How to identify a dysfunctional board - and what to do to fix one

There’s no place for complacency when it comes to a company boardroom.

By Kieran Moynihan Managing Partner, Board Excelen

THE BOARD OF directors of any organisation, whether a company or non-profit/charity, has a major impact on the success or failure of that organisation.

Boards usually have a mix of full-time executive directors, led by the CEO, and independent non-executive directors led by the chair, who has overall leadership responsibility for the board.

When compared to traditional business teams and sports teams who work with each other, day in day out, the board team is unique.

It meets only periodically and has a complex equation of people, which can lead to many boards, even those with quite experienced members, encountering significant difficulties.

Struggling boards often fall into these common patterns:

Lack of trust

The hallmark of any highly effective board is a strong partnership between the executive and non-executive board members.

This balances the critical responsibility of independent board members to supervise the performance of and hold the CEO and executive’s feet to the fire while simultaneously adding value and helping the executive team.

Where this trust level is poor or non-existent, you end up with either the CEO or executive team holding back on critical information and ‘managing the board’, or the non-execs micro-managing the executive team.

Complacency

Many boards can drift into a comfortable groove of going through the motions, doing barely enough to fulfil their legal and fiduciary responsibilities and ultimately letting their stakeholders down by not moving heaven and earth to ensure performance.

Even strong boards can become complacent over time and often benefit from new blood and diversity of thinking.

Group-think

The huge focus in Ireland and internationally on female board member representation is part of the bigger issue of many boards struggling with serious ‘diversity of thinking’ problems.

Many boards still exhibit the traditional model of nine men sitting around the board table in similar suits with similar educational, social and age profiles.

This problem was particularly noticeable in those boards in the financial services sector that performed badly during the financial crisis.

The best boards have a healthy level of debate and challenge with a wide mix of thinking styles across different gender, age, ethnic and professional backgrounds.

Not adding value

A key responsibility of non-executive directors is to add significant strategic value to the CEO and executive to optimise decision-making in the organisation.

In a number of boards, the CEO and executive team fail to genuinely leverage the expertise and independence of non-executive board members.

In other cases, non-exec board members are quite happy to sit back and focus all their attention diving into the weeds of operations and finance. This is not a healthy situation for shareholders, who need a highly engaged board making the big decisions.

Not bringing their A-game

Each board member has a compelling duty and responsibility on behalf of the stakeholders they represent to bring all they can to the board in terms of their work ethic, expertise, judgement, integrity and accountability.

In Ireland, many boards have been overly tolerant in this area. However, internationally there is a huge focus on every single board member continually justifying why they should be on the board.

Resolving problems

While every situation is different and there is no one-size-fits-all approach, there are some steps that boards can take that will, in most cases, help them deal with under-performance:

Identify root causes of poor board effectiveness – this is critical to turn around a struggling board. In many cases, boards have utilised a board review process and external expertise as a key catalyst in benchmarking the current board effectiveness and performance, identifying the key challenges and producing an action plan to resolve them.

Grasping the nettle of problematic board members – many boards struggle with problematic board members who are only going through the motions and not adding any genuine value, while in some cases they can demonstrate overly aggressive behaviours to fellow members. This is not an easy process but vital in cases of serious problems.

Diversifying the board – many boards simply need new blood to shake up the dynamics of the team, bring new thinking and perspectives. We have seen a number of boards in which a small subset of board members become a de-facto ‘mini-board’ within the overall board and effectively make the serious board decisions.

This is very unhealthy and is disempowering for the other board members. Research all around the world has shown a very compelling case for adding more female board members, who often bring a different perspective and approach.

Refocusing on the board’s core mission – some boards have simply lost sight of the fact that they have been entrusted a very critical responsibility by the shareholders and that this can only be properly discharged by an extremely hard-working board team with the right mix of board members challenging each other to deliver outstanding value.

Room for improvement

The majority of boards can improve when they see international best practices of highly effective boards and commit to understanding and improving their effectiveness.

In Ireland over recent years, both in company and non-profit boards, there have been a number of high-profile board crises, as well as crises that were not in the public domain.

In the vast majority of cases, these did not just happen overnight and were caused by a gradual accumulation of serious problems which ultimately resulted in a dysfunctional board letting down the organisation and their stakeholders.

Kieran Moynihan is managing partner of Board Excellence.

If you want to share your opinion, advice or story, email opinion@fora.ie.

Comments