Thanks, Steve. Happy to be here. Love what you're doing.
Thanks so much. We're very, very happy to have you here. And I actually wanted to do a interview specifically about boards, because I got a lot of feedback on the blog post that I wrote about the very same topic. And frankly, I'm not a particularly experienced board member. So I wanted to connect with you, given the depth and breadth of your experience as a board member, but also as an entrepreneur and CEO, which I think gives you a very unique perspective. And where I wanted to start is on the idea of constructing a board. The reason why I want to start there is because I know a lot of folks listening to this have questions about constructing a board.
And one of the reasons why is because very few people have ever done this before. And as a result, it's just a lot of questions. I remember I had a ton of questions myself when I was in a similar spot, I should say. So I'd like for our first few questions to revolve around the idea of constructing a board and maybe we can start with, you know, maybe just at a high level, what are some of the most important things that new or prospective CEOs should consider when selecting board members?
Steve, I love the topic, it's something I have a lot of passion for. And just to pound on the importance of it, if you polled CEOs, and they reflect back on their journey, I bet pretty heavy, this is going to be like a top three or four decision to get right. So what are you solving for, I think, table stakes and this is similar to larger companies. Boards are there to work with the CEO to set strategic priorities, provide governance, assess risk, and to make sure we got the right CEO, like full stop, those are important things. But what's really different in a search, is there's so much opportunity for collaboration, mentorship, and here's where I kind of punctuate most emphatically. Like, boards aren't meant to be endured, they're supposed to be a source of energy collaboration, nourishment, challenge.
I think you want a spirit of partnership, it doesn't mean they're going to be easy, and doesn't mean you don't have like, like intense spirited conversation. But again, it's a mentorship, model, deep collaboration is key. And you want to feel like you're in a safe place to do that. I'd also mentioned, if your search goes well, you evolve with the company through a couple of phases, the first one, you're just trying not to break anything you're getting into the business, you're embracing it, you're trying to extend things like really slowly. But if that goes right, and now you're building a platform, you're trying to get the operation humming, and then you get to scaling and growing. So you're going to have to grow as a young CEO, first time CEO, you're going to be growing pretty exponentially yourself.
So you want board members that can help you build muscle, that are great mentors that help you get there. So I guess the punch line, I'd say is highly credible and proven winners, they can be business builders, they can be investors or combination of both. And I think it usually helps to have a domain expert on the ticket. And then I think you want real deep engagement, like a blood oath that they're gonna be engaged, they're vested in your success. And I think cultural alignment is all fair. You want a real spirit of partnership.
How do you test for those things, Kent? Because I mean, those are all kind of laudable characteristics to pursue, I guess, as a young CEO, who might frankly be intimidated by some of their board members. Like how should a CEO test for some of those things? Is it as simple as having a couple of conversations or maybe a meal with prospective board members? What are some of the kind of tactical ways that a CEO can test for some of those characteristics?
I love the question. So some of these people, you probably got to know in your search, like trust yourself, those are valuable data points. But ask around, talk to other CEOs, look at some of the CEOs of the businesses that you really have deep respect for, maybe you want to emulate in reverse engineer. What were some of the key parts, what were some of the core wiring and get to the board part and ask like who really, really helped. I was on a healthcare board with Andrew Selltoo, and that's a name, some of you might know. And I wasn't in his search. So he was getting to know me. I had been CEO, we had a good vibe. I knew a thing or two about healthcare. And he still did 15 backchannel you know, 15 reference checks on me with other CEOs. So, he was taking the decision pretty darn serious. And I would encourage other CEOs to do that as well.
Yeah, that's a really important point I want to underscore. I mean, if you think about it, the ability of an entrepreneur to effectively hand select their group of coaches for what is likely the most important, ambitious, meaningful undertaking of their professional lives. If you think about it in a certain way, it's kind of a once in a lifetime opportunity, like in what other domain does one have the ability to hand select a group of coaches. And I often counsel entrepreneurs, this is a five to 10 year decision, like the decision that you make today could have repercussions for your next decade. So in light of that, you should give it its due respect. And, frankly, if it takes you a month longer to construct a board, because you're doing channel checks, then take a month longer, in my opinion.
