Executive Sessions and Continuous Feedback

I’ve written about these two related but different topics before but I’ve been doing a lot of board meetings as we kick off 2019 and I am reminded of how important both are.

At the end of every board meeting, the board should meet alone with the CEO in an executive session, followed by a session without the CEO, followed by a session where at least one director, but possibly all of the directors, meet again with the CEO.

This requires a fair bit of time to do right. These three back to back sessions will easily take thirty minutes to do right and could take as much as an hour.

When a board meeting goes three or four hours, it is tempting to wrap when everyone has “hard stops” and punt on these executive sessions.

But that would be a big mistake.

CEOs need to know where the board stands on the meeting, the big issues, the team, the strategy, and most importantly the performance of the CEO. And CEOs need to know that in real time and all the time.

The big problems that I have run into with companies over the years often have to do with misalignment between a management team and the board, and most acutely misalignment between a CEO and the board.

A process by which the CEO gets real time, regular, in person feedback from the board will alleviate many of these issues. These can be hard conversations and they can be difficult for the CEO to understand and process. None of this is easy stuff. But when people know where they stand and can react to it, things go better. It is when people don’t know where they stand and are grasping for straws when things go most badly off the rails.

The executive session/feedback process is also used by audit committees to manage the relationships between the board, CFO, and external auditors. I have found that they are incredibly important in that setting too.

If you aren’t doing executive sessions with your board, start doing them. And if you do them, but you skimp on them frequently due to time issues, shorten your board meetings and protect your executive session time. These sessions need to come last and that makes protecting them challenging but I believe a board meeting without an executive session is a bad board meeting.


Comments (Archived):

  1. Richard

    Or just do the opposite of whatever SNAP does.

  2. karen_e

    There are 57 alumnae of my college registered so far for an evening session called Women on Boards in the fair city of Boston early next month. Registrants are asked to self-identify beforehand as to whether they’re board-curious, board-ready, etc. Anyone who reads avc.com regularly is BOARD-READY!

    1. LE

      Anyone who reads AVC.com regularly is BOARD-READY!I am guessing you are joking? The vast majority of people who read AVC aren’t even willing to say anything at all in the comments. How does that make someone ready to be on a board of all things.Also I think experience in business (or in life that relates to the company with a practical angle on the business (something you know about)) is much more important than any type of diversity (woman or otherwise). And the ability to commit time and effort and not be a figure head who is stretch thin.

      1. karen_e

        There are different ways to build skills among the under-represented groups that many firms want to fold into their business. Academic alumni groups can be one part of the puzzle, such as this LinkedIn Group: “The mission of Stanford Women on Boards is to increase the representation of Stanford alumnae on corporate and fiduciary boards; further develop the capabilities and influence of Stanford women already on boards; increase Stanford women’s readiness for board service and collaborate with students and young professionals on career paths to board service.” And collecting relevant articles from avc.com plus key comments is another.

      2. creative group

        LE:It is difficult to assess who is board ready on this blog. We can agree the majority of contributors who are influencers, business owners, working at VC’s and Engineers to list a few who comment show an ability to seat on a board and should be able to get up to speed.If Chelsea Clinton can be appointed a board member can we agree many AVC contributors can be trained to be seated on a board. All board of Directors and the companies they serve are not equal.If we review the boards of Enron, Lincoln Savings and Loan, WorldCom, Arthur Anderson , Bear Sterns, Lehman Brothers there was no cause for alarm not to appoint the majority but they were ineffective and incompetent.Captain Obvious!#UNEQUIVOCALLYUNAPOLOGETICALLYINDEPENDENT

  3. LE

    To do it right it seems like would take a nice amount of energy (and energy is not always available) on the part of all of those involved. I am wondering how these are scheduled and even the time of day and day of week and so on. I can see how that might greatly impact the results given that people are people and have weaknesses. They are more wide awake and engaged depending on the time of day, sleep and the topic being discussed. I wonder the impact of those factors.With this:At the end of every board meeting, the board should meet alone with the CEO in an executive session, followed by a session without the CEO, followed by a session where at least one director, but possibly all of the directors, meet again with the CEO.So it’s clear that the idea is ‘we talk about you behind your back’ and then one of us tells you what we (as a group) think about what you are doing. Regardless of whether all of us are there (have the time or not) we will protect the directors so you don’t know who is saying what (even though you might be able to figure it out).What about a new twist? What about CEO views meeting of board by camera in another room? So he can’t interrupt and but he gets to see what is being discussed. The board is frank but somewhat restrained. The upside is it makes rumors harder to fly and communications more direct. I can see whereby some directors might (if behind closed doors) try to float something and then pin it on someone else as the culprit. Or issues not being presented with the correct nuance. That is often important people to people. Actually it is always important.Also with this method there is no chance of the director who comes back in the room mistaking the board position or slanting it.And the CEO can then reply directly from his notes (but not interrupt) and not be ambushed.

