In many businesses where performance does not reach the desired targets you will have finger pointing. It is a natural reaction at all levels, there is always another person, department or group that is the reason why performance targets are not achieved. In my experience, when business performance is lacking the first place I start is at the top, the Board of Directors.
Now you may ask why? You may think that the Board has no impact on daily operations but you would be wrong. The Board of Directors is 100% accountable for the performance of the business. When businesses fail, like GM, Bears Stern and Enron it was the Board of Directors that allowed the business to operate itself into failure. How is the Board’s lack of duty that causes a failure in the business, you ask? Here are some of the reasons:
– Board Member Knowledge Many Board Members believe their skills are enough of a contributor to the business so they do not take the time to truly understand how the money is made. They do not take the time to walk the floors, talk with the employees, they rely on a report from the CEO. The Board does not run periodic surveys or focus groups to ensure that the ethics that the company wants to live by are really embraced at all levels of the business. This may sound harsh but typically a Board Member will show up for Board meetings, review the reports, provide their input, maybe give a few stern words to the other Board Members or the CEO and then go on to the next Board meeting. If you are on a Board of a business ask yourself, When was the last time I went into the company to learn how it processes an order, or handled a customer comment? What tools, separate from the CEO’s report, do I review to ensure I am receiving the 360 degree review of the business? What have I done today to add value to the business?
– Board Member Accountability My experience is that Board Members do not hold themselves accountable to the business or organizations that they are leading. I provided a seminar to a group of business leaders that were on various Boards and when I addressed the topic of accountability and an easy way to hold themselves accountable they questioned why they would hold themselves accountable. My response, “How can you prove good governance without accountability?” One of the benefits at having a cross-functional Board is the diverse skills that provide support to the leadership team to achieve results. Logically when we think of good governance we think of performance metrics (KPIs) that measure performance of the staff. But that is not enough. We all know the saying that the buck stops at the top. Well the top isn’t the CEO, it is the Board. Now some of you may argue that stock value is a way to measure performance; but, this is not a controllable metric by the business as it can be influenced by the international market and individual investors. So in order to have a good governing model the performance of the Board must be linked to KPIs that support the vision/mission of the business.
– Board Member Action What action, other than firing and hiring a new CEO does a Board do when performance is not being achieved? What steps does the Board take when they themselves are not functioning collectively, are politically pushing their own agendas or just attending meetings and collecting a check. I have been involved in multiple businesses, none are perfect and no matter how focused an organization is there are always individuals that will not believe nor work in the best interest of the company; however, this should never be with the Board. Be an engage Board Member. Review policies and procedures and make sure there is no waste. Make sure that employees at all levels have the tools they need to do their job right the first time. Drive an innovation culture where ideas, at every level, are recognized and rewarded by the Board. Where good performance is not based on who you are but the value to the business. When there are issues, focus on the WHY and focus on what the Board can do to improve. Every decision should be focused on the metrics and creating a culture to achieve the vision/mission and doing so ethically. If your skills are not going to drive positive results, then step down.
Good governance is not a group of Board Members who meet periodically to review results with the leadership team. It is about setting direction with performance metrics linked to the vision/mission, working collaboratively with the leadership team to achieve results, ensuring the business operates ethically and transparently, when issues arise change course and create a work environment where the entire team is held accountable and can enjoy positive results, even Board Members.