Stefania Mallett, co-founder and former CEO of ezCater, shares her entrepreneurial journey and insights into effective board governance. She emphasizes the importance of board composition, highlighting the pivotal role of understanding marketplaces and the nuances of investor-backed boards.
Stefania also discusses the crucial dynamic between CEOs and board chairs, the challenges in communicating complex business scenarios to board members and the critical process of succession planning.
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Stefania Mallet Bio:
Stefania has spent over 25 years building and growing technology-enabled companies that solve real business problems. Stefania is Co-Founder & Director of ezCater. She co-founded and successfully sold InSite Marketing Technology (now NASDAQ: KANA). Her tenure at National Logistics Management (a broker for $225M in transportation services) brought NLM to profitability for the first time in 4 years. At IntraNet (now NASDAQ:ACIW), Stefania revamped the firm and vaulted it to #1 in its market, a position it has maintained for 15+ years. At a dozen companies, she has held general management, marketing, sales, product management, support, and technical positions. Stefania also operates as a Director and advisor to many for-profit and non-profit firms. She has a BS and an MS from MIT.
On Relationship Between Board and CEO/Management in Investment Backed Companies
“.. it’s kind of like grandparents. The board cares intensely, but in the end, they hand the baby back and you – the CEO and/or the managing team – you’re the parents and you have to deal with all of the colicky moments and all of the ups and downs and all of the difficulties and so much more about what’s going on inside the company.”
“It doesn’t matter how effective a communicator you are, having been on both sides, I can tell you that the most well-intentioned, most transparent, most forthcoming CEO cannot possibly convey to the board everything that the management team knows.”
Origin Story of ezCater and Early Board
“..we closed [a company I had help found] down on a Thursday. I went home and got drunk on the weekend and on Monday we started the business that turned into ezCater, which was helping make food appear for business meetings[!]”
“Don’t bring people onto your board who don’t understand your business”
Evolution of the Board through ezCater’s Journey and role of a Board Chair
“we started to get more professional board members who understood our business. We lucked into someone [Chris Cuddy] at Launchpad, who understood marketplace businesses, not specifically in the catering food for work business, but he came out of online travel [marketplace]. It turns out one marketplace is a lot more like another marketplace”
“we lucked into someone who became our board chair and $425 million of venture capital funding from some of the biggest venture companies on the planet later, we are now thousands of times the size we were when we first met this Chris”
I don’t have a velvet hammer as much as I’m impatient. Impatience is the mother of invention, and so when I watch Chris Cuddy our board chair do his work I think, “Oh my God, that’s just better.” He’s more patient. He listens. It doesn’t really take longer. It feels like a circuitous path to the answer, but it’s actually about the same length of time as I would have taken with less angst, less fireworks. The founder and CEO are not necessarily the best board chairs.”
Transition of CEO for ezCater
“the company was ready, and I was ready, and I went to the board meeting a few weeks later and I said, “Guys, I got to go. It’s time.”
“We launched a search and found my successor. Because of internal discussions, because of the board’s hesitation, because whatever, we ended up taking a year. We had the time, I mean it wasn’t like running, screaming for the exits, and I wasn’t doing a terrible job. My team was doing a super job”
“When this person started, now it’s three months, four months, and it’s quite clear, he has experience at the 10X level. He brings in knowledge, not just “I think we should try this,””
Joe: “You have touched upon series of things that apparently apply to investor-backed companies and startups that also apply to every for-profit company, whether private or public. The importance of the chair, the importance of learning to share power – every CEO has to learn it, every founder has to learn it. Every investor, whether it’s a startup or not, has to learn it.”
Effectiveness as a Board Member and Over-boarding
“One of the very best board members I have had in my entire career in all the companies that I’ve been on or on all boards I’ve chaired or that I’ve been on the board is a guy who, when I did his reference checks for him people raved about him and when I would ask, so what’s wrong with the guy? Almost every one of them said ‘he’s on too many boards.’ ”
“It’s important to remember that the board gives you a couple of things that you can’t get anywhere else. One is the cadence of every X weeks or X months, you have to report to these people…. There’s something about that regular cadence of having to report, that is very valuable.”
The second thing you get from them is perspective. If they are good board members, they bring you a portfolio perspective. You live your life as a portfolio. You can only do one company at a time. Even more industrious and somehow energetic entrepreneurs than I do are involved in two startups at a time, but it’s rare. But these people who are on your board are involved in 10 startups right now, or 10 companies at your stage right now and have seen many others, and so they can say to you, “Listen, I saw people try exactly what you tried and here’s what happened to them,” and you can save a bunch of time.”
