Five signs of a dysfunctional board
There are five key signs that you are sitting on a dysfunctional board. Here is a brief catalogue of red flags that should spur you into action when you spot them.
1. No firm ability to make decisions
The board’s primary goal is to be able to make decisions that benefit the company. It fails in its primary duty to shareholders if it can’t do this.
Indecision can occur for many reasons:
- The board might be a hotbed for arguments. This is a failing in itself. Boards should not become swamped in personal disputes.
- The board has no structure. Meetings are not run according to the agenda nor kept to time. As a result, important decisions are repeatedly pushed back, leaving other stakeholders waiting, often frustrated.
- The board doubts itself. No director wants to take ownership or initiative with a significant decision. This could arise when the decision calls for specific expertise that the board doesn’t have. As a result, they collectively adopt a hands-off approach.
2. No challenges
Boards of the past would regularly offer no challenges. They were expected to be a team of ‘yes-men’, rubber-stamping the executive’s decisions.
Modern governance has flipped that on its head. The ‘yes-men’ approach of the old days would be considered dysfunctional to most stakeholders nowadays, and why wouldn’t it?
Boards are hotbeds of experience and skills. Their purpose is to challenge decisions, embrace new ideas and be open to them.
If your board meetings pass without challenges, without any debate whatsoever, your company could easily be unaware of lost opportunities and serious risks.
3. The “second board”
It’s said if a large gang of friends has a group chat together, a smaller cohort will inevitably have a separate one between themselves.
This can and does happen with boards too, except it’s not advisable and should definitely be considered a red flag.
Why? Because it’s disrespectful. If some board members meet separately and make decisions independently, it fosters hatred, resentment and arguments down the road.
One of the keys to a good board is open, honest communication. You can’t achieve this if some of your group try to separate themselves from the rest in secret.
4. Too much day-to-day
Remember that while boards work with the executive, they are not part of that executive, and there’s a reason for that.
Generally, boards should refrain from getting involved in the day-to-day running of a company. This clouds their vision and restricts their ability to think critically with a top-down view of the company’s progress.
Of course, some directors are executives and so will have more day-to-day work. Just ensure the board as a whole can still think with a wide lens and long term.
5. No one turns up
Some directors indeed value their positions more than others. To many, it’s just an addition to their CV.
Often, these people will miss meetings and offer little input on strategy or issue resolution. They may also have other board roles – sometimes many others – meaning their capacity for your company is limited.
If you see this happening with multiple directors, sound the alarm. It’s not good for governance.
What to do if you spot these five signs of a dysfunctional board?
Begin work to fix the dysfunction. There are many ways of doing so, depending on what your problem is.