Building value in growth companies thru Boardrooms

Jussi Lystimäki Partner, Boardman Ltd CEO, Schibsted Classified Media, Finland

Slush13 - 13.11.2013

My background is in growth companies and internet

One of the global top10 in digital UX and service design. Deloitte FAST 500 EMEA 2008, 50% California, 50% Finland, 90 people

IT developers for online banking, Telco and transactions, 70+ people, Exit to Ixonos Plc 2007 (OMX), Deloitte FAST 500 EMEA 2006

One of the global #10 in BI market intelligence. More than 150 people, over 100 countries, VC-backed (Capman, 3i)

Early stage and incubation – Internet/mobile tech driven FIN, ISR, GER, UK, CHINA, US, listed on London AIM-list, market cap 200mil euro. Exit 2002.

One of the top media groups, Mcap 5+bn euro, in top-3 in global online classifieds. Listed in Oslo. Organic growth + M&A transformation, green field starts

The leading communications group in the Nordics, 800 people, Fully owned by Finnish state. Klikki is the leading nxt generation digimarketing company, In 2010 and 2011 EMEA Deloitte FAST 500

The future of any company is driven by decisions taken

What is the focus and use of time in the boardroom?

Topics discussed and decisions made in the boardroom?

In which role the board gives the best value for the company growth?

  No matter how well you get yourself into the game, identify and negotiate the exit pricing, the most value is created during the ”investment period”

  How is the Period capitalized for building more value into the company

  What is the focus and use of time in the boardroom – benefits for owners to have an active board

For Investors and Angels the value created between pre-money and exit matters most

  Excitement of the opportunity can easily lead to a loss of focus and to a mistake in trying to do too many things at the same time

  The window of opportunity is open or closed – the idea is to keep the eye on the direction and focus despite the daily routines and championing

  Strategy is often an evolutionary journey from desired ”vision” to the real-life implementation – key assumptions behind the strategy might/will change and live as the market evolves. Sometimes you need to fail fast and make those decisions to use resources for a better growth path.

”Start-ups don’t starve – they drown” Shawn Carolan, Menlo Ventures

  Growth company grows in ”stages” and faces new challenges during the journey – the experience and skillset combination in the boardroom should evolve accordingly

  The better the board can understand, tackle issues and support the company+mgmt – the higher is the value created

  Very seldom, same persons have a) complete understanding, b) spirit and c) dare to run dialogues about …the markets, branding, customers, sales, company culture, strategy work, mgmt structures, finances, ecosystems, R&D, humans, superheroes, liabilities, biz model, …

One size does not fit in the boardroom especially in high growth companies

A

B C

  From pre-money to great exit –  An active and well organised work in the board –  Its not a reporting address but an asset to create value

  Don’t starve but drown –  The strategy and implementation focus are important –  KPIs, checking of key assumptions, competencies and

foreseeing issues in growth –  Chairman-GM combo is key – how to build a great team inside

the board and sync well with the top management

  One size does not fit to all –  Working orders, competence mix, must-win-agendas should

change by the course of time –  What is in the horizon should sit in the board as well

”You do have your moments. Not many, but you have them.”

Princess Leia, The Empire Strikes Back

To become successful – also the work by the board needs to evolve

The boardroom work develops and evolves during the course of the company as well

My idea

Early stage Structured growth company

What Finnish growth companies see as top 10 list for minimum level of board work

1.  Meeting practices, working order and meeting agendas are in good rhythm

2.  Documentation and materials at DD-level at all times, undersigned

3.  Composition of the board is planned and include external(s)

4.  Equal treatment – its for the company, not for a single shareholder

5.  Strategy, implementation and targets – know when issues relate to the strategy when to the implementation

6.  Financial management and cash flow

7.  Picking up the right Managing director to run the company and evaluate his/her performance and skills, also successor planning

8.  HR mgmt & Motivation, basic processes around people and recruitment

9.  Shareholders’ agreement and checking of it, clear rules

10. Rewarding and compensation structure and models

Top 10 best practices include Diversity in boardroom, networking+connections, quality of meetings

+preparation, inspiring and energizing atmosphere, clear will and goal from shareholders, ST+LT targets, financing+innovation+strategy in balance, focus+lean+fail-fast, customer+sales orientation, meaningful mission

Source: Boardman2020 study: Kaaoksesta Kasvuun 2013

In many cases the typical board meeting agenda should be turned upside down – use of time tends to look back

Ideal use of time

• Cash flow, budget, similar-level crisis • B.Plan and changing assumptions • Review results and figures since last meeting • Meeting format, meeting times

• Customer satisfaction, -churn, cross sales, … • Risks, foreseeing risks • Direction, where we are or should be heading • Key persons’ motivation, can-do, team & culture • Competition, how to take advantage on that • Strategy and implementation of it, follow-ups • Future in 2-3 years or more

20%

80%

95%

typical use of time

In the High performance model – the board is a proactive muscle for the company Role   Maximise the value of the company for shareholders   Attrack and recruit top management into mgmt team and boardroom   Mentor, steer and measure mgmt team and their work – Chairman leads   Remove barriers for growth and development proactively   Bring in insights and perspectives to develop the company, and

experiences which cannot be recruited into the mgmt team – evolving by the growth stages

  Guide, oversee and promote systematic, regular, ethical and juridical way to govern the company

Typical discussion topics - FAQ

When is the right time to have an external member in the board

•  There is no written rule on this. The moment when the external member is chosen, the boardroom work will be lifted up, as the work needs to become more systematic, prepared, documented and planned.

What is a typical compensation level for members of the board, and for the chairman?

•  There are studies made by Boardman and Hay Group around this topic around growth companies. A typical rule of thumb is to have a compensation level similar to 1-month salary of the GM for a member and bit more for the Chairman depending of his/her activity levels. The median is around 10k per year.

Why a fixed compensation is better than a compensation per meeting?

•  The payment per meeting focuses on meetings, but the work between the meeting is very important as well. The fixed one helps to give focus on meetings but also on efforts/work done between the meetings.

More info: jussi.lystimaki@boardman.fi