Absolutely. It's that important. And that's the whole spirit of doing a search, it's a major risk. Steve, as you know, you get to pick the company, you get to run, you get to pick the industry, you get to be in, at some point, you get to form your own org chart. And I think a board is all part of it, in one of the bigger CEO decisions up front.
So let's get into some of the specific characteristics. And where I wanted to start is with industry experience, direct industry experience. So if a CEO is selecting their board members based on your experience, to what extent should they wait direct experience in the industry that they're in? You mentioned health care? So if I'm running a health care company, how important is it that I have board members who have experience in health care? If I'm running a software company, how important is it for me to optimize around software experience? So maybe you could just speak to that at a general level and maybe speak to instances where industry experience is really important, and if applicable instances where industry experiences may be less important?
Great question. So I don't have a view that every search fund board in every industry has to have a domain expert. I mean, it certainly probably never hurts. But if that becomes the main governor for the decision in and it jumps over, like cultural alignment, how to vibe in a board, how to be value added, how to work well with others, or just understanding how to build a business or being a great investor. I mean, sometimes it can go south. But where I do think it's most important, and where I've seen it work, like invaluably is when the industries are more complex, where there's a level of technical illness or specialization. And you happen to you happen to mention two of the ones where I've had the best experience. So healthcare has a crazy amount of acronyms and nuances and industry structure, things that are just so unique and different.
I had mentioned that that search fun business Integra before, I was the healthcare guy on that board for the first year. And we all soon realized that this complex payer system and the business that they were in was just over my head. So we courted a high level industry icon, somebody that had actually been a CEO that to that new business language, and he was incredibly valuable. I'm also on a software board, were being with some software CEOs that have scaled software businesses that know what a lead generation motion looks like, or how to incent direct sales force and knows all the nuances between enterprise sales versus middle market sales or what a product roadmap look like. I think that's been really, really valuable, too. So I think software like lends itself nicely to people that had software experience and had a similar experience and mental health as well. But again, like specialization, complexity level of technicalness, and sometimes when these industries are really relational, if you have somebody that's a real connector that can be real valuable too.
So if you're in a, I hate to say the word plain vanilla, because I guess no business and no industry would describe themselves as plain vanilla. But if you're in like a business process outsourcing firm or some sort of like B2B services type of context, you're saying it's perhaps slightly less important in that context. But if there is a lot of industry specialization, a lot of contexts and relationships to be navigated, then it would be more important to optimize around specific industry experience.
Yeah, I think the value add gets more punctuated but look, if you're buying into a PEO industry, and you can get Ben Godsey on your board, you should jump at it because you're getting industry and like a great business builder all in one. Or if you want to go in the mosquito termination business and [inaudible] want to sit on your board, that's, that's huge value added, even though that's technically kind of vanilla. But I think where it's most punctuated, is those specialty ones.
Let's talk about another thing that I see very frequently, which is the idea of a seller so in this case, a former CEO, often the founder Sitting on the board after closing, and usually that comes with some amount of rolled equity, not always, but usually. Anywhere between 10 to 20%, in my experience tends to be about average. So there's a bit of push and pull to this question. I mean, on one hand, it can be a very positive thing where business continuity is fortified, the new CEO gets to benefit from the experience of the old one. Those all sound like unambiguously good things. But there is a risk to this. And that risk is that the new CEO is much less comfortable speaking freely about the problems in the business and the changes that need to be made. Because the predecessor effectively created all those problems. So you also don't want to have an environment where the CEO doesn't feel comfortable speaking freely with their board member, or their board members, I should say. So what has your experience taught you about the merits and risks of having a seller sit on the board post close?
Steve, those are great points. And before I went on my first board, there were some really, really smart investors in the search fund world that I really looked up to and kind of weighed in everything they said very heavily. And they were of the opinion, just never do it. And so that resonated deeply. And yet, the first board I was ever on, the seller role, a material amount in was going to be a keyboard number and was kind of a non negotiable with the searchers. So I was skeptical. And now, 20 something boards later, I think my point of view would be point of fact, it's probably not going to work or the realizations not going to reach the promise that we all felt when we did it. But I would also say it's super situational. That first board I was on was like, there was a healthcare company called VRI. And Andy Shunova, and Chris Hendrickson, were the CEOs. Our sellers name was Darren Torrance.
