Regardless of company size or the level of experience on the board, an issue frequently encountered is the disconnect between senior management and the board. From the perspective of senior management, directors can become “comfortably numb” and not sufficiently engaged.
This is not to say management does not respect board members’ expertise and knowledge. Instead, the executive team can grow disappointed if the board is not operating at its full potential. After long periods of service with little inspiration and challenge from senior management and/or board leadership, directors can reach a point in which they are not as engaged as a highly challenged new director may be.
These directors need to be encouraged to be an influential voice on the board, using their skills and experiences to pose the necessary questions on issues presented at meetings.
Recently, NACD announced its Directorship 2020 initiative, encouraging directors to identify where their board and company should be positioned in the year 2020. Once this vision is established, the board can identify where skills gaps need to be filled in, or what additional efforts should be undertaken. This is particularly relevant–especially with today’s rapidly changing regulatory and technological environment–as boards must quickly meet new rules and changes. Even the most successful boards today need to ask themselves if they are well positioned on the path to 2020.
As NACD general counsel and head of Board Advisory Services (BAS), I’ve gained tremendous insight interacting with all types of boards from startups to the top of the Fortune 500. Each board comes with its own unique dynamics, incorporating differing personalities, skill sets, advantages, and obstacles. But despite these differences—and regardless of the size and sophistication of the board—there are several common issues with which most boards are grappling.
While I’ve seen just about every scenario one could imagine, BAS is typically engaged for the following reasons:
The company has reached a turning point in its strategy, which has created tension and a need for alignment with the board and management.
The board is struggling with directors’ extended tenure on the board, which has created a stale environment and an obstacle to fresh thinking.
Often related to the second point, the board is wrestling with the thorny issue of succession planning and how to deal with underperforming directors.
The board is composed of strong, experienced directors, but management does not feel they are as engaged as they could be and are not bringing all their skills to the table.
In each situation I’ve found that our clients, despite facing significant pressure points, all have the desire to improve. Even the most sophisticated boards are willing to admit they don’t have all the answers. As such, they bring NACD—as an objective third party—into their boardroom to assist in identifying steps for improvement.
In my next posts, I will drill down further into these common issues. How are companies dealing with underperforming directors? What new succession planning techniques are working? Does extended tenure affect director independence, engagement levels, and the creation of fresh ideas? How can the board and management team be more effectively aligned?