How often do we hear boards discussing the type of skills they’d like to attract … ‘Wouldn’t it be great if we had an engineer/micro-biologist/blockchain expert on the board?’
I’m fully in favour of making sure our boards have people with the right skills and experience for the business. We’ve all heard of corporate train-wrecks where their absence has been a factor: insurance companies with no insurance or risk experience; building companies with no construction experience; even banks with no bankers (as we found after the 2008-2009 GFC). You need at least some of your board members to have experience in the industry, so the board knows what it needs to ask – in the cliché of some years ago, to move from the unknown unknowns to the known unknowns – and, crucially, to sense whether the answers from management pass the ‘sniff test.’
If I were on the board of an insurance company, for example, I could ask how much reinsurance cover we should hold; but, without experience in the insurance industry, I wouldn’t know whether the answer I received was reasonable. So I’d want to be sure someone else at the table had that experience.
All very reasonable. But, as always, we get unintended consequences. If we have a board with several experts in specific disciplines, we need to watch out for how much we’re really behaving as a committee of individual experts, compared with how much we’re genuinely working collectively as a board of directors.
Secondly, if we have the recognised subject authority around our table, and they offer their opinion (especially when it comes as a statement, rather than a question), who dares to disagree or challenge? And, if we do, does the expert then become frustrated? We need to remember that, as directors, we all have a duty to review and test the information we receive.
This is all manageable, as long as we stay aware of our role.
But what about those organisations, often NGOs, smaller and resource-constrained, which attract heavy-hitters to the board who are better qualified and connected than the managers employed in the organisation? To take advantage of this – the experienced finance, marketing or fundraising board member – we may engage them as cheap (often free) consultants, or set up a committee, in order to strengthen the operational function.
Here’s the trap: your expert or specialist is a board member, so the committee we establish reports to the board … right? Wrong – for two reasons:
- If the committee reports direct to the board, who’s really running the business? How can your CEO influence the committee’s activity if it reports direct to the board, and what happens if s/he doesn’t agree with the committee’s recommendation?
- If the committee’s recommendations turn out to be flawed, and it all goes wrong, who do you hold accountable? You can’t penalise your CEO, who wasn’t responsible for it … and who governs the governors?
I like to draw the distinction between
- Genuine board committees (such as risk, audit, people & culture): these consist entirely of board members and provide recommendations for the board’s decision; and
- Those committees we set up mainly to strengthen management capability: they contain one or more board members but probably also members of the management team.
These ‘management-support’ committees need to be accountable to the chief executive, not the board, so that s/he can decide whether to support or implement its recommendations – as with any other management proposal – and in turn can take responsibility for its success or failure.
This of course requires board members to accept that, when they’re acting in this way, they’re not doing so as board members, but as subject matter specialist advising management. Your board member needs the flexibility (and humility) to accept that it’s up to the CEO whether or not to accept their advice.
However, a cautionary tale: I once chaired a board in the performing arts sector (an industry, our CEO once described to me, of ‘nuts, sluts and perverts’). Our board included several passionate, larger-than-life personalities, some of whom were also expert in fund-raising and marketing (and, as far as I know, none of the above ‘attributes’). We established a couple of committees to support our over-worked and under-resourced management team. One of those committees worked as planned.
On the other, however, one board member simply couldn’t accept that she wasn’t the boss: “But I’m a board member …”
I thought we’d be able to manage this at the board meeting. Instead, we found that the board member, with whom the CEO had disagreed, had become our “hammer” (“When you’re a hammer, everything looks like a nail.”). Despite our/my best efforts, we couldn’t get her to modify her behaviour. In the end, we didn’t simply take her off the committee – she had to leave the board. So, even if you get it right in theory, it doesn’t always work as planned.
As I say, having the subject matter expert on your board can be a mixed blessing.
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