Why Boards fail
Every year we read news stories about businesses, charities and governmental organisations that have catastrophically failed in some way: whether it be financially, ethically or in delivering services.
These episodes unfailingly end with leaders taking accountability and departing the organisation.
Ultimately, almost organisational failure is a Board failure: somehow the governing Board has missed something crucial that they should have spotted. But why do Boards fail, and how do companies protect themselves? What are the signs to watch out for?
The lynchpin of any Board is its Chair. The Chair has an essential role in both challenging and encouraging the Executives to delivering their objectives. The overall role of the Chair is as leader. It’s a demanding position, both in terms of responsibility and time.
Does your chair dedicate the right level of time to the organisation? Do they have frequent one-to-one meetings with the CEO? Are they equipped to stress-test the strategy and decision-making of the organisation?
Equally, there could be a weak links within the rest of the Board. Perhaps one individual doesn’t gel with other Board members or demonstrate a sufficient level of commitment. Or is there someone who simply isn’t enjoying their role? In many organisations there can be one or more Board members that have been appointed for historical or political reasons. If they’re not delivering on their objectives, however, it’s time to address it.
Does the Board have complete and clear direction over what their processes are and how they govern? It’s one thing to list the areas that the Board must oversee, such as financial performance, operations, risk management and reporting – but often it’s another to translate that into the realities of roles, responsibilities and accountability.
Does every area of the organisation have a link to the relevant Board member? Does everyone know how to escalate an issue and make the right people aware?
It’s not healthy for an organisation to be led by the same governing body for decades. It demotivates the Board members and opens you up to risk should someone decide to leave. Some organisations set a time limit for serving on the Board, which creates a succession planning process – where people are identified and developed so that they are ready to step up when the time comes.
Having to urgently find a new Board member after a departure can lead to hasty and poorly-considered appointments. In turn this will affect organisational performance.
The warning signs
There are a few indicators to watch out for. First is to ensure that all Board Members are sufficiently prepared for every meeting. A Board member that lacks commitment or time is not going to be doing their best for the organisation.
The dynamics of the Board meeting are also important. Does the Chair command respect among their colleagues? Do they retain control of the meeting? There are often robust conversations at this level but, while healthy debate is desirable, unprofessional behaviour such as bullying, laying blame and discounting someone’s opinion are all red flags.
We’ve observed that the Board should not remain too static – but high turnover of members is also a warning sign. You should seek to understand why a Board member leaves to help identify any negative root causes.
At WIL Group many of our Interims have substantial experience of working at Board level and we are often called upon to shore up unstable leadership and address risks and issues. Often, a failing Board can be turned around fast with greater structure and a change in dynamic. It can simply be a question of external help.