    1. Susan Rubinsky

      The board I’m on takes a different tack. Most of us talk about challenges outside of board meetings then selects one board member to meet separately with the CEO to discuss, usually in an informal setting — out for coffee, etc. Usually, I’m the board member who takes on this role because I’m the one who is best at persuading him to listen and to consider appropriate actions. But, of course, this is an almost all-volunteer non-profit I’m talking about (only the CEO is paid). I do agree with Fred that executive sessions are necessary and vital to organizational stability.

      1. LE

        Usually, I’m the board member who takes on this role because I’m the one who is best at persuading him to listen and to consider appropriate actions.Key to selling is getting someone to at first listen to what you are saying. So if that is you (not others) then that is the smart way to go. Sending someone else, same words from someone elses mouth, not same impact. I think this is one of those things that people don’t always realize about human interactions. One of the things you discover as you get older.But, of course, this is an almost all-volunteer non-profitPeople are people same themes same positives and negatives. Generally. So by what I am saying above most likely you’d be good at this in another context. I also say this based on even how you format and write your comments here and elsewhere.

        1. Susan Rubinsky

          Yes, you are right on target with the selling/listening aspect. It is totally about emotion/human interaction.

  4. PhilipSugar

    I too like LE first thought is it breaks my cardinal rule if you have a problem with somebody bring it to them too their face. I watched this kind of politics really be a cancer in a company….don’t you think Phil is x ……it’s much easier for the other person to acquiesce to character assassination if the other person isn’t in the room. Coalitions to start, etc.That being said we aren’t in a day to day working situation.and we might be talking not about the person but about the company. And when you do it with management and are evaluating talent you don’t always have everybody in the room.Also you are briefing the person afterwords.Mixed feelings. My quid pro would be ok, but given non dire circumstances this is the only time and place.

    1. TeddyBeingTeddy

      How much of a CEOs time, excluding fundraising, do you think is appropriate to prep for, participate in, and follow up on board meetings?

      1. PhilipSugar

        It’s not just the CEO it’s the staff. But let’s just say CEO. One day preparing (with staff), One day prepping before meeting, One day at meeting, One day at follow up. Now if you do 4 time a year, that’s about 5% of time. 6 times a year that’s 10%. And for all that time add staff, Sales, Finance, etc. Now much of that work (budgets analysis) etc needs to be done anyway, so half that,

        1. TeddyBeingTeddy

          I appreciate the quantified answer, thanks! Wouldve assumed much more time, especially from younger CEOs likely afraid of a high maintenance board

          1. PhilipSugar

            You know in my experience it is the opposite. I’ve seen big company board presentations that must have taken weeks to put together. I mean I’m talking custom video production etc. It’s an interesting dynamic.I’ve seen people prepare literally for two days for a one hour talk. Now this seems ridiculous but when you think about it if you are talking in front of 2,000 people there are no interactions and everything you say reaches 2,000 people versus riffing in front of 20.

  5. cavepainting

    The effectiveness of board meetings is really a function of the openness on both sides (especially the CEO) to share information and feedback without twist or spin. If there is lack of trust, most board meetings are tantamount to being BS as you are not dealing with facts or reality.Especially in early stage cos, it is hard to know if the company is making meaningful progress unless the board is interested, curious, and willing to dig into details. Many early stage situations are nebulous and fuzzy and something can be made to look great when it actually is not.An alternative (or) supplement to once-a-quarter board meetings is to provide investors real time access to key company metrics (pipeline, traffic, usage, retention, etc.). Sustained engagement is the best way to learn about a business. It also makes it more likely that there is core convergence on the facts of the business.

    1. fredwilson

      I agree strongly with your opening line

    2. PhilipSugar

      I agree completely but it has to be a two way street. This is a really important point. I’ve seen board members when confronted with reality, immediately go to the blame game.

  6. William Gilroy

    Fred could you elaborate on how this works with the audit committee?

  7. Thierry Ascarez

    Hi Fred, how does that executive session work? Is there a specific agenda? How many times a year do you recommend to have board meeting hence executive session? Thank you

