Source: Kalen Smith, SSM Partners
We speak a lot at SSM about “providing value” to our management teams. I’ve written in the past about where that typically is – at a strategic level: largely on people, process and exit. But we also think that tactically, it’s our duty to add value in the board room, and part of that duty is to provide accountability. In that light, I found this recent article from TechCrunch a couple weeks ago mildly entertaining, and I thought I’d use it as an opportunity to provide some insight into the SSM approach.
If you don’t have time to read the aforementioned article, the punchline is that Bill Gurley thinks we, the minority investment community, have become scared of providing constructive feedback and have been rendered useless at holding management teams accountable for financial performance. I’m not going to spend much time debating Gurley on his point, though I do suspect there’s a lot of head-nodding in board rooms these days. But let’s focus on the SSM approach – here’s what you can expect if we invest in your company:
In short, we think that accountability in the board room is a responsibility and serves a purpose. It’s not a dirty word, though it can be an uncomfortable word, and suffice to say it can be uncomfortable on both sides of the equation. Rather we believe that accountability is:
- A fiduciary duty. Pretty simple. People invest in us. We have a duty to those people to hold our companies accountable. As board members, we have a duty to shareholders to provide guidance that we believe is in the best interest of the company.
- An otherwise unwritten part of the partnership. Some accountability arrangements are formal, while others are informal. They’re both real. I personal train as a side-gig, and I honestly believe the biggest reason people pay me to train them is to hold them accountable in their diet and exercise. Contrast that with marriage vows. At no point in a typical ceremony does the betrothed say, “I agree to make you a better person”. Yet, ideally – and implicitly – there’s a commitment there to help one another make good decisions – or perhaps even more importantly, to voice concern about potential bad decisions. Bottom line – we think that when we sign the agreement and take a board seat, we’re committing to being your accountability partner.
- A value to our management teams. To Gurley’s point, we actually think it’s unhelpful to our management teams to agree with everything they say, and groupthink can render a board as useless as a board in strife.
Finally, I’ll also say that we believe this topic is one of the reasons that relationships matter in this business. There’s a right and a wrong way to hold one another accountable, and that’s something we practice internally and externally. We’re human – we do miss the mark occasionally – but we generally try to deliver that feedback professionally, with a delicate balance of humility, candor, and conviction.
About Scale Finance
Scale Finance LLC (www.scalefinance.com) provides contract CFO services, Controller solutions, and support in raising capital, or executing M&A transactions, to entrepreneurial companies. The firm specializes in cost-effective financial reporting, budgeting & forecasting, implementing controls, complex modeling, business valuations, and other financial management, and provides strategic help for companies raising growth capital or considering M&A/recapitalization opportunities. Most of the firm’s clients are growing technology, healthcare, business services, consumer, and industrial companies at various stages of development from start-up to tens of millions in annual revenue. Scale Finance has multiple offices in the Carolinas including Charlotte, Raleigh/Durham, Greensboro, and Wilmington with a team of more than 45 professionals serving more than 130 companies throughout the region.