Communicating and Aligning Expectations With Your Board Ahead of an IPO

An effective board communication strategy is an essential part of pre-IPO planning. Because the board will ultimately give the green light on the IPO filing, it is in the CEO and CFO’s best interest to keep them involved throughout the planning process in order to maintain alignment and avoid any unexpected roadblocks.

The key to a successful pre-IPO board communication strategy is starting early, says David Faugno, EVP and Former CFO at Qualtrics. As a former CFO who has led the IPO transition for two companies, he often advises private company leaders to develop a board communication strategy before establishing the timeline. 

“Engaging your board when you’re in that initial stage of IPO consideration can help establish early alignment on the framework of the IPO journey while also minimizing conflicts that can surface further down the road and delay the timeline. It also sets an important precedent because your board largely represents your shareholders post-IPO, and so you want that transparency and alignment.”

David suggests an effective board communication strategy takes into account into three phases of the IPO journey:

Phase 1: Establishing the IPO Framework

In the early stages of planning, it’s important for CEOs and CFOs to align with their board on the company’s IPO timeline.

“At the beginning of the journey, you’re trying to establish the business tailwinds that will drive predictable growth and identify investments that are needed to get to the second or third leg of growth. Your board will already be thinking about a lot of those issues because they’re all focused on long-term value creation; however, now you’re framing it in the context  of bringing the company to the public markets.”

The CFO can start the dialogue informally through one-on-one conversations with individual board members and then bring the conversation into the board room. More often than not, there are some significant differences in opinion on the company’s level of IPO readiness and timeline – and that’s okay. “What’s important is that you establish a healthy dialogue to work through those differences early, and establish a common understanding of the work ahead to be ready to be public” said David.

“The goal is for the board to understand what the work streams are to move the company toward it’s readiness objectives and set expectations about lead times, measures of success and key milestones”

Phase 2: Working Through the IPO Checklist

After establishing alignment on the IPO framework, the company shifts into IPO readiness mode with the CFO often leading the effort to build out the teams, external partners, systems, and processes to prepare for life in the public markets.

In this phase, it’s important for the CFO to establish a two-way dialogue with the board, keeping them apprised of the company’s progress while also soliciting their support in order to stay on track.

“You want to establish clear checkpoints and deadlines for reaching the key IPO milestones,” said David. “I’ve found it very useful to create an readiness checklist that can be read out against at board meetings. That way, we can all review the checklist together, track progress against it, and call out any areas of risk.”

The checklist creates accountability, but it also gives the board confidence that the CFO is in control of the IPO preparation process. It also gives the board the information it needs to lend as much help and support as possible. The right mix of information is important, as you don’t want to inundate the board with every granular detail of your IPO plan, just the high level tracks with the most meaningful activities called out. If it looks as if the company is falling behind on a specific track or milestone, don’t wait until the board meeting to surface that information: “Have those off-cycle discussions with your board members so there’s no surprises when it comes time for the next board meeting.”

One area upon which David recommends building early alignment is around key business metrics that will be used to describe the business.  He recommends creating what he refers to as a “metric map.” A metric map takes all of the business metrics that the CEO and CFO consider in evaluating the business from day to day and identifies which sub-sets are to be shared with the board, externally to shareholders, and at what frequency, and ultimately what will be guided to. Creating a metric map is an important exercise for preparing for public company life. “It gets you into the mindset of identifying and sharing the metrics that matter most to your various stakeholders.”

Phase 3: The Final Sprint

The last 6-12 months of IPO preparation are a gauntlet of tasks, from establishing the banker syndicate to investor outreach, fine-tuning the narrative, and selecting a structure to completing all of the filing requirements. The CFO is ultimately coordinating all of this and is responsible for communicating key updates to the board. Having previously established expectations, called out key decision points and provided visibility to progress, the CFO should have created an environment where the multitude of decisions to be made in this window can be done efficiently and with strong consensus.

At the same time, the CFO needs to facilitate and prepare for major changes within the board itself. “You’re starting to form your three committees, which means you may be replacing existing board members and adding new independent board members. While all of that’s happening, it’s important to think about how you’re going to maintain a collaborative and effective board dynamic.” 

It’s important to spend the time on-ramping new board members to get them familiar with the business strategy and IPO framework, said David. “Look for opportunities  for the board to get to know each other, and get to know members of the management team.” 

CFOs should start to prepare for board meeting cadence and structure that will change after the company goes public.

“The conversation with your board is no longer just about growth. Now you have independent directors and committees focused on the compliance and governance aspects of being a public company. You’ll want to give the broader board visibility into all of that through committee readouts but also leave enough time to focus on high-level strategy,” says David. 

The best approach is to start structuring your board and committee calendars to mirror what life will be like in the public markets:

“Look at the overall calendar of committee and core board meetings that need to happen throughout the year and who needs to be involved. You will likely need to start bringing other leaders from the organization or external partners to some of those meetings. All of that is going to change the dynamic of your board communication, and it’s important to establish a structure and cadence that works for everyone.”

If it sounds like a lot of work, that’s because it is. “It’s one of the core reasons why boards tend to get nervous when a CEO or CFO has never been through the IPO process before.”

To give the board confidence, David strongly recommends coming into the pre-IPO planning process with a well-organized communication plan that breaks out the phases, checkpoints, and tasks that need to be managed.