And not only was he incredibly value added, I think he might have even been the MVP of the board meetings for the first year. His knowledge of the industry, the people he knew, how to define the service lines in our pace of growth. He knew his personnel really, really well. And you could talk radically candid and open with him. So there was a good cultural alignment. And it really, really worked. There was another software one that came along years later called M Tab with Alex Gilman, we had one of our sellers stay on and sit in every board meeting and I thought he was really value added. So there were times it got a little awkward. We had to terminate a legacy employee, we had to true up a working capital issue. We had reps and warranty stuff that came up, sometimes we had to recuse those sellers. And it was it was a tick, awkward, but everyone was professional about it. And we got a lot more out of it, value added wise than not. So I'll go back to just it's very situational. And I think it's tough to assess. But it can work really well.
So it sounds like on average, though there are exceptions, these types of arrangements are probably like guilty until proven innocent. If you're one of these CEOs, and let's say you have an equity role in your deal. And as part of that equity role, your seller kind of understandably, wants a board seat. I mean, this is a borderline unfair question. I'm almost hesitant to ask it, but like how do you know? Or can you know? Is it even possible to know are there questions to ask or thought exercises to go through to help inform the decision of whether or not to accommodate that request? Or is this just so situational and so personal and so unique? That you know, it isn't even really something that can be diligence?
All of the above. I don't think anybody has a perfect diagnostic, no one gets this decision, right? 10 out of 10, or at least no one I've met yet. But if you work through a process, can you have a 60 70% hit rate? Maybe, probably. And it can be really, really value added. And it might be how you get a deal done. So maybe if there's doubt or maybe to manage your risk, and maybe a put a duration or a time limit on the board seat, maybe you commit for six months or a year and every board member is going to get reevaluated. And if it's not working, you might have to let them go. And I've been in situations where we've had to do that and it's awkward and a bit disruptive, but you know better to have them off the board then have them on.
What about the concept of board members as investors. In your opinion, should every board member be an investor and why or why not?
I'm a fan. I think skin in the game is great for alignment. But I would also recognize even more important than the money is going to be their reputation and the time they spend on this. So go for the trifecta. I think get get get all three of those checkboxes and I think you get your best alignment and the best out of that board member.
I mean, so in my specific instance, you know, 10 years ago, we had a board of five, myself being one. And my board members were all investors. But we had one MTC that we purposely kept empty to attract and retain an external board member, what we eventually came to learn was that attracting highly reputable successful engaged board members was actually much harder than I originally thought. So can you just speak to some best practices around both attracting and retaining external board members, so non investors, in what you've learned over your your many years of governance experience in that specific regard?
Steve, I had read, this can be really hard. So a couple of samples are flashing through my mind to your point, I think it starts by the CEO and the board, really recognizing we have room for value added here. So to be thoughtful about it, to start to identify a candidate list that everybody's getting really excited about. And then having the CEO probably take the lead on courting the person, building a relationship, I mean, you're offering them, it's not just a chance to invest in a company, it's to be a mentor, work with a young, thriving CEO, be part of a community with other board members, come into the search world, be part of watching a great company grow, which a lot of people still get fantastic energy from. So the CEO starts all that and they're trying to really build the excitement about being a mentor being a partner.
And then I think board members can really lean in. A lot of our of our board members in our community are really well connected. They're fun people to be around, they're intelligent, they're smart about business, all that can be really energizing, that's a nice package. And then it doesn't hurt to bring them into guest lecture one of the MBA schools or have a meet on campus, just try to get them, you know, to show as great of an experience as possible. And then you might have to pay them off from some equity too. But I've always found that's kind of secondary.
That's interesting. So in your experience, would it be fair to say that when courting external, non investor board members, it's less of a financial proposition for the candidate and more of a proposition about engagement, involvement, and other more qualitative considerations?
Absolutely. I think being part of a great thing. And, you know, most of us never tire being part of like a great business building with intelligent conversation and really interesting people, and throw some mentorship into that, that's a pretty potent offering for somebody that I think extends way beyond money.
