What to do when there's board trouble

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The effect on an organisation when big mistakes hit the headlines can be very destructive – and you don’t have to look much into the recent past to see some high profile examples.

These include G4S and its staffing problems during the Olympics and Bob Diamond’s resignation from Barclays bank following the rigging of the Libor inter-bank interest rate. 
 
In both instances, the companies came under intense public scrutiny and the chief executive and board faced public censure due to a mix of inappropriate decisions and the failure of internal processes.

The effect on staff morale would also inevitably have been significant in both cases. In such scenarios, employees tend to either be cynical or defensive. But, either way, it is imperative that leaders find ways to rebuild their morale - and the confidence of the public.   

 
A key question is, however, how do things get to this situation in the first place and how can HR directors best support senior executives in order to prevent such crises from ever happening again?
 
One of the problems is that a lot of board directors gradually distance themselves from the day-to-day running of the company, even though, it could be argued, close involvement is essential if they are to remain focused on the business’ future. 
 
If board members remove themselves, however, the danger is that they start to focus only on what is going well, at the same time taking a joint, unspoken, decision to avoid the really difficult issues.
 
The ‘ivory tower’ problem can be compounded by the power factor. Unless the board actively asks for information and feedback and sets up two-way communication channels with different parts of the business, it is unlikely that they will hear any negative feedback. 
 
Reflection, feedback and external input
 
But the question then is, who is going to risk their neck by volunteering bad news to a director who hasn’t asked for it?

Bill Gates put it succinctly when he was Microsoft’s chief executive: “Sometimes, I think my most important job as a CEO is to listen for bad news. If you don't act on it, your people will eventually stop bringing bad news to your attention - and that is the beginning of the end."

 
Without regular reflection, feedback and external input, the temptation for senior executives to congratulate themselves on how well they’re doing can be huge.
 
By definition, they have had very successful careers to date and, unless they are blessed with a high emotional intelligence quotient, their previous success can blind them to any current shortcomings. As Bill Gates put it: “Success is a lousy teacher. It seduces smart people into thinking they can't lose.” 
 
But in a small, closed team, it can be difficult to go against the prevailing group opinion - particularly if the chief executive is a strong, dominant personality – which means that groupthink can prevail.
 
So how can the board communicate effectively with its workforce and find out what’s really going on? In a Harvard Business Review article on boosting the effectiveness of company boards, one of the key recommendations was that directors spend significantly more time in the business. 
 
This, it said, was particularly important if they came from third party industries or had recently joined the company. The author explained: “Directors must invest significantly more time than they currently do learning the business and monitoring internal developments and external circumstances that affect the company’s business.” 
 
Vineet Nayar, vice chairman and chief executive of HCL Technologies, in his book entitled ‘Employees First, Customers Second’, likewise described how he changed the firm’s culture by asking people at all levels for their honest opinions – about the company, its products, its strategy and its managers and leaders. 
 
Learning and self-development
 
Nayar believes that the only way a leader can truly understand what is happening and what needs to change is by asking people on the front line. 
 
“At HCLT, we focused on one specific trust-building action: pushing the envelope of transparency,” he said. “As we did, we found that most people within the organisation know very well what’s wrong with a company, sometimes even before management does; or at least before management is willing to admit it.”
 
But most senior executives are also likely to benefit from gaining an awareness of their own strengths and weaknesses as a basis for undertaking focused development. In a short but powerful article, Marshall Goldsmith, a writer and experienced executive coach, exhorted senior executives “to help others develop, start with yourself”. 
 
He pointed to the chief executives of successful corporates such as General Mills, Johnson & Johnson and Dell, who have clearly and unambiguously declared their commitment to learning and self-development in order to lead their companies more effectively.

Another Harvard Business Review article, which was ostensibly about CEO succession planning, also made some useful points to help guide HR professionals in making board members more effectual.

 
It defined the key skill of senior executives as leadership judgment. This concept was broken down into four core responsibilities - personal, team, organisational and stakeholder judgment – against which directors should be defined and measured and given the necessary support to meet.
 
What this all means, in summary, is that a key HR director role is to help the board lead the company more effectively and protect it against potential PR disasters by:
 
  • Ensuring that senior executives undertake transparent and open two-way communications with the rest of the workforce
  • Becoming a trusted advisor, facilitator and communications channel for directors 
  • Ensuring board members understand their own competencies and skills gaps and demonstrating how developing the right expertise can make a real difference to the future of the organisation.
 
Jo Ayoubi, managing director of 360 degree software and services provider, Track Surveys.

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16th Oct 2012 12:37

A valuable and interesting blog with some useful advice, but reading through it does assume that the Board listens to HR and acts upon recommendations. I am in a position where I am part of the Board, yet fellow Directors still struggle to see HR as a commercial function- despite me showing time and again how I have saved money and time, or contributed to the processes that enable other functions to run. I have no hesitation in voicing concerns but I know many in HR who do, and who are dismissed due to others' perceptions of what they are trying to achieve being skewed.

I was pleased to see the three points in summary though, which do recognise the need for HR to build that trust and be the channel for good communication- I am considering how we do that if other approaches have failed!

Thanks for posting.

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16th Oct 2012 13:45

I agree with the points made, but what is recommended for the HR Director is just as applicable to the Non-Executive Directors.

And indeed, in really difficult circs, the HR Director is going to want their support and contribution - just as much as they may need their HR Director's!

Kind regards

Jeremy Thorn

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17th Oct 2012 10:38

Thanks for your thoughts.
Your're right, it's not easy to be the voice of doom, the HR Cassandra who brings bad news to the Board, even if you are on the Board.
I guess that's why this approach works best where the board themselves have take on the responsibility for eliciting information from managers and employees, getting closer to the business, and developing their own self-awareness and skills. 
And of course it really works when there's a CEO who will make it happen...

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19th Oct 2012 09:02

Hi Jeremy

Yes, couldn't agree more.

The points I have listed for HR are certainly a subset of the responsibilities of the non-exec director.  Taking this further, HR and non-execs would seem to be natural allies in keeping the CEO and the board informed and aware.

Do you find that non-execs do create useful alliances with HR? It's certainly a potentially powerful relationship that some HR colleagues might not be using to full effect...

Jo

 

-- Jo Ayoubi MD Track Surveys www.tracksurveys.co.uk

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