First things first. To land a position in a corporate board of directors, you must start by acquiring executive experience. Without a strong background in operative management and decision-making, it’s impossible to serve on a board, says Sanna Suvanto-Harsaae, a full-time board executive, who’s currently Chairman of the Board at Altia, BoConcept, Workz, TCM Group, Footway, Nordic Pet Care Group, and BabySam, and a board member at numerous other Scandinavian companies. Before deciding to focus on board work, she served at senior management positions at several global corporations including Reckitt Benckiser and Procter & Gamble.
According to Suvanto-Harsaae, board members must be at least as capable of handling complex issues as the company CEO. “The board is supposed to act as a sparring partner for the CEO. That means that the board must have an understanding of the problems the CEO faces and have tools to support the CEO and the entire executive board in decision-making,” Suvanto-Harsaae says.
Entrepreneur, company builder, angel investor, and new business executive Inka Mero agrees. “I started board work at a very young age and quickly realized that if I want to add value as an investor or company owner, I must develop my own operative expertise. This took me to various executive positions involving, for example, sales, product development, and business development in both startups and big, technology-driven corporations. This background is of great value to me now,” says Mero who’s currently Chairwoman of the Board at Industryhack and also works on the board of directors at Fiskars, Nokian Tyres, and YIT.
Helicopter View into the Business
Mero describes board work as a natural extension of an executive career. “It gives you a helicopter view into the business. You must not forget, though, that the operational level is where the actual work is done,” she says.
It could be said that when you become a board member, you have to abandon the operative perspective and change your point of view completely.
“When you’re in an operative position, your job’s mainly about execution and translating the company strategy into everyday practice, whereas a board member must look ahead and continuously evaluate the strategy. Overall risk management and organizational structure play a bigger role as there’s more room to focus on them when you don’t have to involve yourself in operational work,” Suvanto-Harsaae says.
Overall risk management and organizational structure play a bigger role as there’s more room to focus on them when you don’t have to involve yourself in operational work."
The main responsibility of the board is to create shareholder value, Mero says. That’s the principle that guides the board in assessing the market, the company strategy, and the management, particularly the CEO. “Each board member must have a strong view on the business and the market and an ability to evaluate whether the company is going in the right direction, at the right speed, taking the right steps. In the end, this is what creates value and generates growth,” Mero says.
Suvanto-Harsaae sees selecting and appointing the CEO and the executive board as the board’s most important task. “Without capable management, the company has no chance to succeed, no matter how good the board of directors is,” she emphasizes.
The board’s top three duties also include risk management, which Suvanto-Harsaae calls police work. “It’s the board’s job to protect the shareholders’ assets so that they’re not squandered. It varies according to company size. In big corporations, there are set policies to follow, whereas in smaller firms it’s much more operative, such as seeing whether the burn rate is too high compared to cash generation.”
The Whole is Greater Than the Sum of Its Parts
A good board is made up of diverse experience, background, and expertise. This, though, is just the starting point, Suvanto-Harsaae says. “A good board is greater than the sum of its parts. All members must be good generalists and know their P&Ls, but they also need to be experts in their own fields”, she adds.
By diversity, Suvanto-Harsaae refers to two things. First, the composition of the board of directors should reflect the company strategy so that the board can respond to strategic challenges. Second, the board of directors should mirror the executive board. “I’m surprised by how rare it is for major companies with large production plants to have supply chain and distribution expertise on their boards. In my experience, having a sparring partner on the board can give a huge motivation boost to an executive and accelerate business development.”
For Mero, the characteristics of a successful board include a good relationship with the management, a willingness to set targets, and an ability to resolve disputes in good faith. “Each board is, of course, unique, as is the way the board and the management interact, but my experience is that in the most successful boards, there’s a strong mutual trust in the skills and expertise of the people. A good board also dares to question the corporate strategy and demand measurable results,” Mero says.
Another magical aspect of board work is intuition."
At best, routine meetings lead to strategic insights. Something like that happened to Suvanto-Harsaae a while ago. “A brilliant idea just popped up in the middle of mundane conversation. We were all gob smacked, the management included. That’s how the magic happens. You can’t plan that, of course. It’s based on trust, open communication, and the board members feeding off each other’s ideas.”
Another magical aspect of board work is intuition. “Over the years, I’ve learned to trust my gut. If you have a bad feeling about something, you should follow that intuition. Not wallow in the feeling but look at the data to find out what made you react that way, and then take it up at the next meeting. This may help prevent problems in the future,” Suvanto-Harsaae says.
Bad News Can’t Wait
Every board position provides many key learning points. Not only do they teach you about the industry and the business in question, but big-scale investment decisions, for example, require thorough consideration and far-reaching analysis, which can be very educational.
“If the executive management is competent, the board’s impact may not always be apparent on the short term. On the other hand, sometimes today’s challenges have their roots in bad decisions the board of directors has made fifteen years ago. It’s a good reminder that as a board member, you have to think both in the short and the long term,” Suvanto-Harsaae says.
Mero’s main learning points stem from the startup experience. Either the timing has been wrong, the funding insufficient, or the approach too techno-optimistic. “Big corporations seeking to go digital now face these same challenges as they’re forced to chart new territories,” Mero says.
Digital transformation is a great teacher, Mero says, whether it’s about seeking new growth or improving the efficiency of existing operations."
Digital transformation is a great teacher, Mero says, whether it’s about seeking new growth or improving the efficiency of existing operations. “Having a strong vision and making big investments is simply not enough, the board must insist upon measurable results, too. It’s crucially important to know whether the transformation is proceeding as planned,” Mero emphasizes.
Suvanto-Harsaae shares the view. “For a board member, surprises are never welcome. Good news can wait, but bad news should be shared immediately. The management may try to hide problems from the board, thinking they can handle them themselves, but in the end, they become the board’s headache anyway. As a board member, you can’t help but wonder whether it’s about someone not doing their job properly or whether it’s been deliberate.”
In big corporations, these challenges can usually be tackled by governance policies, disclosure obligations, and other formalities. In unlisted startups and growth companies, it all boils down to trust and open lines of communication. “Growth companies are often born out of excessive optimism, which is inherent in the startup culture, and the management may be prone to give overly optimistic estimates of, say, product development timelines or contractual risks in commercial contracts. If things don’t go to plan and the risks materialize, it inevitably results in a crisis. That’s why the board must be able to trust the management and its ability to bring all issues out in the open,” Mero says.