Where do you where do you land on this idea of it being valuable for a CEO to have an advisor or advisors outside of the board who might not be investors? And the reason why I asked that question is because I had somebody who did not sit on my board personally. And maybe just by virtue of that alone. In some instances, I felt like I could just have different types of conversations with him than I could with my board. So it was kind of done on purpose that he wasn't sitting on the board. What do you think about that idea? Is that something that CEOs should think about?
I think they should be really open to it. I mean, you know, this Steven, being a CEO, it's incredibly fulfilling, but it's incredibly hard, it's lonely. You can love it, but not like it every day. And it's really hard. You can't always show how you're feeling or what you're wrestling with your employees. And I think most CEOs feel like they can't be that open and transparent with their board or a board member. So I'd have somebody on the outside or even have a coach, I think is something every CEO should seriously consider. It's a personal choice. Most of the CEOs I know have something like that, or a formal coach, and the types of things you talk about and the types of situations. They're just not appropriate for a board meeting. And there might even be a conflict.
On the other hand, sometimes, and maybe this breaks a little bit of like a good board governance process. But sometimes one of the board members starts to serve that role, and it's a safe place to just talk and be vulnerable and say, I don't know and there's a lot of discussions in between board meetings and that can serve the role too. I think the most important thing is just trust yourself, I think it's really relevant to talk to some of your peers and see where they're getting good nourishment, energy, and just trust yourself on the decision.
So as we conclude this section around the concept of constructing a board, the other question that I want to ask is more specific to the board member than it is to the CEO. But obviously, this is this is going to be an important consideration for the CEO. And that question is, how many is too many boards for a given person to sit on at any one time, because on one hand, CEOs presumably value a lot of board experience and governance experience. That's kind of a wonderful thing, for obvious reasons. But if it comes at the expense of that board member being spread very thin, and as a result, their ability to help them then then presumably, it's less of a good thing. So I don't know if it's a specific number I'm looking for, but maybe you can I just speak generally, like, how many is too many boards for one person?
Yeah, I think it's a great question. I don't know if I have a perfect answer. And I might even be one of the ones that pushes the maximum and even breaks the rules a little bit. But I will say, when I reflect back, there's been times I've been on two boards, there has been times I've been on 12 boards. And if you took Yelp reviews from the CEOs of the other board members, I'm not sure there would have been a difference. So I'm not sure that alone, is the governor or the answer? I think there's a lot of factors that weigh in, the experience of the board member, the fact pattern they have, you know, competing priorities, like there's some board members out there that they're just managing their own money.
There's not any administrative things, like distracting them, they don't have LPs that they're not managing have fun, not that that's good or bad. It's just another body, it's just another motion of time. And some of it depends on the CEO and who the other board members are. A lot of my early boards, I was on with Bill Egan, who's, you know, a big legendary name in our community. And we love this stuff. We had somewhat complementary skill sets. But a lot of the fun conversations would turn into late nights or weekends. And it just seemed like I had unbounded capacity with a board member like that. And I think that played into it. So I think a lot of it's situational. But I do think it's the right question to ask for a CEO, you want to make sure you're getting engagement, that's where the gold is.
Yeah. Now, you know, we've touched on this a few times already. So I want to touch on it directly. And this was something that I struggled with a lot in my first, at least my first year, maybe even my first two years, which is that for new CEOs reporting into a board for the first time, or maybe their prospective CEOs about to report into a board for the first time. They might be honestly kind of fearful of their board. I mean, I certainly was, even though my board was composed of thoughtful, engaged, helpful, genuinely nice people, they did all the right things. I guess I just kind of viewed them as my boss, as opposed to my coaches. And frankly, like, I'm a bit embarrassed to say this, but I'll say it, because almost certainly other people are thinking it. Honestly, my first four board meetings, I was pretty convinced I was going to be fired in advance of each of those first four board meetings. So because I felt it, I presume others are feeling something similar. What do you say to those CEOs who might be feeling something similar?
Yeah, so first I can relate, I was pretty high strung as a young CEO. And I literally came to work every day just justifying I deserve to be the CEO. So the the amount of pressure I put on myself just internally was was pretty high level. And I would also say like I feel for you, if you felt that way, I don't think that's ideal design. I think fear is not the best center of gravity, and it's incredibly draining. So I and I know there are others that feel that way too. So I think what's better design, or at least the spirit, the direction I'd love to see other CEOs take is boardmembers, you know, they're your partners, they're your collaborators, they're your mentors. They do have to assess whether you're the right person or not. But they're not meant to be endured. They're supposed to be a source of energy for collaboration, nourishment, taking on challenges together.