Joe: [00:00:00] Hello and welcome to On Boards, a deep dive at what drives business success. I’m Joe Ayoub, and I’m here with my co-host, Raza Shaikh. Twice a month, On Boards is the place to learn about one of the most critically important aspects of any company or organization, its board of directors or advisors, with a focus on the important issues that are facing boards, company leadership, and stakeholders.
Raza: Joe and I speak with a wide range of guests and talk about what makes a board successful or unsuccessful, what it means to be an effective board member, and how to make your board one of the most valuable assets of your organization.
Joe: Before I introduce our guest today, I’d like to thank our friends at the law firm of Nutter McClennen & Fish for sponsoring the On Board Summit 2023 on November 1st, as well as this, [00:01:00] our eighth season of On Board’s podcast. Our guest today is Stefania Mallett. Stefania is a business executive and entrepreneur with extensive experience in building marketplace businesses.
Most recently, she is the co-founder, former CEO, and board member of ezCater, an online catering marketplace.
Raza: Before founding ezCater, Stefania held leadership roles in a number of different companies, focusing on product development, business strategy, and operations. Her expertise in these areas played a crucial role in shaping ezCater’s business model and its success in the competitive online marketplace.
Joe: Welcome, Stefania. It’s great to have you today with us and On Boards.
Stefania: Thank you. It’s fun to be part of this. I’m flattered by being invited and I appreciate being here.
Joe: Great. Let’s start with your background because it’s so important as part [00:02:00] of the story here. Tell us a little bit about your background as an entrepreneur and founder and CEO.
Stefania: I went to work for other people for about 20 years. You’re supposed to drop out of college and start a company. I had to wait till my stepkids dropped out of college before I could start the company. And then I got going, so late life is fine.
I was past 40 when I started my first one, and it’s a lot of fun to be in the entrepreneur seat and it’s helpful to have seen what it’s like to be an employee, as I was for so many years, climbing other people’s ladders. I got involved in the internet starting in 1996 when we didn’t know how to spell it. It was quite a long time ago. It was really kind of cool.
I had a three-digit serial number on the modem that I had from Comcast. Three digits. I was a pioneer and then I got more and more involved and had plenty of failures as a startup entrepreneur [00:03:00]and plenty of success. I mean, ezCater, my most recent one is quite a lovely success. I’m very proud of what we’ve done there, and I’m even more proud of the fact that the board and the new CEO who I helped pick at my instigation is now running that company. It’s a great step for the company and for me to be able to say time for the next stage.
Joe: Talk a little bit about your board experience because as part of this you have served on some for-profit boards.
Stefania: Definitely, I have. I have been on for-profit boards of my own companies and of other companies. I’ve never been on a public company board, and admittedly, I have not been on a large private company board other than my own, but I have a lot of CEO friends, and we trade notes about this topic. It’s more the smaller companies where I’ve been on the for-profit boards, or my own large-ish one at ezCater. I’ve also been on non-profit boards and seen the differences and seen the similarities.
But in the end, [00:04:00] it’s kind of like grandparents. The board cares intensely, but in the end, they hand the baby back and you, the CEO or the managing team, you’re the parents and you have to deal with all of the colicky moments and all of the ups and downs and all of the difficulties and so much more about what’s going on inside the company. It doesn’t matter how effective a communicator you are, having been on both sides, I can tell you that the most well-intentioned, most transparent, most forthcoming CEO cannot possibly convey to the board everything that the management team knows.
There’s just so much nuance and so much detail that is actually important, but impossible to convey in the amount of time that a board can devote to the company.
Joe: I love the grandparent metaphor. We will get back to that, but before we do, let’s talk a little about ezCater.
Raza: Yeah, so Stefania, ezCater has a very interesting genesis story [00:05:00] as well, so talk about how ezCater got started, what were the circumstances and how that initial journey was.
Stefania: I can do that. By the way, the grandparent metaphor was given to me by a 30-something board member who described it this way. He said, “I watch my grandparents. I think this is what they do.” And I certainly adopted that metaphor long before I became a grandmother.
So, in the early days of ezCater, I’m a serial entrepreneur, I am not the idea person, I’m the operating executive, and I follow people who have ideas around. And when you find someone with a really great idea who’s not an operating executive, and you marry them up to an operating executive, you get a powerful combination.
