Four Approaches of "Superaccelerator" Boards: Fast-growing companies provide governance formulas for accelerating value.

• Author: Gwin, Bonnie W.
• Position: HEIDRICK & STRUGGLES GOVERNANCE LETTER

It's no secret that consistently fast-growing companies such as Apple and Google's parent company Alphabet, operate differently than other companies. But do they govern themselves differently?

Research our firm conducted suggests that they do. We found that these and other high-performing organizations we've dubbed "superaccelerators" fall into four strategic categories and each has a style or type of board associated with each approach.

* Portfolio Investor strategy--Working Board

* Customer Intimate strategy--Thinking Board

* Execution Engine strategy--Responsive Board

* Talent Magnet strategy--Inspiring Board

Though it's possible for a board to embody more than one type, each is quite distinct and understanding them can help any board clarify how their dynamics potentially enhance or impede a range of strategies.

What makes a "superaccelerator"

Before exploring the four types of boards our research examined, it's useful to begin with a quick explanation of how we identified high-performing companies. To determine which were genuinely elite we applied four stringent criteria to the 500 largest companies in the world by market capitalization.

To qualify, a company must:

1) Place in the top 20% for revenue growth in both the previous three and seven years,

2) Generate no more than 20% of its growth inorganically (through acquisitions),

3) Receive no more than 20% of its revenue from its home government (eliminating state-sponsored behemoths like Saudi Aramco and some Chinese banks), and

4) Not see its profit margin drop more than 20% as a percentage of revenue during company growth.

In 2016 only 23 companies passed all four of those tests, and in 2017 only 25 made the cut.

Overall, the companies come from a wide range of industries, not just high tech. But all are indeed high performers. For instance, the companies on the 2016 list grew their revenues 20% a year, on average, over the seven-year period from 2009 to 2015--four times the growth rate achieved by the entire 500 companies over that span.

A question of board composition

In our initial research in 2016, we found some intriguing differences in board composition among superaccelerators and other companies.

These so-called "superboards" were smaller, averaging under 11 members versus almost 13 members for other boards. Median tenure on the superboards averaged more than nine years versus less than seven years for non-super-accelerators. (Our hypothesis: The smaller number of members...