I think there's really supposed to be a spirit of partnership. And again, as I just talked about earlier, this is a mentorship model. So It's supposed to be a safe place, you should be able to talk, you should be vulnerable. You should be able to ask any kind of questions you should be able to say, I don't know. But I would also say there is a price of admission. And that's like an intense thirst to learn. To want to make your business better, to have a healthy sense of urgency, not an erotic one, to be humbled to be respectful, but not fear. And I also say, and this isn't always easy, like, always be transparent. Never lie, be a good business analyst, good, bad, ugly, be transparent with your board, and then work your butt off, like that's probably like, my only pet peeve is just to try your very hardest. And if you're doing those things, then that fear it kind of hurts to even to know people are feeling that way. It's really counterproductive.
Yeah. Is there something that like, the proverbial good board member would do, let's say early on in the relationship with the CEO? We're just gonna lay that foundation and set the expectation that, you know, hey, this is a, this is a psychologically safe place where we encourage you to be vulnerable. Other than just straight up saying it, are there things that like a, quote, good board member would do to just kind of like, establish that as the prevailing context of the relationship?
I don't know if I have a magic answer, but I can think of some samples where, you know, I was on a board and I sensed that the level of angst or even fear was, like, getting very unproductive and that may have meant like going and getting an ice cream after a board meeting. And this really happened one time. And this CEO was just like, like terrified about, like, not being able to present a budget to a board that he had deep respect for. And to the point where I was really impacting, like, how he ate undigested food and sleep patterns. And so that was getting an ice cream sitting in a park and like, we're in this together. So, you know, it could be a walk, it could be a one on one, it could be inviting the CEO out, and just spending a day together, but deepening the connection and just personalizing it. And let's kind of reset the aperture here. And we're here to support and collaborate with you, not the other way around. We're not here to dictate to you know, however you get that point across, but I think it's really important.
Yeah, I agree, the personal relationship is easy to overlook, but one would do so at their peril. So, you know, as I reflect on my own experience, reporting to a board, I almost kind of have to chuckle at the content of the discussion, the depth of the discussion, even the materials that I presented in like my first year or so. Because when I contrast those things with the content, the discussion, the materials in years, five, six, and seven, I mean, they're completely different. So for those CEOs who are new to reporting to a board, maybe those who have never reported to a board before, can you just speak to what our board members looking for, or expecting in those first, like 1, 2, 3, or four meetings?
Because I remember my first slide deck was like, 90 slides, my last slide deck in year seven was like fifteens. There's a natural evolution. But I think that 90 slides was honestly underlined by some sense of insecurity, which is like, I don't really know what these people expect of me, I don't really know what they want to see, I'm just going to throw everything including the kitchen sink at them. So they can't possibly say that I didn't tell them what they should have been told. So what are board members actually expecting in those first one to four meetings?
What a great question. And you'll have to send me that 90 page deck, that'll be interesting to read through. So I think like everybody's in learning mode, so I'm always most impressed when the CEOs learning, we're learning with him, things are thoughtful and framed and there's a lot of key questions, observations. There's a motion to learn the processes and the people and how things work and how the company makes money and but I think structurally too, just, I don't think it needs to be 90 pages, but getting a deck out with relevant data, at least a couple days ahead. Some board members have a chance to just digest it and read it and try to come prepared. Maybe in the early going, talking to each board member, even if it's 1520 minutes before the board meeting, just kind of pre wiring like where's your head's at?
You know, taking a pulse on what kind of mindset they're coming into the meeting with. Maybe you start that deck with just just a one page State of the Union with bad news first. I think the financial reporting can be short and crisp, the reporting part of the conversation, like, keep it 30 to 40 minutes, tops, and key events, some financials. And then leave space for the two or three kind of media discussion topics that you've prioritized, the CEOs prioritized, and they're really trying to get their arms around, and maybe the way that conversation on PACs is 60%, CEO, 40% investors, but it's a real discussion. It's not just like a monologue or all, like one way speak, CEO to investors, and maybe you're talking about how to approach new pricing at a software company that happens in our first year.