That’s what I have managed to create in every setting that I’ve been in, in every company that I’ve co-founded. I’ve never founded a company entirely by myself. We had a company, my co-founder, in an earlier company, a fellow [00:06:00] named Briscoe Rodgers. He started a company to help get in front of clients, specifically doctors, for pharmaceutical company sales reps.
We kept uncovering the need to help those sales reps make food appear for the very modest lunches that they would bring in in order to get a few minutes from these extremely busy physicians, and after a while, we came to see that was a better business model than what we were doing, and frankly, we ran out of cash with the model of attempting to get appointments with physician’s offices.
We shut that company down. We thought we had a savior. We thought we were going to make it, and then on a Thursday, it was just all over and we let everybody go. We were just done. I mean, it wasn’t a surprise to anybody at that point. I’m very transparent. Everybody had been carried along, but we close the thing down on a Thursday. I went home and got drunk on the weekend.
Joe: I love that part. I wanted to say. [00:07:00] Wow.
Stefania: business that turned into ezCater, which was helping make food appear for business meetings, and we had thought that we were focusing on the sales reps who, not just it turns out in pharma, but in other industries, there are sales reps in many industries who have to bring food into the entire group that they’re talking with, not just to the one decision maker, and people don’t have time to go out to lunch very much anymore.
So, you bring a modest meal into the entire group and thereby get a few minutes with the decision maker and get people to listen to your story. It turns out that there’s that need, not just in pharma, but in many industries for the sales reps, and then it turns out, of course, we all order food everywhere.
We backed into a huge market, not even realizing that when we started it. The board at the first company, the company that closed, was a combination of investors, they were [00:08:00] representatives from our angel investors, and they were, I’m sorry to say, a very difficult crowd. They were not savvy to the business that we were in. They were an example of. “Don’t bring on to your board people who don’t understand your business, people who just think, “Well, they sound convincing that founding team, so there’s probably money to be made here.””
That’s not enough because they can’t help you, and they’re always nervous because it’s their money. They’re legitimately concerned and so they’re continually second guessing and continually pushing you in ways that don’t make sense for your business. But it’s hard to explain that when they think, “I’m holding the gold, I make the rules.”
So, that was a difficult situation. When we moved into ezCater, we took one of those board members, the fellow who had been most supportive in the transition to ezCater, we took him along to be on the board because he wrote the single biggest check, [00:09:00] $50, 000. We bootstrap this thing. We started this company with $120,000 and he wrote one check for 50 of it. That was a pretty impressive big chunk, right? He was the majority owner and the largest owner, and we had him on the board.
We had board meetings at the local diner once a year. They were lovely because he’s a wonderful guy, and he would ask us general business questions, but he again, didn’t know our business, and admittedly, I mean, he himself would say, “I just don’t understand marketplaces. I don’t know high growth tech businesses.”
He’s a serial entrepreneur, but he doesn’t understand this particular niche, and so we didn’t get more than moral support from him on our board.
He was my co-founder and I, and he on the board, not enough. When we finally started taking in more than friends and family money, when we took in angel money, [00:10:00] including money from launchpad investors, we started to get more professional board members who understood our business. We lucked into at launchpad, someone who understood marketplace businesses, not specifically in the catering food for work business, but he came out of online travel.
But it turns out one marketplace is a lot more like another marketplace than it’s the fact that one of them sells nursing supplies and the other one sells food. That the nursing supplies versus food is a tiny difference. The fact that it’s a marketplace versus e-commerce versus manufacturing of widgets, that’s a huge difference.
So, we lucked into someone who became our board chair and $425 million of venture capital funding from some of the biggest venture companies on the planet, we are now, I don’t know, thousands of times the size we [00:11:00] were when we first met this board chair and he’s still our board chair because he has something which is so powerful. Not only does he understand our market, our business, but he has a velvet hammer. He is able to convince all the disparate points of view on the board to agree and to all feel like we got what we wanted, even though it’s not possible, but he made us all feel heard. He makes us all of us. I mean, I don’t mean just the entrepreneurs and the leadership team. I mean, the largest investors.
Joe: Yeah, I was just going to say that what you’re saying about the board chair, I think it runs across all boards, investor backed, small for profit, huge for profit public, having the right board chair is just a game changer, and it sounds like it’s definitely been true for you and ezCater.
