The board process is mythologized to be rational, measured, data-driven, and evaluative.  Directors have a clear set of tasks - evaluating and compensating management, evaluating and approving strategy and capital allocation, reviewing financials.  Disappointing outcomes are usually reduced to charicatures - bad leaders, lazy boards - and directors are exhorted to be more “vigilant” and to be better at “challenging management.” 

 

The reality is completely different. 

 

The issues that determine value in organizations are ephemeral, qualitative, and difficult.  They’re tied to people, visions, experience, intuitions, convictions.  Opportunities are inseparable from the leaders that create them.  They job of discussing, evaluating, and evolving them can be difficult - and the issues can be truly unresolvable.  It’s easy to imagine a board debating and evolving a policy.  But what happens when that policy springs from a personal conviction, that’s tied to the DNA of the leader?  Can you really adjust, evolve that?  What happens when a great vision is combined with difficult instincts in other areas?  Sometimes there’s no good answer.

 

Issues affecting value come in all shapes and sizes.  They come at unpredictable times. Often, confronted with a development, the first challenge isn’t finding the right answer - it’s deciding whether to engage at all.  How do you size things?  It’s often unclear.  A controversial hire could be a blip - or, it could have ripped effects through the organization.  So - there’s an ever-shifting, unclear territory for board engagement.  Ask any board member, any CEO:  the lack of clarity is ever-present, and constantly frustrating.

 

Boards themselves are difficult, political bodies.  They’re groups of peers, comprised of individuals each with their own beliefs, prejudices, and personalities.  They’re governed by a structure that’s well known for its inefficiency and proclivity to behavioral pathologies.  Groups develop unconscious  biases and shared belief systems.  Micro-cultures arise, with unspoken behavioral norms.  Groups tend to resist new outside information.  And there’s the underlying problem of joint responsibility:  the board’s collective liability for outcomes usually translates into no felt individual responsibility.  When everyone’s culpable, on a team, no one is.

 

Shareholders - who have the right to offer viewpoints, influence the process - do so irregularly and based on a perspective that’s fundamentally at variance with those inside.  Their different perspective can add value - but it can completely miss the nuance of culture, legacy, and other intangibles issues critical to achieving success.  Unfortunately, often in public companies. the shareholders who appoint themselves as guardians of value have self-selected to be resistant to deep discussion (or even to polite exchanges).  So what could be a useful exchange of views instead becomes a mud-slinging contest.

 

Leaders are tasked with engaging with boards - and they typically want support and even challenge.  It’s lonely, as they say, at the top.  But - they don’t want semi informed challenge from board members acting as “watchdogs.”  Nor is it easy to deal with multiple directors each with own opinion and agenda.  It can be an incredibly stressful process and an unpredictable le one.  Conversations about a new strategy may evolve over weeks, and opinions shifting as semi-informed board members debate amongst themselves the nuances of policies that they do not live every day.  So leaders often step back and try to avoid that kind of real discusison, substituting instead elaborately choreographed, contaied presentations that drive out debate..  

 

These behavioral realities drive 80% of board outcomes.  Over the years I’ve observed and  cataloged the results.  They range from low-level dysfunctions - for example, an issue un-addressed because of an ongoing, unexpressed deadlock in viewpoints - to full-on crises brought on by a series of flawed communications, relationships, and group dynamics.  It’s not unusual to see a boards make a decision at clear variance with any rational outcome - one that no individual member would've said was possible.  

 

This isn’t meant to indict the people involved:  that’s the whole point.  The complexities of the process overwhelm well-intentioned, intelligent people.  And there’s usually an overlay of denial, because boards are comprised of highly functional and successful people.  They aren’t used to being defeated, particularly by a group process.  

 

You might respond that:  people are people, of course its messy and complicated, but so what?  There’s nothing to be done about it.  But that’s not true.  First:  there are systematic pathologies - ways that people and groups consistetly fail to get these things right.  Those can be addressed through creating a different culture and process. Second: with enough experience, watching may groups. one can start to see around corners a little bit - to find core problems and road blocks, sort out conflicts and misperceptions, identify where value lies, and find a different way of navigating there.  That’s what I’ve tried to help accomplish in my involvements over the years.

 

Programmatically, I advocate to shift board culture in a direction that flatly contradicts the received wisdom.  We don’t need more watchdogs on boards, there to guard against financial irregularities and wrongdoing.  We need more coaches, there to help build great companies.  We need deeper engagement and partnership:  directors who  are deeply involved, passionate about the business, emotionally honest, and who lean and work closely with leaders.  In that kinds of culture everyone engages in an entirely different way: focused on working together, tolerant of each other’s flaws, focused on value creation - .everyone in search of the same thing.  You can ask the CEO any question if you’re a friend, coach, and partner - you can’t if you’re an independent watchdog, judge, and jury.  It’s kind of that simple.  

 

A culture expecting and attuned to wrestling with complex problems, and to addressing the emotional and personal difficulties of doing so, can dig deeper without creating conflict.  Board members acculturated in empathetic engagement can be more aware and more helpful without creating tensions for leaders.  Problems can be identified and fixed earlier; new opportunities, that would have been passed over, can be seen, investigated, and vetted.  Conflicts are lessened because there’s a presumption that value is enhanced by intense, curiosity-driven discussion (which doesn't have to feel like debate or challenge) and by shared new perspectives.  Leadership is strengthened by a process that elevates decision-making.  The organization is smarter - because more minds are working together to find the right answer.