengul: 10:35

It depends on the company. Okay. I would suggest the bigger the company, the more it becomes a lion share of the board responsibility and board check ins and then board approval over major strategic decisions. Yeah. Acquisition, strategy changes, opening up a new line of business, things like that.

Corey Ferengul: 10:50

You know, kinda as you move down, the board is gonna have a little more engagement. I'll go back to my my days at Roby. You know, we made a massive acquisition. We had 4 or 5 special board meetings to bring the board along as we were talking about it and thinking about it.

Mike Shannon: 11:03

Out of normal cadence. Totally out of normal cadence.

Corey Ferengul: 11:06

Like, hey. This is a it was a bet company Yeah. Move buying a company bigger than us, and then we were gonna divest half of the company we bought. Sure. So yeah.

Corey Ferengul: 11:14

That was the the real trick about a board, how do you bring them along? Yeah. How do you and it's not just the bad news. It's not just no surprises. How do you bring them along?

Corey Ferengul: 11:24

How do you hear them? Yep. So you're not just trying to get them to nod. If they're on your board, they should have some expertise to offer you in the company. Yeah.

Corey Ferengul: 11:33

And without that expertise, you gotta think about why they're on your board. Yep. They have the expertise, use it.

Mike Shannon: 11:38

Yeah. Right.

Corey Ferengul: 11:39

And that's the the the key as a CEO is how can I use the expertise? Who do I tap into?

Mike Shannon: 11:46

Alright. So let me ask you this then as a board member. An example or scenario you can share where you felt well used as a board member, and another where maybe you felt like I could be doing more, but the Sure. Facility of it is just not meshing.

Corey Ferengul: 12:02

Yeah. I mean, I I on a board, on a board now that the CEO, I think, does a terrific job of using his board.

Mike Shannon: 12:07

Okay.

Corey Ferengul: 12:08

He understands that he's got one person on his board who's got more of a legal HR background, and he uses that person, you know, in in those areas. He brings them in. They meet with people. They help, he calls me because he needs help as he's thinking through strategy before he works with the broader Okay. Aboard.

Corey Ferengul: 12:21

He's thinking through financial issues. He's got a lead investor who is, you know, really good at figuring out what the multiple you know, what's gonna mean on that if you do this and if we, you know, put this money here and so on. And I and and it's funny because if you ask him, he won't tell you he does a good job at this.

Mike Shannon: 12:34

Sure. Right.

Corey Ferengul: 12:35

But as the outside looking in, I'm like, you're doing a good job of this. And and I find that he has figured out whose matters. He's figured out why, he's gotta talk to each one of them. And there's never a surprise at the board meeting. And he uses board meetings sometimes, takes the board through exercises that he took the company through

Mike Shannon: 12:53

Oh, interesting.

Corey Ferengul: 12:54

To get us to engage in the strategic conversation. You know, get up here's okay. Everybody write, you know, put you got 3 post it notes. Which investments would you make?

Mike Shannon: 13:00

Yeah. I'll just say Okay.

Corey Ferengul: 13:02

That's a good Yeah.

Mike Shannon: 13:03

Get actually hands on.

Corey Ferengul: 13:04

It's not

Mike Shannon: 13:04

just information delivery and feedback. Yeah.

Corey Ferengul: 13:07

It's in. They they

Mike Shannon: 13:08

we did

Corey Ferengul: 13:08

this with the team. What do you think? And then it tells us how we compare to the team. Yeah. Right?

Corey Ferengul: 13:12

And and that also helps anchor the board on how are you thinking compared to people inside Yeah. Where they have more info than you, which most boards don't always agree with. Right?

Mike Shannon: 13:20

Because it reminds me of I started doing something where we had a few meetings, you know, you were on my board that got hands on enough that I felt like, alright, I've gotta call an immediate management meeting afterwards because we need to continue this. And I started just prescheduling it, with sort of the expectation that, hey, this may get canceled, but it was like the board meeting was on Wednesday. I already had senior leadership, you know, Thursday meeting. Hey. Something's gonna be talked about at the board meeting.

Mike Shannon: 13:47

We're gonna roll up our sleeves on something. Let's be ready to spend a few hours the next day, and then take that to all company or all management. And look. Sometimes we cancel.

Corey Ferengul: 13:55

If we think about board meetings, I mean, think about what might be effective getting feedback that's gonna be useful to the company means it was an effective board meeting. Right? And I I think about those situations. We were talking about what strategy shifts you're making, what investments, or you were good about coming in and saying these are areas, here's kinda what we're working through, and we'd discuss it.

Mike Shannon: 14:15

Yeah.

Corey Ferengul: 14:15

And then, hopefully, we'd come up with a few other ideas that you and the management team would go beat around. Right? So that was a a a a really good precursor from you to the management team, like, be ready. Yeah. Right.

Corey Ferengul: 14:26

Right. But it also meant you were open in in the board meeting to hearing input and learning from the team.

Mike Shannon: 14:30

Yeah. Right? I mean, we got Just hungry for it because it was effective.

Corey Ferengul: 14:33

But let me say that the board isn't the enemy. And this is what I say and and when you say I'm gonna, what about my bad board examples? I've seen it where the the the CEO treats the board as basically an enemy, somebody they don't want to engage. Yeah. And they're like, okay.

Corey Ferengul: 14:46

We're gonna go through this meeting. Right. Right. Get it over with. You know?

Corey Ferengul: 14:50

And and when that's the case,

Mike Shannon: 14:52

it would a waste. It it it's a waste. It's gonna be there.

Corey Ferengul: 14:55

They're gonna go away. Yeah. They'll be here after you. Right. Right.

Corey Ferengul: 14:59

Yeah. So that that's the, you know, if you walk into it and realize they're not going anywhere Yeah. They are actually here to help you. They are not the enemy. Right.

Corey Ferengul: 15:08

They all have some kind of skill they can offer you. Even if it's not the one you needed today, they're here. Take advantage of the skills they have, and if you only plan to spend time with them in the board meeting, you're not going to succeed. Yeah. You you have to invest time in them outside.

Corey Ferengul: 15:24

What one other point, you made the the comment bad news travels fast. Right? Private equity firm said that to me 20 years ago, something like that. Every other private equity firm I mentioned to goes, oh, that's exactly right. Bad news.

Corey Ferengul: 15:36

You know, they all say it. Right? I've never heard a board member that think that's a bad thing. Yeah. You know, so that's like one of those, like, etch that in your mind.

Corey Ferengul: 15:42

Right? The board's not going anywhere. Etch that in your mind. The board's not an enemy. Etch that in your mind.

Mike Shannon: 15:46

Right? So I'm hearing board is not an enemy. Treat it as an extended team that can be valuable only if you know who each player is and how to extract that best value, put them in position. Yep. And then the communication around the board meeting is sounds like you said 70% of it.

Corey Ferengul: 16:05

Yeah.

Mike Shannon: 16:05

The meeting itself happens, but it's everything around it.

Corey Ferengul: 16:08

And around it is bringing the board along, bringing them along your thinking, bringing them along your strategy. You used to do memos that would bring people along. If you're doing m and a, you better not walk into a room and they go, why the bleep are we doing? I don't understand. They go, oh, yeah.

Corey Ferengul: 16:21

We've talked about going into this kind of world. Yeah. The board being informed, being brought along is going to be the best way to manage them and get them to work with you as opposed to have a combative situation.

Mike Shannon: 16:32

Alright. Well, I think there'll be more board meeting talk and opening the c suite, but if that does it today, appreciate it. Manage the court. Thanks.