I recently spoke to a co-founder of one of the major startup successes in the Benelux. He had quit the company he co-founded because he no longer felt ethically aligned with the leadership of the company. The board, he explained, was pushing to spend money on aggressive marketing campaigns such as large radio campaigns. The CEO - though skeptical - had not objected to doing so, because he did not want to offend the board member(s) who had suggested the idea. The expensive radio campaign, as anticipated by the founders, generated exactly zero new leads. And yet the CEO was presenting the campaign to the board as a major success and a great idea.
The moment founders or board members become concerned about the loss of face or reputation, resulting in sugar-coated or even dishonest communication, the board setting is seriously unhealthy. Preventing such toxic situations requires serious thinking about how you can create a safe space in board meetings. So, what is a safe space? Why does it matter? And what are a few concrete actions you can do to create - and retain - such a safe space?
What is a safe space?
In plain English a safe space is a space where people feel free to speak their mind, to disagree, and to be critical of ideas, without such critique being taken personally.
Why it’s important.
Creating a safe space is critical to ensure honesty and transparency at all times. It is also important to ensure you get the full picture and not just the framed picture of what is going well.
How to create a safe space.
While I am no expert either, here are a few things I learned in roles of being a founder, investor, board advisor, as well as in the role of being a CEO, where creating a safe space for your employees and managers is equally important:
It is very difficult to create trust if you don’t have a personal relationship. Try to get to know someone at a deeper, more personal level, ideally outside of the work setting through dinner, lunch, coffee breaks, or my personal favorite: a walk in the park. Who is the founder really? What is her family situation? What does she do outside of work? What keeps her up at night? Getting to know someone at a personal level is a two-way street. Dare to be vulnerable and open so that he or she also sees you as a person rather than as the VC partner whom she needs to impress. Share your personal life, your lessons learned, your successes, and especially your failures and fears. Getting personal literally gives each other a face and a much deeper, more robust connection than you will ever have if you only always talk business. It makes you human.
Make failure an option.
The reason why people sugar-coat, beautify, or even lie is because they are afraid to tell the truth. People feel they could be berated or even punished for so-called a failure. The targets were not hit, a pivotal sales deal was lost, or maybe you just simply made a stupid mistake. Not all, but many people, are afraid to be seen as a failure or as incompetent at a personal level. It can be pretty damn scary to admit these things. So if you don’t fully trust the people in the room, or if you are rightfully or wrongfully scared of reactions, it is perfectly normal behavior that you would omit certain failures or present issues in a more positive light than is warranted. Once you create such a culture, ethical lines are easily crossed.
It is everyone’s accountability, and more so the accountability of the board advisors, to ensure you create a safe space for failure. One way we do this at Peak Capital is to explicitly state that it is okay to fail; it is okay to make mistakes. What is not okay is to omit important information, to make things look better than they are or to not learn from mistakes. Explain that if you have the full picture of the good, the bad, and the ugly you can add most the value by offering your best advice, helping to resolve a messy situation or preventing similar mistakes. Again, it helps to share failures and vulnerabilities of your own to encourage speaking of failures. Creating a safe space where failure is okay and can be discussed in a constructive way takes practice. As a board advisor – more so, as an investor – take careful note of your reactions, too. If your first reaction when hearing disappointing results, for example, is to crack down on why we are failing and what is going wrong – then a founder will be more hesitant to share disappointing results in the future. Even your body language can reveal your dismay, even if you say nothing at all. As an exercise consciously observe how you respond to disappointing news – both in your body language, tone of voice, and what you say. Alternatively, ask peers for feedback on how you react to messy situations.
It is especially important to take your time to create a safe space after a transaction closed. During the deal you are in a sales process. Of course expectations are rosy, results are better than the month before, there are no challenges that keep you up at night. During the deal the relationship between a startup and an investor is not one of equals and interests are not necessarily aligned. But once the deal is sealed, you are married and partners from there on out. This situation requires a conscious reset. A useful exercise during a first board advisor meeting can be, in addition to getting to know each other intensively, to clearly identify expectations and draw up rules of engagement - e.g. failure is an option, be critical but never get personal, etc.
Ask, don’t tell.
Something that is incredibly hard and yet the most important thing for advisors to do, is to ask and not tell. Being someone who has strong-held opinions and a clear view on most any situation, I have always found this challenging. In my previous CEO role, during meetings, I would often write down for myself “shut up and listen” to ensure I would refrain from constantly giving my uncalled-for advice. Insights are tenfold more valuable when someone generated such insight themselves versus if someone gave you good advice. If you can nudge someone to generate an insight all by herself, it’s a game-changer. It is also insanely difficult not to offer your advice, more so if an issue is close to your heart or within your domain of expertise or experience. A good coaching exercise I learned in the ScaleUpNation board program was to ask 3 simple questions: i) where are you now on this issue? ii) what does success look like? And iii) how do you plan on getting from A to B?
Creating a culture of trust in any organization or setting - be it a board, a company or a management team - is no easy overnight task. Trust is hard-earned over long stretches of time...and easily broken. So it is good to kick off things right: set the ground rules and set clear expectations. But remember, it requires constant effort to expand and retain trust. Keep reminding all participants that failure is an option, that you are here to listen too, understand and advise on the good, the bad, and the ugly. Pay attention to your body language and tone of voice in difficult conversations. And, finally, shut up and listen.