What next when management loses faith in the board?
When management loses faith in the board, it’s a problem.
Everyone in corporate leadership should know the company’s strategy. But by that same logic, everyone in corporate leadership should be able to recognise when a company’s strategy isn’t achievable.
So, what happens when executive management – perhaps including the CEO – feels the weak link is the board?
For starters, remember that this is an immensely tricky situation. Approach it carefully.
Why would management lose faith in the board?
It’s always possible for executive management to conflict with a board. This is more common and may always be fixable with good communication.
But we’re talking about something more than that. We’re talking about when management believes that the board is not fit for purpose. In other words, they feel there can be no further progress until there is a change among directors.
How could we get to this point?
A skills shortage
Perhaps management feels the board suffers from a skills shortage.
Take the pandemic as an example; it forced many companies to shift their business online. If the board doesn’t have the right digital expertise to advise on company strategy, then an important task is without a key leader. This could spook management.
Lack of engagement
Management may feel that while the board has the expertise to turn strategy into results, it’s not using this expertise, and the company is suffering.
This can occur if most – or all – directors stretch themselves too thin. They may have other board roles elsewhere or live too far away to make a meaningful contribution.
If management feels their goals are being ignored, they will usually stand up and say something.
Not being listened to
Directors usually keep a distance between themselves and their company’s day-to-day work. This is important for impartial judgement, but it can backfire in the form of a disconnect.
If management consistently reports problems on the ground, and the board refuses to listen, this is a problem.
Why would they refuse? They may think the problem is less critical than it actually is. Perhaps their focus on the company strategy blinds them to its urgency.
Board members should go through consistent evaluation, just like any company employee.
Their progress should be assessed against company strategy and performance. If either doesn’t go well, then questions must be asked at the board level.
If management sees those questions remain unsaid, they might feel like a critical link in their leadership chain is broken.
What should happen when management loses faith in the board?
Communication, reasonable judgements and humility – remember all three.
Everyone has a role in this kind of impasse, from executive to board. Of course, every situation will vary, but consider the following as a rough guide.
If the management team feel the board is not helping achieve company strategy:
- The CEO should communicate this to the chair of the board. They should do so having spoken to other management personnel so that they can present a complete and thought-out collection of feedback.
- The chair should acknowledge the criticism and convey the feedback to the board – if necessary, alongside the CEO.
- The board should self-assess and then flag the issues raised with the committee responsible for board roles, appointments and succession.
- Throughout this process, directors should remember to keep things professional. Having a management team doubt your capability can be daunting, and it’s easy to take things personally, but don’t! Strategy is the core focus, not personal records.
- If the above process produces recommendations for changes, they should be communicated to shareholders with clear reasoning and a blueprint for ‘how the change will make things better.’
Keep a cool head if your board is on the receiving end of management criticism.
It represents nothing more than discordance, not a personal attack. It could be solved through discussion or board changes, but ensure a consistent communication stream goes through the proper channels at the right time.