Successful enterprises are always balancing between staying the course with a clear commitment to a proven plan and innovating and changing because of new disruptive forces or changing circumstances. Boards, in concert with the CEO and leadership team, govern strategic direction, execution and performance results as well as the risks and opportunities that come with changing market conditions. Management leads and oversees execution of agreed-upon plans and drives for the results expected. Just another day in the life of a private mid-market company competing for customers, meeting its numbers, ensuring its future and keeping shareholders satisfied, right?
Today, it’s simply not always that straightforward. There are likely business disruptions emanating from both internal and external conditions that boards must address. Your board may have experienced some of the following:
- An unexpected CEO departure
- Shareholder concerns about performance
- A generational shareholder change in a family-held business
- Leveraged lender concerns in a PE-backed deal
- An unsolicited buyout offer from a competitor
- Unexpected sales declines
The list goes on.
Today, every board needs to embrace the obligation to be a transformative board, one that is driving constant performance enhancement, both in good times and in challenging times. A transformative board can lead by example and be a catalyst for innovative competitive change when your business is strong so it can get to the next level. A transformative board is certainly essential when abrupt changes and challenges disrupt the status quo. What can a board do to be a more agile, transformative agent of change to guide the success of the enterprise? There are no “one-size-fits-all answers,” but have your board consider these principles and questions to become a better, more agile transformative agent of change.
Effective transformation requires simultaneously being loose and tight. Transformational agility requires a board to adopt loose and tight perspectives and practices. Boards need to be loose, or unconstrained, in exploring options and alternative pathways to success in good times. They need to be loose in considering solutions when dealing with a pressing disruptive situation, not restricting themselves unnecessarily. Are your board discussions and deliberations on the big issues robust and fully formed? Do they command the timeshare and mindshare that they should vs. board reporting and administration? Are they constrained by the formal agenda of form over substance?
Boards also need to be tight, or disciplined, in the quality and rigor of the analysis and critical thinking for committing to a new action or in reviewing performance of the business. Do you invest in the time, energy and analytics required for addressing the opportunities or issues you have determined to be transformative or disruptive?
Agility requires being lean and prepared. Is your board too large to be effective? Do you spend more time updating and informing and less on probing, exploring possibilities and debating selective initiatives? Does your board have all the lean muscle mass where you need it? In other words, does it have the right talent and athletic ability to go fast and far as a board team when needed? For private companies, the right 5-to-7-member board can be much more agile and transformative than a 9-to-11-member board. You can hire specialists when needed, but you always have to have the best thinkers and business builders on your board team. The right team of board members will come together being fully prepared to engage as opposed to just updating or rehashing old ground. As legendary football coach Bear Bryant once said, “A good, quick, small team can beat a big, slow team any time.”
Foster a culture of constant curiosity.Does your board environment encourage questions and curiosity? Are questions welcome to help examine, explore and engage during board discussions (but also with management) or are they seen as time-wasting, second-guessing and irritating? Using language like “Have we considered…”, “What if we tried…”, “Help me understand…”, and “Why is this critical…” should be the norm. You might be surprised by the solution orientation, new discussion and committed conviction it can generate toward effective transformation.
Act like a friendly activist shareholder. Your board needs to be a catalyst for objective performance management and for driving the improvements or changes needed to be a leader company as opposed to a follower company. Activists don’t accept the status quo without question. They do the work to have spirited discussions. The transformative board does the same. A transformative board should be welcomed since the business cannot have a better, more well-informed, more consummately prepared and truly dedicated steward of the business.
Don Yee has been an independent director of numerous companies. He currently serves as chair of Aerometals, and on the boards of TotalMed, Lundberg Family Farms and the FAT Group. He has also served as the CEO of multiple private enterprises from mid-market to multibillion-dollar enterprises.