Stefania: I’ll tell you, in [00:12:00] a couple of my own boards, I wanted to be the board chair. And I did, in hindsight, not a very good job because I’m the hotheaded entrepreneur, right? I’m the one who’s like, “Come on, people, we got to do this, let’s make a decision, let’s move, we got to go, we don’t have time to screw around with this, we can’t talk about this forever.”
I don’t have a velvet hammer as much as I’m impatient. I think impatience is the mother of invention, and so when I watched Chris Cuddy, our board chair, do his work, I thought, “Oh my God, that’s just better.” He’s more patient. He listens. It doesn’t really take longer. It feels like a circuitous path to the answer, but it’s actually about the same length of time as I would have taken with less angst, less fireworks. The founder and CEO are not necessarily the best board chairs.
Raza: One earlier point that you made, Stefania, is also really valid in this, that you got to, as a startup, take board members that are [00:13:00] going to be additive and that have governance experience and that are going to be able to move the needle for the company rather than just representing an investor or non-investor or whatever the case may be.
At the angel stage, sometimes you can get those board members, and sometimes you can’t, so you really have to be careful at that early or the first sophisticated check into the company stage to be able to do that.
Now, did your board evolve? Like I know Chris Cuddy has been the constant or stayed with the board, but with successive round, did it evolve or how did it evolve?
Stefania: Definitely, it has evolved. And what you said about looking for people who are additive, I would say that’s true at every stage and you don’t always get that choice. If you are bringing an investor, for example, and you really need investors to proceed, [00:14:00] you may not have a choice. I mean, you may have one-term sheet, and then you have to decide, like, is that money worth it? Do they know what they’re doing? And will the individual who’s going to sit on my board be themselves additive? Will they be distraction? Will they change the dynamic on the board for the better or for the worse?
We made a matrix of all the things we wanted in board members, and each time we had an opportunity to add another board member, because we were bringing in money, if we had a choice in whose money we would take, and usually we did, I’m very proud of that, then one of the dimensions by which, which we would use one of the parameters we would use to decide whose money to take was whether the person that was going to represent that money would fill out our matrix better than the person coming from a different company.
You don’t just look at the valuation or at the valuation plus the terms, you look at the valuation plus the terms, plus the money, plus the reputation of the firm and plus the. [00:15:00] person and the reputation of the firm and where they fit in your matrix. So I wanted, since I knew that we were at the point where we started bringing in larger money, I knew that we were a national firm, I wanted both West Coast and East Coast representation.
Because it’s different ways of thinking in our board, I wanted operators and money people because they’re different ways of thinking. I wanted if I could get it, diversity of background, diversity of gender, ethnic diversity, racial diversity. I wanted people who understood we’re a two-sided marketplace, people who understood and potentially had a Rolodex in each of the two sides of the marketplace.
So, of course, based on your business, what does your matrix look like, but sit down and think about that matrix, how do you make sure that the business questions, the strategic questions that you are going to [00:16:00] address, have someone who’s thoughtful about that on the board? Make that list of what of your future strategic topics and see whether you can match people to that.
Joe: Part of what i’m hearing is the investor-backed board adds a layer of complexity to the issue of good board composition, a lot of layers maybe, because you’re talking about creating the right kind of board, as you said, with a matrix of skills, experience attributes, whatever you’re looking for, but the overlay is who are the people investing and can you find the right composition among those people?
So, the challenge is great, but the issues are very similar because what you want on your board are people that can drive the business forward, that understand the business, that understand what a board does, those kinds of basic things are applicable no matter whether it’s a [00:17:00] $50,000 startup or a multi-billion dollar privately held company.
Stefania: I think that’s correct.
Raza: But Joe, I would say one thing to that, which is, because of successive rounds of investments. Investor-backed boards do get more opportunities to refresh, change, recompose, and reconstitute the board more than maybe some other companies that are at a different stage and don’t get that event of investment as an excuse for changing the board, at least on the plus side.
Stefania: Our independence, once we brought in the venture-backed board members, the venture representatives, we asked to have independence on the board as well, and with the independence, we put in a time limit right from the start.
It was a one-year deal. Every year, potentially, we could ask you to leave. If you want to like give people two years to start, but you don’t really know what everybody’s like and it’s a lot easier to get rid of somebody if you told them up front that at the [00:18:00] end of the year you were going to revisit this question.
