What does it take to get on a board? The Center for Women & Wealth (CW&W) attended the Harvard T.H. Chan School of Public Health’s two-day “Women on Boards: Getting on and Adding Value” program to get answers to this question. One of the sessions, a panel moderated by Ellen Zane, CEO emeritus of Tufts Medical Center, provided attendees the opportunity to learn from public and nonprofit company CEOs and one of Brown Brothers Harriman’s private equity investors about what makes an effective board.
Steve Schwartz, Ph.D., CEO
Andrew Dreyfus, President and CEO
Blue Cross Blue Shield of Massachusetts
Ivan Pirzada, Managing Director
Brown Brothers Harriman
Understand and Engage in the Business
Steve Schwartz: For a company of our size, with a market cap of $2 billion and enterprise value $400 million, it’s different from a Fortune 500 board – our expectation is that each board member gets involved in the business. Our board members can tell you about the strategy of the company, recent acquisitions and all the initiatives related to the semiconductor and life sciences businesses. They are not just doing committee work; they understand and engage in the business.
Focus on Diversity
Andrew Dreyfus: Eight and a half years ago, when I became CEO of Blue Cross Blue Shield of Massachusetts, we had (not surprisingly given our not-for-profit history) what I would describe as a civic board, comprising civic leaders who cared about the community and had varying degrees of business experience. At that time, we said that we were going to create a diverse business board that still represents the values of the business and the values of the community. Today, we have 14 board members, and 60% are women and people of color. We may have one of the most diverse boards in the city of Boston and in the state.
Qualities of New Board Members
AD: Healthcare is going through tectonic change. A decade from now, the healthcare system will be unrecognizable from the one we operate in today. That means humility is a very important characteristic for board members because when you think you know a lot, you may be wrong.
AD: It’s a balancing act. We want quarterbacks and coaches. On one hand, we look for expertise – financial, clinical and business – but we try to pick it at a level that is high enough that it’s strategic. We’re looking for strategic thinkers and leaders.
Ivan Pirzada: As a private equity investor, I’m looking for a board that can mentor the management teams and provide an experience-based outside perspective.
IP: We’ll bring in new board members when we find skill set gaps with current management and/or current board composition. The companies we work with are typically at growth inflection points, which create new challenges and opportunities that may not be immediately recognized by management. An effective board member can challenge the status quo in a constructive way.
Why Problems Between Board and Management Teams Arise
IP: Sometimes directors bring their perspective to board discussions but don’t realize they are there in an advisory capacity vs. as an operator. They are there to help inform the strategy, not set or dictate it.
IP: If the management team does not view the board as advisory, they’ll be more reticent to bring issues to the table because then they’re worried about being exposed or having somebody else take over their role. When we bring in an outside director, it’s important that we explain the director’s role to management – he or she is here to help, not take over your role.
Importance of Committee Work
SS: It is really important that committee work is done before the board meeting, not at the meeting. At the reporting meeting, I encourage everybody to dig into the committee work but to remember that is not the job. It is one part of the job.
Creating the Bridge Between Management and the Investor: The Private Equity Perspective
By Ivan Pirzada
The role of the private equity investor is to provide capital to businesses and help those businesses grow and meet their objectives. It also involves creating an environment that enables the founder to grow the company to the next level. Therefore, the board members that we look for at Brown Brothers Harriman Capital Partners (BBHCP) are individuals with skill sets that are complementary to a company’s management team. We focus on creating a board of independent, industry-focused professionals.
Key takeaways for private equity board members:
- Define what your skills are. Don’t try to be all things to all people so you can match with what a company may need and what you can bring to the table and add value.
- Recognize that you’re the advisor to the company, not an operator.
- Recognize that these companies are at an inflection point. Identify areas where you can apply your experiences and the skills you’ve developed in your own job to help in these more entrepreneurial settings.
- Be prepared to roll up your sleeves. Different from other settings, private equity really requires members of their boards to be hands-on mentors (whiteboard sessions), work with management, help make informed decisions and ask the right questions to create the right strategies.
- Commit to being the bridge between an investor and the management team.