  8. sigmaalgebra

    I’d guess that what Fred wrote could result in a wide range of BoD activity from helpful to okay and harmless down to disastrous for the company.Yes, all other things being equal, “feedback” is good.BUT: What is described, e.g., “continuous feedback” with the hints of a lot intensity, stand to be scary for the CEO and the company. So much attention to review, discussing, and “feedback” risks replacing the CEO with what is usually a disaster, i.e., management by committee, i.e., the BoD with the CEO a puppet on strings from a poorly informed BoD.I know: I know; the CEO should devote the time, effort, attention, time away from running the company, lost sleep, etc. for such interactions with the BoD. Of course he/she should: After all, 90% of the job of the CEO is raising money.But also 90% of the job is each of selling as in ABC, always be selling, managing the people, finding and executing the company vision, getting everyone excited and pulling together as a team, pleasing all the stakeholders, and recruiting for the people needed for the growth of the company. And another 90% is to keep down gossip, goal subordination, cliques, fractured loyalties, internal battles, arrogance, inward directedness, formality over reality, etc.To me, by analogy, the BoD is flying over the company at about 50,000 feet up. If they can see a wildfire down there, okay, respond.But, innovation can help a company, and on that I’ve noticed something: Innovate for a few months, get some depth, hopefully technical depth, that is, technical where can have some confidence in correctness, and then start to explain to others, starting at 50,000 feet up and working down.Observation: For some tens of thousands of feet down, lots of people will leap to make guesses at the answer; the better answers will cluster together at about 20,000 feet and still be a long way from the real plans from the real work. The common problem is the people (1) have not been very close to deep thinking and (2) think as far as they can quickly, come to an end, and guess that the end they see is all there can be.War Story: FedEx needed its airplanes to rendezvous at the central hub sort twice a day.A BoD Member with a background from American Airlines (AA) took some concerns from the struggles of making AA connecting flights work to concluding that for the planned growth FedEx couldn’t work. As a result, others on the BoD were concerned, funding was blocked, and the company was at risk.The fundamental problem was just that the former AA guy was, to put it delicately, bonkers, brain-dead, wack-o, like saying that the Model T couldn’t work because there were no provisions for hitching up horses.So, I wrote some software that saved the company: The software reported a finely detailed schedule for the full planned fleet. Two technical guys from Board Member General Dynamics went over the schedule in detail and announced “It’s a little tight in a few places but it’s flyable.”.The BoD AA guy shut up.Founder F. Smith said that the schedule work solved the most important problem facing the company.Really, net, the company would have been much better off if the AA guy had just slept through the BoD meetings. Also good would have been if the rest of the BoD had not been so timid and, instead, had been just taking what the AA guy said with a shovel full of salt.My software was helpful, but really the company blew it again, and the BoD, Smith, and the rest of the company didn’t have even a weak little hollow hint of a tiny clue: Getting a schedule that would do the work was not very difficult. Quite difficult was getting a schedule that didn’t waste for no good reason about 10% of aircraft Opex. That 10% of Opex was big bucks in nearly every sense.I saw this point. No one on the BoD did.Eventually AA did good work on such things, but at the time at FedEx the BoD was (A) making childish mistakes on simple issues and (B) being totally hopeless on major issues. More generally, their problem was that they tried to take a view from 50,000 feet and, then, act at the level down on the ground.Yes, there is a need for BoDs, e.g., from 50,000 feet up seeing wild fires on the ground.But from what I’ve seen, first hand and indirectly, of BoDs, they do more harm than good. The main reasons are (1) they just don’t know enough about the details of the business and (2) they are essentially hopeless at seeing with any useful accuracy possibilities for leading edge innovation.For (1)-(2) the CEO, C-level people, and the best staff people could give educational sessions to the BoD Members, but that would take a lot of time and effort for everyone, usually is not done, and for a startup is too expensive in time, effort, hours, and money.For me, I’d be just terrified to have to report to a BoD. The crucial core technical ideas of my startup are well beyond essentially all the Sand Hill Road culture and any BoD from there. That situation is part of my technological advantage, barrier to entry, crucial intellectual property, secret sauce, etc. And, essentially by design, there’s no way a Sand Hill Road BoD could ever evaluate that technology or understand an evaluation by others.If my startup becomes really successful and, horrors, becomes a C corporation, then I’ll have to have a staff team that works full time doing care and feeding of the BoD and also some close, trusted advisors that help me with a strategy basically to keep the BoD asleep and no threat to the company.Trying to run a Michelin 5 star restaurant and have a lot of self-taught cooks whose best work is some charcoal broiled hamburger wandering round in the kitchen advising on the seasoning in the beef stock.

  9. Pointsandfigures

    Yup. What he said is exactly right. I feel that public corporate ought to do this as well if they don’t already.

  10. Dan Epstein

    Fred, do you follow similar practices for non-profits where you serve as a Director? If not, could you elaborate on the differences?

  11. Dan T

    There is no ONE best way to do this, obviously, it all depends on the company, the CEO, the executive team and directors. I went through this twice – with VC’s – raising, building, exiting. Different groups/situations each time. The one that worked the best for ME (as the CEO) was when our investor group LEAD (the guy that could speak for the majority of investors across the coalition) would stay in touch more regularly and do what was described above in Executive Sessions – – I would have hated the Exec Sessions with the full board . . would have been very frustrating for all parties and waste of very valuable time.