I have dreamt that I would be able to ask for that with our venture representatives, and the best I’ve been able to do is to develop relationships with an inside a venture capital firm and say, “Listen, we love you guys, but Fred on my board or Susie on my board, it’s just not representing your company effectively for us, and we’re not getting as much as we could. Do you have somebody else?”
It takes a lot to ask that question, but you can ask You need to be objective and fair about it. It can’t be like, “I don’t like their cologne or something.” It has to be something objective and fair, but it could be, “Listen, the board is very collegial, but this individual is not, and we would like to have a more collegial board. Do you have someone whom I could replace?” That’s a legit reason.
Raza: Or, simply that the needs of the companies have evolved and where the company needs to go, we need those skills.[00:19:00] Stefania, one other thing that I wanted to go back to was, this Chris Cuddy’s relationship or a board chair’s relationship with the CEO and the chemistry with the CEO and the board chair is also an important factor in that longevity of being able to not just to add value, but be able to stay as a board chair, and did you experience that with Chris Cuddy knowing him? I’m just guessing.
Stefania: Yeah, definitely. The thing that was so striking for me, besides the velvet hammer element of what Chris brings to the table was the coaching he could give me not so much about how to run the company. I’m a pretty good operator, and I’m sure I’m actually older than Chris. I’ve had more years of experience running things than he has, though he’s very knowledgeable about that.
But the thing he. has, which I didn’t have, is knowledge of how big investors think. After a board meeting or before a board meeting, I would say, “But they’re saying, they’re saying X, Y, [00:20:00] Z. Why are they saying X, Y, Z?” And he’d say, “Think about it from the investor perspective. It’s because…” and then he would give me example after example in other companies of the same thing happening.
It was never inappropriate in telling me any of these stories. There were stories that you could read about that I hadn’t thought of or stories that he had firsthand knowledge of with companies that were long gone, and so it was perfectly legit for him to give me these examples, but boy, they crystallized for me, the thinking of these individuals, which I need to respect.
I am quite sure that he helped the investors understand, “Listen, she’s the entrepreneur, her co-founders and her, the management team, the leadership team, they want this because they’re coming at it from the entrepreneur angle,” so that anybody on the board can help with that to help bridge the gap between the way that an investor who in the end absolutely must make money, that’s what they’re there [00:21:00]for, and that’s what their limited partners are beating on them for.
The difference between the perspective of that person who has to make money and you as an entrepreneur who wants to make money, but really also wants to build an enduring iconic brand, you want to build a business, you want to hire people and have people be happy and your need to create money is sometimes less strong than your need to build a business or to prove that your idea was a good one or to whatever it is that motivates entrepreneurs. It’s not just the money.
Raza: Stefania, you and your team have built an iconic business, so talk about where ezCater has evolved and you were the founding CEO and the CEO throughout the company’s journey, but then you have come to a point where you thought about transitioning. Talk about the journey to here and the next transition.
Stefania: Sure, the first company that launched and co-founded back in 1996- 97, one of my board members who was himself a [00:22:00] serial entrepreneur who turned into an investor said to me, “Stefania, you need to share power more and more as your company becomes more successful. I have a thesis that entrepreneurs come in three flavors. There’s the ones who want to prove something to their dad. There’s the ones who want to prove something to themselves, and then there’s the ones, and I’m in this third camp, who just don’t want to work for anybody else. And so, you think you’re starting the company, you’re like, ‘I got this. This is me. I can do this. I can do this,’ and over time, if you are successful, you have to share power with more and more and more people.”
I still remember where I was standing. I can see the guy when he said this. I thought, “Oh my gosh.” My bulb went off over my head, and my evolution has been to where when I started ezCater many years later. I built the company to not need me. It’s not my baby. It’s not I’m running this thing. It’s how can I make the first small team we had, [00:23:00] and then the business itself, and even as it’s huge, operate without me.
It was actually the way that I had functioned most of my life working for other people. Teams that I built were very self-sufficient because that way I was given more responsibility. When I was climbing other people’s ladder, and I found that if I got to where everything was working really smoothly, people would say, “Hey, you have bandwidth. Can you do this?” And I would get promoted. It was great.
So, by the time in June of 2022, one day I was sitting around, I had COVID. COVID was developing into a case of shingles. I was sick and miserable and I thought, “I think it’s time. I think the company can run really well without me. I think I have given it all the knowledge I have. I think I’m at the point where I would have to go out and learn a tremendous amount to be able to do the next stage. I took the company to billions of bookings, and I like to add [00:24:00] another zero.” At that moment, I was feeling so sick. I was like, “I don’t think I can do that.”