Or maybe, you know, we're looking at our org chart, and we're talking about how to hire the first like C level person that company's ever had, or we're looking at old, you know, incentive structures that don't make any sense. And maybe that's the second or third board meeting, and we're just having real discussion about it. And you're seeing a CEO learn. Now, all that being said, I think it's okay to be a little innovative too, there were Barton, Matt Howard searchers that I get to work with they were CEOs of a company called Healthmark. And it was pretty fascinating in those early board meetings, they went to great lengths to provide a deck and appendices that were really dense and information. It wasn't 90 pages, Steve, but it was pretty darn dense, and very thoughtful.
And this was a page out of the Amazon playbook. They go over the financials the night before it dinner. And then on the day of the board meeting, you come in, it was expected you read everything. And they would start by saying so what would you like to talk about? Pretty provocative. So you know, the burden was on the board member to come and learn with them and prioritize where they had the most thirsting curiosity. So have some fun with this. It is about learning. It's about building a business together. And I think you're trying to capture that.
I love that last point. Because one of the things that I did, I don't know if wrong is the right word. But one of the things that certainly changed my latter years versus my former years is first couple board meetings, like I basically just did a page flip of the deck. And I think what I failed to appreciate is that, in advance of the meeting, every board member had already read through it carefully. So I was just really kind of repeating myself. You know, by the time we were at the end, I followed an approach that closely resembled the one that you just articulated, which is not in so many words, but effectively I said, all right, we've all read the deck, you know, who's got questions, what do we want to talk about? And I found that those just led to much, much better discussions.
Well, you and most of us did the same thing. And it's just, it's a lot more enriching to just learn together. And that's what that first year is all about. It's about embracing the business, learning everything you can. I think that's a more effective way to do it. And we all did it. As opposed to that year 5, 6, 7, where now you're scaling and growing, and the conversations in the deck just look completely different.
Yep. Yep. So one of the ways that we can understand a good board is actually by thinking about a quote, bad board. So bad is a bit of a intellectually lazy word, let's call them unproductive, unhealthy, dysfunctional, non supportive, you know, whatever adjective you want to use. I guess my question to you is, have you been on any of these types of boards and to any common themes or generalizable lessons emerge from those experiences?
Yep, I had that and on two threads. So one, I had commented on structure and process, so like to not do those things, to have a board meeting where the materials are incomplete, their sentence late, you know, there's not a transparency to the data in the bad things. It's a lot of one way reporting, there's not really discussion. And maybe there's not even an attentiveness to the energy level or the or the time management and a board meeting, you know, the structurally process wise, or maybe you have a board member that'a a know at all or they haven't come prepared or they're there on their computer. reading the New York Times halfway through the board meeting, like those are all things that bring down the quality of a board meeting. But I would say even more important than that, and I think this is where the secret sauce is.
What makes great meetings and great boards, I mean, it's the human element. It's not structure, it's social. So I found the most involved diligent value, adding boards, they might not even follow all the recommendations out of the good governance handbook. I mean, they might not even do minutes as religiously as they're supposed to, and I'm gonna get myself in trouble by making comments like that, but the point I'm trying to make is, they're more like robust, effective social systems. There's like this nice cycle of respect, trust and candor, that somehow has got, like, captured into the wiring of the board and the CEO. And there's trust, and you can talk, and information is flowing smoothly, and people are looking forward to the meetings, and they're energizing, and your talking business, and you're grappling with the problems together. And there's even open to send.
So Steve, there's a CEO, you know Remis and Steve Laube, up in Toronto, and I was lucky to be on their board. And I mean, they were curious and intense. And it can be pretty animated some of those conversations. But it was fun. And it was energizing and super memorable. And I thought they harnessed the best work out of their board members, there was great rhythm, and you certainly weren't indifferent to the challenges they were grappling with. But again, it was all about the social part. So I think that that's where the magic is, that's what you're trying to capture.
You mentioned bad news a couple of times. So that that actually brought to mind a question, which is, how and when should CEOs communicate bad news to their boards, maybe a big customers left, maybe an important employee has quit? I mean, whatever the flavor of the bad news. In your experience, presumably, you've seen good examples of how and when to share this and perhaps you've experienced bad examples. Can you just kind of talk us through how CEO should think about that?
