In the pursuit of good governance, the board of directors of publicly held companies meet four or more times per year, and some board committees meet even more frequently. There is quite a bit written regarding the need for directors to come to these meetings well-prepared, having read the board materials in advance, and ready to contribute their questions, insights, and experience to the dialogue.
Not surprisingly, these meetings also require a substantial investment on the part of the executive team and their people in terms of preparation. However, the amount of effort invested by the organization is not always commensurate with the amount of traction and impact generated by the board discussion. Extreme levels of preparation can generate unproductive levels of anxiety and divert executive attention away from running the business, as if a board meeting represents the potential threat of a categeory five hurricane. Monitoring the extent of this investment relative to the impact of the board discussions can provide a meaningful indicator regarding the quality of the partnership and communication between the senior team and the board and the health of board dynamics.
Providing the information necessary for good governance and setting the stage for crucial conversations that mine the collective wisdom of the board are worthy investments of any C-suite team. But, like any investment, it is helpful to monitor the ROI and factors that can negatively impact the result. Over the past several years in the board evaluations we have conducted for clients, the following situations have emerged that cause executive teams and their staff to invest significantly more than the overall return would suggest:
When CEOs and their teams are managing their board versus leveraging their board. Inundating board meetings with highly polished decks and presentations filled with data to support the targeted path with little time for actual dialogue helps to control discussions at the board level and avoid deeper and possibly more challenging conversations. However, this approach requires considerable time preparing and vetting decks and rehearsing presentations to ensure a consistent and uncontroversial message among presenters. This road is generally either built by or leads over time to a lack of trust between management and the board.
Individual directors driving their own agenda. Unfortunately, this is not uncommon and takes on many forms. Directors may seek to prove their expertise through irrelevant, distracting questions or comments; others may appear to vie for the CEO role through disparaging the current leader and his or her team. Some directors manage their personal anxiety regarding the current level of ambiguity or perceived risk through a series of requests for more data and others embark on a quest to catch executives in trivial mistakes and prove an underlying assumption of incompetence. While irritating and disruptive to fellow board members, over time, these behaviors can create corrosive levels of churn within an organization seeking to meet these requests and avoid problems at the board level. Left unchecked, this also leads to a lack of faith in the rest of the board who appear to condone this behavior.
Misalignment among board members. When the expectations or direction are unclear, executives and their teams are forced to cover more options than are merited. For example, if there is a lack of alignment at the board level regarding an acquisition strategy, teams can spend an inordinate amount of time and energy pursuing and vetting options that will never generate sufficient support at the board level to move forward.
Unsurfaced or unacknowledged conflicts. When individuals in power do not address their differences, the impact is more visible in the next level down. Significant and ongoing disconnects between the CEO and the board, or between individual board members can generate substantial wear and tear on those in the organization seeking to meet conflicting expectations and avoid stepping on metaphorical interpersonal land mines.
Raw data versus polished summaries. Directors who are trying to learn the business, or those joining the board due to questions about company performance, tend to desire access to more detailed and unvarnished data and reports. However, without direct conversations about what would be helpful, the directors will likely be given polished summaries versus more rough, detailed reports. Unless caught early, this disconnect can create an increasingly negative cycle with directors becoming progressively frustrated or distrustful with a perceived lack of transparency and asking for more information, which in turn generates additional work to meet the demands of directors who appear never to be satisfied.
Preparing for worthwhile discussions, even if time-consuming, can actually be energizing for executives. The preparation itself can force a team to step back, check assumptions, and fine-tune perceptions. Engaging in rigorous, challenging dialogue on key issues that matter in a process that leverages the combined expertise in a room of seasoned individuals from a broad range of backgrounds increases both the caliber of the decisions and the odds of success for the enterprise. However, the return needs to justify the investment. Lead directors, board chairs, and CEOs collectively bear the responsibility for ensuring the resources dedicated by the organization in preparing for board meetings are justified by the ensuing dialogue and decisions.