Tuesday, November 07, 2006

Board Meetings: Why the Management Report is More than a Dimpled Chad

In the last month, much has been written here in the blogosphere about managing effective board meetings, setting the right board agenda, and the like. Very little, if any, attention has been paid to the issue of what exactly management should report to the board. Other than, that is, to recommend keeping management's slide deck short. With respect, this is selling short the utility and value of a comprehensive report. Here's my view:

Management reports are the primary means by which a board informs itself and oversees the affairs of a corporation. This makes them the single most important communication exchanged by the board and management. The form and content of the report are critical to a director's ability to fufill his/her fiduciary obligations to the board.

When a client completes a new round of financing, I urge them to speak with their directors and agree to metrics they wish to use to monitor and measure the business' progress. Those metrics then become the form for the report generated before each board meeting. The report is always in powerpoint, as befits a private company. A shortened version of the report may be used at the meeting (in accordance with the agenda), but the board should always have a complete, consistent view of all metrics, whether they are an agenda item for a particular board meeting or not.

There are a number of metrics which our form delves into in more detail than we would for a public company because, in our experience, they are where startups face the most challenges: human resources (and in particular, recruiting and retention); marketing; sales and business development (and in particular, the sales pipeline and the process for qualifying sales prospects); and product development. Data security and intellectual property management are also areas that we recommend companies that are post-beta regularly review with their board.

At my firm, we have developed a detailed template for a management report to the board which we provide to our clients for their own information. Anyone who would like a copy should email me; powerpoint does not blog well. I also recommend you check out Pascal Levensohn's presentation on Best Practices for Running a Board Meeting for a good discussion of what are appropriate financial emetircs for a board to review.

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