Functional Boards Featured

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Instituting a functional Board at the head of a company is not rocket science, even if it seems much more complicated than that.

It only needs to have a small number of things in place:

  • A leader
  • A strategy
  • The right people
  • Information
  • Decisions

The complexity arises because there are a lot of variables in the equation, not least of which is people, making it beyond calculation and somewhat non-linear. Nevertheless, each of the five things has just a small number of characteristics to get right:


The Leader

Sets the tone, inspires, arbitrates, is decisive. The leader does not need to be larger than life, all ego and machismo. He or she just needs to have seen a fair bit of life, be battle-hardened if you like, and be competent to put the elements of the jigsaw in place - strategy, people, information, decisions.  They can be larger than life too, it's just not a necessary part of the role.

Leadership is about surrounding yourself with the right people, with appropriate skills and knowledge. Leadership isn't about being "the best" and employing "the best people". That's power trip stuff for people who can't acknowledge that humans are fallible and that most of what we do is wrong.  Recognition of fallibility allows a Board to be free to let go when it needs to, to pursue the 'less wrong' instead of being paralysed by the search for the perfect. It also stops a leader stifling the Board's creativity.

The person at the top of the organisation influences the culture that flows through from the top to the bottom. If there is a blame culture, you know where it flows from.  If there is a greed culture, with everyone out for themselves and the bare minimum of cooperation, you know where it comes from.  If there is a team ethic, with people actively identifying problems and working out solutions, you know where it comes from.


Strategy

Each person on the Board needs to know who you, as a business, are; where you are; why you are where you are; where you are going; how you are going to get there; what you are going to do it with; and why.

To get that knowledge requires working together to gather the information, to tease out what matters and debate and decide the nature of the landscape and the priorities.  The result is not just a strategy, but also a team that thinks and acts in concert, that speaks the same language and has a sense of common purpose.  The danger is a team that submits itself to groupthink  (which is one reason why dissent should be encouraged).

The strategy provides a clear sense of direction that helps the Board stay focused on the important stuff, the big picture, and stops it from becoming sidetracked by operational issues, minor distractions or recent events that gain an importance above and beyond their impact.  Strategy brings a Board back to its proper course. It leads to the taking of considered risks, instead of leaps in the dark.

See Addendum One for the distinction beween the management board and the executive board.

See Addendum Two for a note on how strategy informs policy.


People


A good Board is composed of  people with an intimate knowledge of the products and services, the markets, competitors, suppliers, the law, finance and psychology. They have an instinctive feel for the shifting of the landscape you operate in. They are not "yes men" or walking egos, but appreciate the right balance between serving each other and speaking up.  They know when to argue a point, and when to let go and pull together. They are confident of their positions and comfortable in their skin.  Dissent is to be encouraged : as a guard against groupthink, as a way of ensuring a wide breadth of perpectives; as part of the process of assimilation of a new member.  A member who has reservations but is prepared to support effecting a decision is of more use on the Board than off it.  This is the most difficult task of any leader: surrounding oneself with good people and encouraging the right culture amongst them.

I have a pet theory that good people are easy to find, it's the leadership that is difficult.


Information

The strategy won't come together and decisions won't be made without a good grasp of reality. The Board needs the kind of information that comes from being in the world, from getting out and about, talking to customers and suppliers, walking the shop floor, doing the job yourself.  The internal information, KPIs and financial data, is important, but only to the extent that it helps with getting to the bigger picture or monitors performance against strategy. A Board needs those multiple perspectives that can only be obtained from 'being in the world'.  The Board needs to work hard at seeking evidence, rather than being easily swayed by hearsay and anecdote, while keeping a wary eye out for its own narrowness of vision and perspectives.


Decisions


On balance it is almost always better to make a decision than to make no decision at all. On rare occasions there are decisions that are best not made, like the ones where you are betting the farm. In organisations all over the world there are whole departments desperate for their bosses to make a decision, any decision, so that they can get on with their jobs. Putting off a decision can cause paralysis in a business.

There is a sense in which all decisions are the wrong decision, because we can never have full information and because the situation changes. Knowledge of this allows a Board to be decisive without becoming too attached to the chosen course of action. Note that competitors actions don't always need to be mirrored - the grass looks greener next door, and classy operators have a halo right up until they don't.

A last thing on decisions:  when made, someone needs to be given the responsibility and authority to effect them, along with a deadline.  Without these, the decision has not been taken.

 

 

Just those five things are needed


There is much more that can be said about achieving a functional Board - on strategy, on the distinction between the Executive and Management, on policy or good parenting, on human fallibility and the nature of 'reality' - but these five things are at the core - a leader, a strategy, the right people, good information and decisions to act.

 

See also :  Dysfunctional boards

 

ADDENDUM ONE - the Executive and Management

It may help to clarify the distinction between executive boards and management boards. 

The executive board deals with strategy, makes the big decisions and decides the direction of the company. Its directors are, usually, formally appointed and registered at Companies House. Company law lays down rules and formalities they must abide by and they may be personally liable if in breach. In particular, this gives creditors some protection when dealing with a limited liability company. This article is specifically about the executive board, referred to above as 'the Board'.

The management board runs the company. These are the people who effect the strategy, who direct operations and make tactical decisions. The policy provided by the executive board - derived from the strategy -  defines the limits within which they can operate and gives them the freedom to act within those limits. Referred to as 'Management' here.

In all but very large companies there is considerable overlap between the boards, some members serve on both. Nevertheless, it is important to keep the roles separate, to know which hat you are wearing on which day, so as to address the right issues at the right level.

 

ADDENDUM TWO - Policy

Policy flows from the strategy. Policy being the guidelines for Management, spelling out the limits within which they are free to operate. Much as a good parent makes clear to their child where the lines are drawn, so too the Board draws the lines for Management.

These lines might start with the mission statement, any commitments and statements of intent, plus any express subjective goals. They end with specific objectives which have been costed and set in a budget.  These last, however, come from Management, not the Board.  It is Management's problem to work out the how and come back to the Board saying, "This is how we are going to do it and this is how much money we need; here is the balance sheet effect.  Look how much bang we'll give you for the buck."  The Board approves and the race is on.

Note that the Board need to ensure that Management come up with specific, clearly defined objectives,  with timescales and  'who is' reponsibilities attached.  You don't want to experience that moment where two people look at each other and simultaneously say, "that was your job", or the moment where someone gets defensive saying, "that wasn't how I understood the objective", because it wasn't made clear to begin with.  This is how you avoid a recipe for a blame culture.

Last modified on Monday, 07 October 2013 10:24
More in this category: « Dysfunctional Boards
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