BERKONOMICS

Boards of directors have a number of important functions, both legal and structural.  Boards provide or see to it that there are resources for the company (especially money) to operate.  The board selects, monitors, helps, and oversees compensation for the CEO.  The board can replace an underperforming CEO.  The board is responsible for approval of all deferred compensation for all employees at all levels, such as stock option grants, and is responsible for the vision and strategies for growth and protection of the corporate asset.

The CEO has every right to expect his or her board to help with issues when asked, particularly when board members have associates, friends, or contacts that they believe would be able to help solve a problem or provide a service requested or needed by the CEO.

We used to call these contacts collectively the “golden Rolodex,” but long since have had to replace the name since there is an entire generation of management unfamiliar with the circular Rolodex.  (No, that is not the watch company, if you are one of those.)  Board members each have a collection of associates who, because of their relationship to the board member, usually would be willing to help provide a solution to a problem when called upon.

[Email readers, continue here…]  It is one of the most useful services some board members perform in any organization.  Because of the value of these contacts to the board member, it is important that these contacts not be misused by the CEO, and that each offer is followed up with at least a first contact when a name is offered.

Some of your board members will have and offer more relevant contacts than others, and you will soon learn the importance of keeping those board members in closer contact and better informed between meetings.  The intangible resources they provide can easily lead to finding ways to reduce time and cost to market, to find valuable new employees, and to find new customers who will listen to your pitch because of their relationship with the board member.   People you could not reach yourself are sometimes quite willing to listen and help because of those relationships.  So use the board for outreach.  As long as not overused, your board members expect to be asked, to offer and to encourage use of their valuable contacts.

It happens. Boards are elected by the shareholders, sometimes with preferred shareholders holding seats by right of their investment.  In that instance, often the investor selects the board member and the CEO goes along with the choice, mostly out of having no alternative at the time.

Then there comes the first – or better yet the fourth – meeting of the board following the appointment of a new member.  Remember that the board must by law be acting completely on behalf of the best interests of the company, not the investors, in all deliberations of the board.  For the first several meetings, all parties usually play nice as they get to know the company and each other.

Some board members come to the table with preconceived notions about the capabilities of current management.  We have explored this in previous insights.  With this insight, we are dealing with board members who are dominant, obviously hushing their peers and often interrupting, or those always anxious to change the subject to their own agenda during meetings, including challenging management by attacking individuals (called argumentum ad hominem), rather than their ideas and statements.  And some board members are just bullies, alienating the rest in a single sentence or meeting.

[Email readers, continue here…]  If you have never experienced such a board with members out of sync and out of sorts with each other or the rest, you have been lucky.  But you have missed one of the great challenges of your business career, depending upon the importance of the board, the size of the company, and the immediacy of decisions resulting from these events.

If you are the chairman, the CEO or lead director, it is your responsibility to return the group to the core issue and even move to another agenda item if running the meeting.  And if that does not work, temporarily adjourn the meeting to speak individually (and alone) with the offending board member out of earshot of the others.  Describe how the actions of that person affect you and how you see them harming the board itself.  If you get nowhere and you believe your cause to be just and perhaps representative of the group, return to the meeting and air the problem out with the entire board.

What if the person continues with his or her personal agenda or continues to disrupt?  I have had this experience more than once.  The solution I chose was to approach the VC, or another partner of the angel group, and explain the problem.  I would do this only if the problem was seen in consensus by the rest of the board.  In one instance, this brought about a replacement board member much more attuned to the duties and culture of the corporation.  In the other, the offending board member did back off in subsequent board meetings.

Designated board seats cannot be changed because of investment documents. In the worst of situations, you might ask another partner of the investment firm for an alternate board member. For non-designated board seats the solution may be to propose a slate of board candidates without the offending person to present to shareholders for a vote at the next annual meeting, if board members are elected annually.  Alternatively, it is effective – even if confrontational and emotional – to just ask the board member to step down and allow for another to be elected.  And if that person is the CEO, the board will find a more effective solution not at all to the liking of the CEO.  That too has happened in my board career.

In one extreme case, I was a member of a public board whose members could not agree on anything substantial, each claiming that the value of the company would be damaged in the market by proposed actions.  In this case, the board was not held together by a strong chairman or CEO.  I felt it my duty to suggest, then strongly support, discussions about merging with another company, which the board ultimately did.  In a merger, egos sometimes dictate who survives at the board level (and at the CEO level), and offending board members from one company are rarely retained.

Board members can be very professional in comportment and in their exercise of their duties.  Or not.  Putting up with bullies, or those with obvious conflicting agendas not in the best interest of the company, is a step toward mediocrity.

Who is responsible for the vision that drives the company? This is arguably the primary job of the CEO, with agreement from the board.  Many entrepreneurs after taking outside investment defer to their board for matters of direction that include setting the vision, as well as executing the plan.

Here is a general rule:  The CEO sets the sails and points the ship, creating the vision for the company.   The board provides input into that vision, testing it against their experience and reason, and challenges it as a part of its duty to protect the shareholders and care for the corporate asset. The board then assures that management receives or has resources to affect the vision, monitoring progress at each step.

