Bobble Head Boards of Directors

Recently, the executive director of a nonprofit conservation group resigned, and a new one needed to be recruited. The chairman of the board said she was interested in applying, and the board made her acting executive director while the hiring process was underway. She was eventually offered the position. When the staff found out, a revolt started. The board did not know that the employees hated working for this person. The offer had to be rescinded, and a new search began.

Had no one on the board asked the employees for input?

I have sat on a number of boards of directors, both for business and nonprofit organizations. Although they are considered the most powerful link in the chain of business, I believe they are the weakest element. Remember Boeing, with all its quality issues related to the 737MAX, military air refueler, and spacecraft? The CEO of the company said that the board was up to date on these issues when, in fact, the board members were not, according to a report in The Wall Street Journal. We Work, the commercial real estate company, is another good example. The founder and board member did not attend board meetings given he was surfing in the Maldives. No wonder JP Morgan CEO and We Work board member Jamie Dimon’s aorta exploded.

Given what board members are paid in the for-profit world, you really scratch your head. The Wall Street Journal reported that the Boeing BoD members receive over $300,000 plus stock and options. That is a lot of change.

And, yet, I have seen too many boards of directors become bobble head boards. Come in for cocktails and dinner, listen to misleading PowerPoint presentations the next day, and go home. Maybe a committee or two.

Why? Filtered, often misleading information (especially if the chairman of the board is also the CEO). For example, as evidenced by the Boeing fiasco, stock price becomes the sole focus, and destructive forces can exist without a BoD knowing anything about it. If board members are not out and about within a company, they will never pick up on these until late in the game when issues become costly.

Simply put, board members should focus on three things: execution, growth, and risk. In most board meetings I have attended, the agenda usually begins with a reading of financial results. Why not start with real action and results that bring forth the financials instead and discuss them within these elements? Without their story, they are just numbers.

Execution

Every organization has programs that are being executed in terms of its mission. It is imperative that these are understood. Quality, schedule, budget, problems—these are elements that need to be reviewed. I have seen rot begin at the program level and spread like a virus across an organization. A good board member will talk to staff three or four levels down, outside of a board meeting, to see if what they are being briefed on is, in fact, true or slanted. Board members have a license to go anywhere in an organization. They are not an organizational element, so there should be no paranoia over politics.

In addition to employees, board members need to meet with customers to see what they think of deliverables/products. Again, this requires going down several levels to fully understand customer opinion. Board members need to be able to ask direct questions and have a good BS detector. Once you get a true picture of programs/products, only then will you understand if the financials you are looking at are accurate.

Growth

An organization is either growing or dying. There is no stasis for any for- or non-profit entity. To stay alive, growth may mean 1) getting bigger in size and/or 2) getting bigger in scope, changing and adapting to a new area as the world changes around the organization. Within that growth, missions are accomplished and decisions are made to disband or establish a new mission.

Here, again, board members should drop down a few layers in the organization to ascertain how growth opportunities are progressing. They should also be on the lookout for entrepreneurial initiatives by staff that may be a diamond in the rough overlooked by the company at large.

Likewise, they should be on the lookout for pet projects that have no potential. I can’t count the number of times I have seen CEOs support lackluster staff or chase a dream while solid opportunities are lost for lack of funding. If the board members had just walked around a bit, this goose chase could have been killed early on. (Often these ventures are the brainchild of the CEO, so it had to be the board members who would see the light and kill them.)

If the growth is a bid for a contract, then board members should be active members of the marketing effort. This includes meetings with senior staff of the potential client, team members, and others. Board members should have relationships that can help get the data necessary for a winning bid. Business development is part of their portfolio.

Risk

This is where boards really miss the mark. Most board members do not have the filter to understand where the risks lay or see the risks in front of them. That risk filter is gained mostly through experience, either directly or indirectly, such as through watching others.

And these days the risk landmines are more extensive than ever. They used to revolve around financials and playing with the books. Now, the risks are far and wide. They include sexual activity between various levels of staff, morale, HR complaints, having special interest groups for all the flavor of employees, cybersecurity, pay and bonus scales, harassment… The list goes on.

Boards represent the shareholders. (For nonprofits, I assume that is the donors.) And to truly represent the shareholders and protect the business, board members need to be proactive walking the halls and talking to employees and customers. To increase and grow share price, they need to know the business, learn, not be afraid to ask the hard questions, and be able to peel the onion until they get the data and facts required to make informed decisions.

This requires time and effort, which is why it is time for board members to stand up and do their jobs. Too many times, they are protectors of management instead of what they should be: protectors of the companies for which they are responsible.

Pat