Yeah, a couple of things went through my mind. So when I was a CEO, I used to kind of score the the gravity of the issues in front of me on a one, two or three scale where threes were the biggies. So if I had bad news, and it was a three or a three minus, I think communicating that right away is important. So an example, this didn't happen to me, but I was then on the other side of this software company is growing at 40% a year. So high velocity, high growth, we're adding tons of new onboarding, tons of new people into a company. And we talk about culture, culture, culture, but you got to be genuine about that. It wasn't just a budge, a buzzword or a punch line. And they have a holiday party and head of sales, gets drunk and punches somebody in product breaks their nose. What do you do? That's the two in the morning phone call. So that's the kind of thing to in the morning.
It's a level three, got to talk about it with a board member and you make a decision. How are we you know, 40% book of business, the salesperson is carrying, but we've talked about culture, like what do we do here? Those are immediate things. But I would also say, I've been on boards with some of the board members, or they're so emphatic about all the bad news first, that I actually think it's a little bit imbalanced. You know, I'd like an opening statement at a board meeting, you know, maybe there's a State of the Union right up front. And I think it should have the right balance that matches what the business is going through. If you had five good things happen. And one, maybe level one or two, not good thing happen, it's okay to put them on the same page. Like you can shout out the good things first, but just make sure that we know what the bad news is, and that you're prioritizing it right. So those are the things that come first in my mond.
And I think it's important for CEOs to understand that there's always going to be something bad happening. I mean, that's the nature of leadership. That's the nature of being a CEO is that at any given time, you've got presumably several, you know, quote unquote, bad things happening. I think that the art and or the science is determining what's a level three, what's a level two and what's a level one? In my experience is the same as you know, as best as you can tell if you have a level three, early and often and open. I mean, there just can't be anything wrong with that. I mean, there's no downside to doing There's only downside if you withhold information or take too long to report it. So I would certainly encourage CEOs, if you think you've got a level three, early, often and open and there should be no negative repercussions for you doing so.
Steve, I think you hit on something else real important in I like to think that my report and vibe with the CEOs has been very positive and genuine. I'm super proud about that. And if I reflect back, or the feedback that you've given me, when we talk about the real meaty issues, the yucky stuff, the mess ups, the level threes, we can have real conversations. And I might even say a smart thing or two, but it was usually grounded in I pretty much messed that up myself. That's not false modesty, like I've really messed that up. Here's how I worked out of it. And I learned a thing or two along the way, can I share it with you, you might not have the same scar that I have. That resonates a lot better than no one else that seemed to have done everything perfectly. Because we all know that that just doesn't happen.
Of course. Actually, you just prompted another question that was somewhat emergent, just based on your answer this concept of feedback, which I think is a really interesting one. Because when I was reporting to my board, at the end of every board meeting, I would kind of excuse myself for 10 minutes or so. And then I'd come back into the room and the board would give me feedback, which was always helpful, right? So I think we can probably safely chalk that up to good governance practice. What about feedback the other way, which is to say feedback from the CEO to the board members? Where do you stand on that as an idea, is that something that happens or doesn't happen in your experience, something that can be done effectively, or fumbled? If you could just maybe talk to us about feedback, kind of go in the other direction?
I love it, I think it should be an open line of communication. I like the executive sessions that you just mentioned. And I think 360 feedback facilitated by maybe an independent third party, both ways can be really, really effective. So I think it's great for CEOs to have it done on themselves where the people being interviewed or board members, people they work with even even your debt lender, but to have boards evaluated and to get feedback, I think it's a pretty interesting, provocative idea. There's a CEO at a mental health company, his name's Alex Stavros, he was very big on that. And I'm not sure we always followed it to the tee as a board as much as he would have liked. But it was a great idea. But whether it was formal like that, or even offline, I was, you know, as a board, as a proud board member of that company, I would thirst for his feedback, like, where was I helping?
What was my tone? Like? It helped me become a better business person. So I think I think it's a great idea. And it's a little unnatural for a CEO, right, like, in a way feeling any kind of fear. Or you feel like these are kind of your bosses, I don't think it should feel that way back to the earlier conversations that we had. I don't think that's great design. But it does take a little bit of gumption, to want to have an ideal board. And I think it is on the CEO to make it happen. But it's not easy. I think it's a great idea, though.