[Email readers, continue here…]  The board does not get involved in how the job is done, but rather why it should be done and perhaps when it should be completed.  Once the members, unless invited in a consulting role, involve themselves in execution of the plan, management is robbed of its principle responsibility – execution of the plan approved by the board.  When that happens, even a good CEO will pause and defer to the board before making strategic operational decisions, slowing the progress, perhaps endangering the company, by allowing competition to gain ground, and sometimes ceding some control to board members who are remote from the operation and may not be the wisest of advisors in each situation.

This may be news, but boards of directors can offer bad advice. A typical board is composed of five persons in a company that has received outside funds from professional investors.  Two members usually represent the founders or management, two are from the investors, and one is often elected by the four to represent the industry in which the company works.

The financial investors typically have deep experience running companies, often in other industries.  The fifth board member often is an expert, but not an executive with operational experience.  Realizing that this description is a generalization that fits some, but not all, growing firms, the dynamics of the board are a key component in the effectiveness of advice and leadership given by the board.

[Email readers, continue here…]   It is not uncommon for the founders or executives on a board to defer to the three outside board members, responding to questions and defending previous actions. All this is proper to the extent that the two founders or executives do not leave their brains at the door when attending a board meeting, acceding to the suggestions of board members as if each were a direction or order.

I still recall vividly the board of a young company that was composed of the entrepreneur and four investors, each of whom had differing thoughts on how to use resources to grow the company, giving mixed signals to the entrepreneur who wanted greatly to please each and all.  That company embarked upon an expansion drive before perfecting the operation in its first city, as a result of the board’s direction to the entrepreneur, which was against his better judgment although he remained relatively quiet and certainly compliant.  “The board knows best” is not always true.  And in this case, the company over-expanded, did not have the resources to fix problems at its new remote offices, and died a slow death from issues of control and quality, all of which might have been mitigated had the company spent more time debugging the first-city operation.

This one comes straight from football.  From experience and from information about the competition, a coach creates a playbook that contains detailed plans for actions or plays that the entire team must know without question and execute without pause in order to win games and advance toward the playoffs.

What is different about you as a manager?  If you manage with your team knowing the intended results of each action, and if the members of the team have not honed their skills at execution of their tasks, then you are the coach without a playbook.  And if you have a plan but do not share it with your direct reports, then they are acting without motivation toward mutual goals, without metrics to measure their progress toward the goals, and without the leadership that makes great winners.

[Email readers, continue here…]  So what does your business playbook look like?  How do you create and update it?  Who gets to see it?  Again, there is a great parallel in football coaching.  The coach creates a playbook from experience and research.  He drills the team again and again in execution of the plays from memory and without pause.  He keeps metrics for each team member to see, including yards gained, passes completed, games won.  He compares these metrics to past seasons, to competitors, to his own lifetime bests.

You as a business leader are the coach for your team, no matter what the size.  Trained employees execute their tasks better than those who are not.  You are responsible for the training and for the outcomes both for individuals and the team.  You set the goals and develop the metrics by which your team is measured against those goals.  You publish the metrics, and use them to focus and align your team to perform even better.

You develop, train, measure, and reinforce successes, all based upon your coach’s playbook.  Unless of course you have no playbook and are just a fan in the stands without a clue, cheering for a team you know and love but do not effectively lead.  All because of the playbook you should have created, shared, and used as your team’s guide to success.

It is hard to hide incompetence behind appearance or personality when you are a virtual manager.  In a virtual environment, people measure you mostly by your actions, and remember only the most recent good work you’ve done for them and for the organization.

Today, many companies hire great managerial talent who commute from a remote home location. Often, such senior managers start with a four-days-here, one-day-from-home plan that slowly degrades to two then sometimes three days operating remotely.  And some senior managers are quite successful at driving innovation, vision and excellence from a distance.  Some companies are operated entirely virtually and there is no other way to manage.

I’d suggest that the quality of a senior manager who must control from a distance must be higher than one always on the spot in front of middle management and staff. And I’d think that not every such remote manager is able to rise to the occasion, constantly creating a sense of urgency and a push for excellence in his or her absence.  One thing is for sure. The risk of failure is higher when a manager is often absent from the scene of the problem, no matter how strong the person’s skills at delegation and no matter how competent your employees are, one level down the ladder.

[Email readers, cintinue here…]  If you find yourself having to share your time between a distant location and home base, whether because of constant travel or living in a remote spot, you should redouble your energy – focusing your people at all levels toward being able to make decisions with skill and confidence.  You should hone your skills of delegation with accountability, and practice your communication skills so that short communications count more than ever.

And you should find ways to focus your people upon your vision of excellence without seeming to merely be a cheerleader encouraging from the sidelines.  Some great managers do this by keeping a mental or physical list of several, perhaps three, key performance indicators for each direct report, and quizzing about progress in regular planned or chance meetings.  Others keep a dashboard that alerts them to excursions from expectation and permits more management by exception.

It’s all about your performance, especially when you’re physically absent some or much of the time.  Take a few minutes to think about ways in which you can creatively leave yourself behind when you are absent, encouraging others to feel your sense of urgency directed toward achievement of your vision, even in your absence.