COVID giveth and COVID taketh away, but I’m telling you COVID had something to do with my thinking. I’m not sure I can do that. I think it’s time. So, the company was ready and I was ready, and I went to the board meeting a few weeks later, and by then I was quite healed, recovered, and I said, “Guys, I got to go. It’s time.”
We launched a search, and found my successor. It took us a year. Because of internal discussions, because of the board’s hesitation, because whatever, we ended up taking a year. We had the time, I mean it wasn’t like running, screaming for the exits, and I wasn’t doing a terrible job. My team was doing a super job, and I had told the management team, “People, this is what’s happening. It’s time, so you need to take more and more responsibility.” I think they were actually enjoying it.
When this person started, now it’s three months, four months, and it’s quite clear, he has experience at the 10X level. He brings in knowledge, not just [00:25:00] “I think we should try this,” but “I did already try this in this larger context, and I know that it will work this way so let’s do it.” He brings in a new kind of discipline. He brings in new energy. It’s everything that I hope for.
Joe: I will say you have touched upon a series of things that apparently apply to investor-backed companies and startups that apply to every for profit company, whether private or public. The importance of the chair, the importance of learning. to share power, every CEO has to learn it. Every founder has to learn it. Every investor, whether it’s a startup or not, has to learn it.
The differences in the goals, and I’m just thinking about family businesses where different generations have different goals. I mean, just one obvious example, but it’s in almost every business and last but not least succession planning, and I give you so much credit [00:26:00] for actually thinking about it, whether it was COVID induced or not, thinking about how does this company go to the next step no matter how good the CEO is, that person, if he or she is doing a great job should be thinking about that. It doesn’t happen all the time, but that’s a governance issue. That’s a CEO issue, and it’s certainly ultimately a board issue, so I give you a ton of credit for doing that.
I do want to go back to something you said earlier. You talked about the impossibility of giving the board all the information that management has, and I think that’s hard to argue with. When we first talked though, you said something a little more dramatic, which was boards get maybe one percent of all the information from the CEO and management, and that’s not because of a lack of transparency, it is because things are just moving too fast. There’s so much there, we have to figure out the one percent to get to the board so we can get to the next step.
I’m just [00:27:00] wondering, again,understanding that investor-backed companies are just different. I mean there are different challenges, there are pros or cons, whatever. Is that part of the thinking that could change as it has with other for profits? Because lots of for profit boards, owners, whether they’re family or non-family, have thought, “The board is a pain in the neck. I’ll get my friends. I’ll get people I can control.”
That’s not good governance, and ultimately, having a good board, whatever that means in the context, and having the right people on the board is better, usually, for business. So, I’m just wondering, this one percent thing, is that a mindset of the investors and the people that are in this particular part of the market?
Stefania: You’ve touched on multiple things there. I think data rules the day. One of the issues with bringing in family members or friends is that it’s harder for us to have [00:28:00] data control our decisions or strongly influence our decisions when there’s a lifetime or many years of friendship or chemistry from when I was little, you stole my dog, and I mean, who knows, right?
To have the data andhave the amount of influence that it should have is more difficult when there’s a lot of long-term relationships involved. If you focus on the data, what data are you conveying to your board? Think about your reporting package. Think about, of course, the GAAP reporting packages, but also what is germane to your company at this stage that can be encapsulated in data? Are you still building out your brand? If you are, what do people know about your brand? Do some surveys and figure that out. What do people think about your brand? What is your aided awareness? What is your unaided awareness? What do your customers want? Do some data collection and [00:29:00] figure that out and then bring that to your board because this is not in a GAAP report. This is germane to the strategic question that you are focused on today.
Just think about, you have four hours of board meeting every quarter, or even if you have it every six times a year, four hours, six hours, twelve times a year. Look at how many hours are in a year. It’s less than one percent, because a lot happens in every minute, so, just extrapolating from that, it’s clear that there’s a lot going on that the board can’t know.
But in the time that you have with them, give them the data that will allow them to be intelligent and contributory to the strategic discussion that you want them to participate in.
Ask yourselves, if you’re going to have the board tackle a strategic question, have that strategic discussion with your own people a month before and keep note of the topics that people brought up to help address that [00:30:00] question, the data that they referred to, the data they wish your own team wish they had and keep that list and then go and collect all that and hand that as a package to the board and to your own working teams as you figure out the answer.
