Originally published in Baltimore City BizList.
I’ve recently had several conversations with CEOs about the state of their boards of directors. Few feel they have the perfect boards, though many CEOs view their directors as highly functioning. Some though felt their boards don’t add the value, which got me thinking about why some boards struggle while others are highly functioning. My conversations led first to dysfunctional boards. I heard many theories on why boards end up struggling, but they come in three basic flavors: (i) boards designed to play defense, (ii) those set up for offense, and (iii) those that exist solely to affirm.
What’s clear is who gets to pick the board shouldn’t be the sole determinant of how that board will function. And while board members’ duties run to the stockholders, that doesn’t really answer the question of who should serve and what they should do (and be asked to do). Many companies and their CEOs fail to realize the full potential of their boards when their members are not aligned as a resource to constructively challenge leadership and drive growth.
While struggling boards are usually a Neapolitan mix, if you’re worried you sit on or report to a dysfunctional board, the first step is to figure out which of the three flavors predominates. So here is each flavor in its concentrated form.
Playing Defense. At first blush, a defensive board appears to be one built either by the CEO to fend off investor or stakeholder leverage, or by investors or stakeholders to babysit the CEO. In either environment, the key signs of a board built for defense are:
- Agendas evade what’s important (often larded with detail and data to run the clock out)
- Questions are personalized and answers evasive (pick your metaphor, an exercise in: kabuki, minuet, fencing…)
- Distrust and opacity are the orders of the day
- If there are “independent” members, they’re really not
- Not much happens until meetings are adjourned, then the fun begins
- Each meeting feels like a repeat of the last
Running Offense. I suspect most companies viscerally want a board that plays offense, but if that’s all the board does, it inevitably leads to chaos. Your board is too far weighted to offense, if:
- The agenda is all over the map and everything is equally important (it isn’t) measured by where the board’s time is spent
- Rather than driving clarity and focus, questions and answers add complexity and uncertainty to company priorities
- Everyone is a domain expert on everything (they’re not)
- So much happens at each meeting that nothing gets done (ironically most leave these meetings thinking lots got done)
- Each meeting is groundhog day, though with new stuff stuck to the walls
The Enabling Board. Who wouldn’t want one; these boards dole out Saccharine, while the CEO adjourns each meeting in a sugar-like high, the company starves:
- While often subtlety delivered, members cultivate the CEO’s (and sometimes each other’s) inner narcissist
- In an effort to avoid any constructive evaluation of performance, these boards steer the Company to an alternative reality (where success is measured by the state of the CEO’s ego and not the company’s performance)
- These boards rarely see others on the management team for other perspectives, certainly not in any substantive way
- And if there is fault to dole out (there usually is), it is to subordinates, or customers, or market conditions, or…
Figuring out one has a problem in how a board is constituted is only the first challenge. Then one has to sort out what to do about it, given the realities of how the board has to be constituted under its charter. But there are paths that enable a bad situation to get better, and perhaps even to make a board highly functioning, with meetings that are strategic in nature, where transparency and trust are the cornerstones, but that’s for next week…