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How To Manage Up and Have A Happy Board -- Even When You Miss A Quarter

Aaref Hilaly

Originally published by Aaref Hilaly on LinkedIn: How To Manage Up and Have A Happy Board -- Even When You Miss A Quarter

Earlier this month, I spoke at SaaStr, which is by far the most relevant conference for any early stage enterprise app company. Before joining Sequoia, I was CEO of a SaaS company (Clearwell) that grew to $100m in ARR and was profitable. But for most of my company’s life, we didn’t feel successful — we felt balanced on a knife’s edge, about to fail at any moment. So I wanted to talk about how to lead through the tough times, of which there were many, and Jason Lemkin helpfully provided a title for my talk (above). The main points are summarized below: 

We all know that bad things happen to good people: cars crash, cats die, elections produce unexpected outcomes. In the context of your business, one of the worst things that can happen is missing a quarter. That’s because when you miss, people question their commitment to the cause. “Will this business succeed?”, "Does our CEO know what she is doing?" These kinds of questions creep into the minds of employees and sometimes board members. 

This talk is a survival guide for what to do when that happens. There are four lessons, and several pitfalls to avoid. The first two lessons are things you can do today, before you miss. 

Lesson #1: Do not "manage" the board

I know this talk is called “how to manage the board”, but that’s a completely wrong approach. Instead, you should engage them. I learned this the hard way in my first ever board meeting with Mike Moritz, who was incredibly kind in getting us focused on the right issues when I had no idea how to work with a board. [There’s a funny story as to how, which I’m happy to share if we meet]. 

Remember the board meeting is for you, not for investors. Use it as a forcing function to look up from the day to day and think big picture about where you are going. Talk about what’s on your mind — it’s probably the most important thing. 

Lesson #2: Product over metrics

Engaging your board is not enough; how you engage them is also important. The best approach is to focus on product over metrics. This is not always obvious because investors love metrics (just look at how many talks at SaaStr are full of LTVs, CACs, paybacks, quick ratios, etc) and SaaS companies can easily be understood and compared through the numbers. So boards often fall into a trap: they lose sight of what you are building, why it matters, and how you will win. Don't let that happen, because if all people know are the numbers, then when those numbers stop moving up and to the right, they panic. 

To avoid that, focus on product in your board meetings. Beyond that, train your board so they understand your business: make sure all your board members can explain in 3 sentences what you do, why it's better than the competition, and how you will win an important market. That gives them a compass to navigate the numbers and keeps them grounded. 

These are both things you can do now, well before you miss a quarter. But even if you do these, you will still miss. You will still have that terrible meeting, where you walk in with your stomach in knots. You will feel like you have screwed up, let everyone down, promised results that you did not deliver. You’ll be questioning everything, but at the same time know that people expect you to have the answers. What do you do? 

Common Pitfalls

Here’s what you don’t do. Don’t say: 

  • "we missed but everything else is great" (denial)
  • "we missed, but if we keep doing exactly the same things, we will exceed next quarter" (hope)
  • "we missed, we are screwed, it's hopeless" (doom & gloom)
  • or the most common response: "we missed, but if we just fix this one thing [usually, fire the sales guy], we'll be fine (silver bullet)

None of these are credible. They are just knee-jerk responses that make you look like you don’t know what you are doing. 

Lesson #3: Own the miss

What I have learned over the years is that a good board member has seen lots of companies miss lots of quarters. What matters more than the miss is your reaction — and you need to own it! You should be upset, to show that you get the importance. You should be hard on yourself, because the harder you are, the more the board will want to lift you. But you should also help the board process what happened. For example, is it a tactical issue or a structural one? Tactical would be you hired a bad sales rep; structural would be product issues causing churn, or increased competition, that will take longer to fix. 

At the meeting itself, you need to keep control. Send out materials in advance and tackle the miss head-on as the first agenda item. Be honest about what you and the team did wrong. Help the board process what happened by getting to root causes, no matter how unpleasant.

Lesson #4: Put the board to work

The reason you have a board is so that they can help you in tough times. Bring them into the process, and put them to work — not on demeaning tasks or busy-work, but on meaningful things that will help. Reasonable requests are things like: “It would be great to speak with 5 customers in the finance vertical to see if that’s a market we should pursue”, or “Can I get your help recruiting a VP Marketing?”, or “Walk through the product with me and let’s discuss how we could simplify the workflow”. 

People feel better when they are doing something to help. So prepare a list of things the board can do to help in advance of your board meeting.

Today, I’m on the other side of the table. Instead of being the entrepreneur, I am the board member showing up at board meetings hearing about the miss. What’s surprising is that I am often more bullish about a company after a miss than before. When founders do it right, the miss actually strengthens our relationship. That’s because any good investor knows that founders who show the grit and skill to lead their companies through the tough times are much, much more likely to succeed. 

Thanks to Seth Bindernagel, James Buckhouse, Omar Hamoui, Andrew Kovacs and Jess Lee for their feedback on this post.