Beware The 100 Page Board Deck
Don't let analysis get in the way of understanding your business
Most of my career has been as an operating executive, but I have also been an advisor and board member to venture-backed software startups. It has been helpful to see the inside of another company, the challenges they face and consider what lessons I can apply in my own work. It is also gratifying to help younger companies avoid common strategic and execution pitfalls.
As a rule of thumb, you should try to get your materials to the board at least three days in advance, and preferably seven. Depending on the timing of the meeting and the size and complexity of the operations, you may not have the final financial statements if the quarter has just closed. But you should still strive to get the materials and draft financial statements to 90% accuracy. Most board members would rather have an early read on how the company is doing in advance of the meeting than wait for perfect information in the meeting.
One troubling trend I observed with one company was the ever-growing scope of the board deck. What started out as a long twenty or thirty slide deck continued to grow every quarter. There was the CEO’s summary of how the business was doing. There were detailed slides on sales performance, often with four or more competing bar and line charts showing one team’s performance compared to another, based on win rate, deal size, sales cycle and so on. There were even more details on average deal size by geography, product, new sales versus expansions. More slides on gross renewal, net renewal, by segment, by product line, by geography. And slides on quota attainment, by geography, by team, by segment. If there was a number, it was reported, usually in several different ways.
At some point, the board deck grew to 117 slides. It was as close to “death by PowerPoint” as is legal in the state of California.
Analysis Paralysis
The irony was that despite the company’s detailed analysis of their performance through every lens possible, they never hit their numbers. In fact, if you weren’t paying attention, you might not have even noticed that.
To me the problem was not one of analysis, it was execution. The inordinate amount of analysis inhibited management from improving sales execution and product differentiation, the two most likely culprits. Sometimes the diagnosis is not to be found under a microscope, but by talking to the patient.
Instead of endless slicing and dicing of numbers, it’s better to ask more fundamental questions:
When someone buys from us, why do they do so?
What situations do we see where we have a higher likelihood of winning?
When we lose a deal, what does the customer do instead?
What could we do to better differentiate our product?
Are there new capabilities that would expand our appeal in the market?
Any time I see a massive board deck, I cringe at the cost to the organization. The larger a company gets, the more scrambling there is. It’s not uncommon for a finance team to spend two to three weeks putting together board materials.
No matter how detailed the reporting, a good board will ask questions that have not been answered. Often this is because they are trying to be helpful to tease out a line of thinking that they want the management team to pursue.
In time tested max of “shit rolls down hill” an off-hand question by a board member can turn into days or weeks of reporting by sales managers and the finance team. And once it’s been memorialized in a board deck, it tends to become a standard requirement for all future reporting, regardless of whether anyone is still using the information.
When I’m on a board, I tell the CEO and management team I want to see the reports that they use to run the company. I’m not looking for them to undertake new reporting for the board.
Of course, if it’s an early stage startup and they don’t have good reporting, then it’s easy to go overboard with an extensive list of what mature companies do. But remember, a startup is not a mature company, it’s an experiment.
What Matters Most: Product Market Fit
In the early days what matters most is finding product market fit and repeatability. Some analysis can be helpful in finding repeatability. But product market fit is not something to be found through analysis. It’s either obvious you’ve got it, or you’re not there yet. That said, product market fit can be a bit like falling in love. Sometimes it hits you where you’re not looking.
In the early days of MySQL, we had quite a few small web startups using our software. This was one of several interesting patterns we saw in the market, along side our software being embedded into applications, and a few forward looking Enterprise companies trying to decrease their dependence on Oracle. It was nice that Craigslist was using MySQL, but it wasn’t paying our bills. A surprising number of promising web startups failed in those days.
But what emerged from that fallout, was the industry-wide recognition that if you wanted to build a high-scale company, you should use the open source LAMP stack: Linux, Apache web server, MySQL, and your choice of PHP, Perl or Python.
The LAMP stack became the dominant architecture for the next generation of developers and web companies became our fastest growing segment. Once that was under way, we knew what to measure and monitor to drive growth.
The analysis you undertake before product market fit, bears little resemblance to what’s needed once you start to scale. It can be useful to develop some basic reporting on sales and marketing performance and how different segments perform, but don’t let it get in the way of understanding the patterns that are emerging in your market.
What’s The Most Useful Reporting?
Of course, I have my own views on what can be helpful in analyzing sales performance or marketing effectiveness. Generally, it is based on understanding what is happening at the ground-level. Why are we winning or losing? What are the patterns that indicate a higher likelihood of winning? Which campaigns are bringing in the most pipeline? What is our biggest differentiator? How can we amplify that?
No one starts out by saying let’s spend three weeks building a 100 slide board deck, but if you’re not careful, that’s where you end up. So how do you keep this from happening?
First of all, be aware of the cost. Few managers are going to complain when asked to create reports for the board. But there’s a big difference between “give me what you have” and “spend 2 weeks making it perfect.” Set guidelines about what level of effort and accuracy you expect.
Secondly, when you add a new piece of reporting don’t automatically make it in perpetuity. Perhaps you only need to report on the new metric until a particular issue has been solved.
Thirdly, at least once or twice a year, prune the board deck to focus on the few metrics that are most meaningful. Too many metrics often means conflicting symptoms. Focus on the most important ones.
And finally, in lieu of creating a larger and larger board deck, consider writing a quarterly board letter as a way to provide a more comprehensive and nuanced communication for complex matters. It’ll probably take a whole lot less time than putting together endless slides. Writing out your thoughts in prose can also help refine your thinking better than the bullet point summaries used on slides.
Most boards will defer to the CEO to understand how they view the health of the company. Focusing on the basic financial statement (Income Statement, Balance Sheet, Cash Flow) and a few key metrics (Annual Recurring Revenue, Cost of Acquiring Customers, Gross Margins, Net Dollar Retention, Churn, Burn Rate, Cash Out Date) may provide most of what you need.
What’s been the most useful board reporting you’ve used? Have you tried Zeck? Slides or prose? Post your comments below!