Do the role play, do the dress rehearsal of the conversation, and figure out what you all know that you’re just bringing unspoken assumptions that you’re bringing to the conversation, be listening for that meta level of information that people are bringing in, that you may not have ever conveyed to a board, because it’s in the water, it’s in the air. Make it explicit and bring it to the board so the one percent that they can get, or the half a percent, or whatever it is, looking at how little time they have, is really, really powerful.
Joe: I think the idea of bringing the most important relevant information/ data to the board again [00:31:00] covers everything. I have to say I’m still pushing back against the one percent thing.
Stefania: Do you think it’s too low? What are you pushing back on?
Joe: I think it’s way too low. Look, you and Raza have a million times more experience with investor-backed companies and boards than I do, so I’m not in that world. My observation is that all of the same things you’re saying have been said by CEOs and management of for profit companies forever. I just wonder if it is a mindset where the venture people, the angel investors, whoever it is, it’s part of the mindset of what they bring and what serial entrepreneurs like you who are impatient and hotheaded, as you described yourself, bring that, if you could get over that, maybe it wouldn’t be as challenging, but who knows? It’s something, and I’m curious, Raza, what you think, because you’re in this world everyday.
Raza: I think the one percent is just a number, but it’s just to highlight that there is a [00:32:00] pyramid and a tip of the iceberg problem with information, and there’s a lot of information in an organization, especially a growing and a fast moving startup.
What I’m really gaining from Stefania’s perspective is that that practical notion of how you figure out what is the important additional information that you should be conveying to your board.
So, this is from the direction from management to the board, just the basic numbers and GAAP accounting is not enough, figuring out what’s the right context and right pieces of key information for that decision making for the board is like an important exercise for CEO and management to make use of their boards much more effectively.
Stefania: I’ll give you an example of that. When you are in the company, you hear customer stories all the time. They influence your thinking quite a lot. The board doesn’t hear those [00:33:00] customer stories. You can come in and say, “You know, customers think we’re great because, and customers hate this about us,” but that doesn’t have anywhere near the impact as would come in if you went and told the stories, the same story that struck you, someone in your frontline customer service called you up and said, “Stefania, you’ll never believe this. The guy said to me this on the phone.”
You’re so impressed by this story. It could be a bad story about you. It could be a good story. It doesn’t matter. It’s just telling for the thing that that customer highlighted. Tell that story to the board. Tell the stories that build the emotional underpinnings of your strategic decisions because they’re not purely data. They’re influenced by your customer interactions. Bring those to the board too.
Raza: Stefania, this way of conveying information from management to the board and [00:34:00]building a good package of information makes the board informed. And in fact, the board has to be an informed board. But from the board standpoint, there’s another thing at play here, which is the board members has individual members and then collectively as a board also have to have the time available to digest that information and to read that through.
We sometimes see this phenomenon of let’s call it overboarding, and that’s where people are on 8, 10, 11 company boards. Have you also observed that and see that there is a need for figuring out how to reduce that overboarding.
Stefania: We’ve seen that and you usually you can ask but you can’t demand that someone get off of six other boards in order to have more attention for you. There is one thing you can control, which is how early do you get the information to the board. [00:35:00]
Never underestimate the importance of a weekend. The board members either read over the weekend or their analysts read over the weekend, because you have a senior person on the board and the analyst has done all the work and gives us even a digested version of what you said to the individual who’s on your board, and they do that over a weekend.
So we finally hit a cadence where our board meetings on a Thursday and we absolutely, come hell or high water, get the board deck to them, the entire packet of information, the Friday before, so they have almost a full week, and they have the weekend, and we try very hard not to send it Friday at 11:59 pm. We to send it 2 in the afternoon on Friday.
Raza: And maybe one other thing that’s in control is when that board composition question comes up at a fundraising round or who you pick as a board member to include how many boards are they already on as a way of [00:36:00] judging whether they would have the time to be
Joe: Yeah, I was going to say serving on a board is a job. Part of the job is being available to do what the job requires. That’s from the smallest startup to the biggest company. Again, the overboarding is something that’s been around for a long time, less now than I’ve ever seen, and again, I would just say that the folks who are sitting on too many boards to do their job is doing a disservice to the company.
Stefania: I agree, but you can’t force them.
Joe: No, no, I’m not blaming you. I’m just saying, again, I think it’s a mindset, “Oh, well, I can do 10 boards.” No, you can’t. No one can do 10 boards really well, maybe someone can, but it’s highly unlikely.
