This article originally appeared in our sister publication, Private Company Director.
As a director, you’ve digested many articles on best board practices and entertained the sage advice of other board members. Sounds easy: Support the right CEO, engage in strategic planning, align incentive plans, understand risks, demonstrate teamwork as a board and all will be fine. In the area of performance oversight, unfortunately, “as drawn” (on the whiteboard) and “as built” (in the field) can be two very different realities. While reviewing board responsibilities in light of business performance that does not meet expectations (especially over a fair period), directors must fully own their critical role in achieving acceptable levels of business performance and returns, while keeping in mind how to support (not micromanage) a CEO and management team. You must understand and ensure that diving in deep on performance (both good and bad) is vital and is not overstepping your bounds as a director, especially in circumstances that involve underperformance. The right leadership team will understand and appreciate the alignment this generates in achieving better performance.
Here are some perspectives and lessons learned that you might consider while fulfilling your directorial responsibilities to enhance the performance of the business, especially when results are chronically below expectations.
Key board mindsets in overseeing performance include:
- Hope is not a plan. Wishful thinking has no place in your deliberations.
- Strategy without execution does not matter. You must understand if the problem is the strategy, implementation management, the team or all three.
- Data doesn’t lie. Neither does a pattern of underperformance.
- Headwinds can’t become excuses. They must be challenges to be understood and addressed.
- Deep dives drive insight and solutions. Asking hard questions and expecting viable answers is a valued critical process for management and the board, for both great results and waning performance.
- A supportive board is not passive. The best boards are curious, highly engaged and demanding. They ask insightful questions and have reasoned impatience.
- Leadership capability and passion both matter. Prior experience only matters when currently coupled with leadership and management passion for the business.
- Settling for chronic low performance can become the norm. Ultimately, it can be a slippery slope to no performance and loss of shareholder value.
These mindsets are essential to excellence in a board’s oversight of performance. Are these fundamentals present within your board?
On a tactical level, what actions can a board take when business performance has waned over time, and what options might be considered? Here are several key practices that can add value when company performance has settled.
- Leverage candid board discussions to unify board understanding and priorities. Every director has the responsibility to share their views of performance with the group. Use your executive sessions wisely to deepen your oversight and determine if the board is on the same page on performance.
- Be honest with the CEO. Being supportive does not mean unclear, so get direct. You can be firm, sharp and pleasant simultaneously.
- Sharpen board deep dives. If deep dives are not the norm, make them so. Prioritize critical issues, probe with insightful questions and demand insights, not descriptions and excuses. Understand the true drivers of business performance.
- Assign selected directors to team up with management to review selected areas. This is especially useful if the topic is not aligned with a specific standing board committee. This engagement is not micro-management, but a team seeking solutions and committing to improvement.
- Understand successful competitors. Know what is driving their success.
- Consider an independent view of the business. Engage other knowledgeable individuals to take a look. Adopt an investor due diligence perspective.
Performance oversight of the business seems easy when results are great and can also be very clear when there is disaster looming, but what you do in the midst of “uncomfortably settled” performance can determine which direction the business takes in realizing its potential.