Let's jump to the perspective of the investor or the board member, I should say, how much time or space or autonomy do you think board members should give to CEOs? And the reason why I asked this question is because like most things in life, presumably that there's a balance that need to be struck, that needs to be struck, I should say. Because, like, on one hand, a good board member, they want to be available, they want to be engaged, they want to be helpful. But on the other hand, if they kind of overdo that, they might be seen as overbearing, they might be seen as like looking over the CEO shoulder, they certainly don't want to come off that way. So I mean, how do you strike the balance between being engaged, but not being heavy handed for lack of a better way to put it?
It's such a great question, I think, where a board member can go wrong, is when it's a one size fit all approach. So I think the best board members, in however way they're diagnosing this, they're kind of assessing where the CEOs at, let's say you're measuring a CEO and on the abilities, you're seeing it on their motivation. And if they're high ability, high motivation, I think you want to flex your board style to being you know, very reactive, very delegatory, how can I help you what barriers can I remove, but you really want to give them space to go crush it. And on the other end, if they're showing low abilities in medium or low motivation I think it's really responsible for a board, especially representing all the investors to be more directive. That the questions get sharper, it's really the board members responsibility to dig in.
And that directive style, while unnatural and uncomfortable is warranted, it may even lead to the CEO not working out. But 80 to 85% of the seals are somewhere in the middle. And then I think, being overly directives like negative, it's negative energy, you want to be collaborative, you want to be supportive, you want to be willing to lean in and even guide the CEO to help them get to a better place. And support and collaboration takes a lot of energy. And there's got to be a right tone, and it takes patience, and it's got to be a safe place to talk. So that's hard. I mean, all of us board members, you know, could probably use some lessons in some development workshops on on how to get that tone right. But what a great question.
I mean, as a board member, I have to imagine that you've probably had instances in which you've kind of wanted to jump out of your seat and just yell the answer. Right. So for example, you know, one of the things that I think most CEOs struggle with early is the concept of firing. And specifically, the mistake that's most frequently kind of witnessed, certainly one that I experienced many times it's taken too long to fire somebody who clearly needs to be fired. Yeah, I have to imagine there are instances as a board member where you give the CEO rope. But there's probably a party that wants to like stand on the desk and just scream just fire this person already. Can you just talk to, especially as a former CEO, do you ever experience you know, I don't know frustrations, the right word, but I guess I'll use it because I can't think of a better one. Do you ever experience like a certain level of frustration where you want to be more directive, but you just don't think that's the right thing to do in that circumstance?
Well, you're triggering a couple of thoughts. So one, and this probably happens too much. For those of us and Steve, you, too, like, when we've been a CEO before, they're in and now you're working with a search CEO and a business you like, and you're excited, and you've personalize it, and you're committed to being engaged. So this has become like something you're very committed to, it can be our natural bias to want to lean in, we can't help ourselves, and then we got to remember, it's their show, right? We're there if they're doing a good or great job, we engage when we're invited. So that you have to resist that natural tendency to just jump up and have that and I have certainly had my moments and I'm not the most patient person by nature. So that's taken some like reflection and learning along the way. So I think you have something there.
As we conclude the conversation, I'll just kind of open the floor for you. Though I recognize this as totally putting you on the spot. Is there anything that we didn't say today that you think we ought to have said, anything that you want to say to the prospective CEOs out there who haven't reported to a board or constructing a board, might be fearful of both of those things, anything that was unsaid from our conversation today?
No, but I might take the moment to triple punctuate this is a really, really important decision. It's the CEOs responsibility, like, don't fall into it, even when it's well intended. The lead investor is pushing for this board member for all the right reasons, and even doing so respectfully or you have other kinds of forces, like, pushing you to making a decision. Think independently, this is really important for your development, and the things you learn from the right board and they may last for 20, 25 years. So I'm not trying to over romance it or over dramatize it. But I think it's really that important and think independently, make the right decision, and do what's best for you and your business.
That is a great place. I think that's a great place for us to stop. Kent, thank you so much for joining us today. We really, really appreciate you taking the time to allow us to benefit from your experience.
Steve, my pleasure. I'm a big fan. Thank you so much.