There are things that need to be done no matter how good management is about getting the material and the right material and getting it as fast as they can, there are things that [00:37:00] just have to be done. And I would say, to the extent you have people on your board that really take it seriously and understand it’s a job, not just something to shuffle around and kind of check the box, I think all the better. And that has been true from time immemorial on for profit boards.
Stefania: It’s like employees. I mean, board members are people too, just like employees, right? I mean, some of your employees do a better job than others. Some of your board members do a better job than
Joe: Well, I think that’s the headline. Board members are people too. I like that line.
Stefania: The best board member, one of the very best board members I have had in my entire career in all the companies that I’ve been on or on all boards I’ve chaired, that I’ve been on the board too, not just my own companies, is a guy who, when I did his reference checks for him, when people raved about him and when I would ask, so what’s wrong with the guy? Almost every one of them said he’s on too many boards. [00:38:00] And I thought, “Okay, so my choices here are to get somebody who’s really awesome, but on too many boards, so I won’t get much of the awesomeness, or to get somebody who has a lot of time from a different company, take money from this other venture firm, who has a lot of time, but people don’t rave about him, and I picked the raving, but not enough time guy, and I tell you, it was the best decision.
Joe: Yeah, I understand.
Stefania: time he figured it out and just got off of several boards. Thank heaven not off of mine. But all you can do is try to help by packaging up the questions as neatly and efficiently as possible by giving them the information well in advance.
Joe: Yeah, that’s always been and will always be a prime responsibility of good management. I mean, there’s no question about that. But is there anything you’d like a final question or any final things, Stefania, that you’d like to say?
Stefania: It’s important to remember that the board gives you a couple of things that you [00:39:00]can’t get anywhere else. One is this cadence of every X weeks or X months, you have to report to these people and you find yourself, if you think about what you’re going to say to the board next month, you think, “Oh, I didn’t have to explain that. That’s too embarrassing. Can we go fix that?” And you will really make a better company. There’s something about that regular cadence of having. to report, so there’s a value there.
The second thing you get from them is perspective. If they are good board members, they bring you in a portfolio perspective. You live your life as a portfolio. You can only do one company at a time. Even more industrious and somehow energetic entrepreneurs than I do are involved in two startups at a time, but it’s rare. But these people who are on your board are involved in 10 startups right now, or 10 companies at your stage right now and have seen many others, and so they can say to you, “Listen, I saw people try exactly what you tried [00:40:00] and here’s what happened to them,” and you can save a bunch of time.
So. Even though the board has a very different outcome in mind, 100 percent focused on money, very little focus on building a business itself, a different focus from yours, even so they bring you a lot of knowledge, and when they ask you to viewing your business a different way from the way that you’re viewing it, listen. Listen really closely, because, A, you might need more money and if they bring in the money perspective, and the money perspective is asking that question, that means other money people will do that and so you want to know how to describe your business in a way that is appropriate for money people to hear.
We view our board as a focus group. Our board is some of the best investors on the planet, and if an idea that we have doesn’t fly with them, it’s probably not an idea that we’re going to be [00:41:00] able to get funded by anybody else, and as long as we choose to operate not profitably to grow faster than we can be self-funded for, we need outside money.
So, the board we have is a focus group for whether the ideas we have make sense in the sense of, are they fundable, but there’s another angle, not just are they fundable, but these guys, again, these people, men and women, have seen many business models and the questions they ask about money probably will give you a real insight into the operation of your own business and into whether you’re using your money wisely, so listen to what they say. They’re not there to make your life difficult. They’re there to actually try to build a business.
Raza: Make your board a valuable asset for your organization,
Stefania: And some of that is just your own attitude toward them.
Joe: It has been terrific speaking with you today. Great conversation. Thanks for joining us and thank you all for [00:42:00] listening to On Boards with our guest Stefania Mallett.
Stefania: Thanks for having me.
Raza: Please visit our website at OnBoardsPodcast.com. That’s OnBoardsPodcast.Com. We’d love to hear your comments, suggestions, and feedback. And if you’re not already a subscriber, please be sure to subscribe at Apple Podcasts, Spotify, or wherever you get your podcast and remember to leave us a five-star review.
Joe: Please stay safe. Take care of yourselves, your families and your communities as best you can. And we hope you’ll tune in for the next episode of On Boards. Thanks.