Be it as a board director, advisor, or executive, it is unfortunately common to witness teams and individuals fail to put forth the necessary resources and effort to meet the full measure of expectation in their elected or appointed role. This results in a breach of the fiduciary responsibility, but also a failure to the spirit of the governance role. I believe this to be witnessed and understood as a frequent reality by many aside from myself. Boards and organizations will set an expectation for a desired outcome, then fail to fully commit the resources or time necessary to accomplish the outcome. Individuals may initially drive towards a goal, but then enthusiasm wains. This behavior can apply equally to processes as to goals. Process improvement systems have a full cycle of gaining understanding, execution, and follow-up, yet many times one or more of these steps are skipped. Why is this? Why is it so prevalent in the professional circumstances we find ourselves in?
As individuals, we most often make decisions driven by emotions, and then seek to justify them logically. For example, exercise equipment, programs, and memberships are each bought on the emotion of wanting to improve our health or physique. We justify the expense by arguing we will utilize the purchase and that we will ultimately be the better for it. However, after the enthusiasm which influenced the decisions have passed, we often find ourselves less driven to complete the task. This reality can evolve to a broader conversation about motivations and perhaps even change management in business. For the purposes of this argument, let us narrow our scope to the boardroom; and more specifically what typically results in the weakest of outcomes. In many cases of a professional failure to accomplish a predetermined goal, the underlying factor is the absence of doing all that is required to reach the end result. This isn’t a single decision, but rather the commitment and resiliency to strive to that end.
Power of Individual Agency
For the purposes of this review, we will rule out external forces, and rather focus on the those that if committed, will ultimately find a way around the obstacle, or will redirect or even choose a different path. Our greatest concern is those individuals who in exercising their agency – or choice – do not do all that is required. This exercise of choice can be the most difficult reality for organizations to mitigate, or even to admit. I recently heard an analogy that applies in this context. In calculus, you have the concept of a vertical asymptote in which the graph will move toward a positive or negative infinity as the inputs approach A. The analogy had an individual who wanted to calculate the number of steps required to walk from one position to another, if half the distance was covered in each step. Initially the progress looked promising with 50% of the distance covered in just the first step! However, as the person got closer to the destination, less and less progress was made with each step, because in each step, still only half of the distance was covered. As indicated by the vertical asymptote, the graph or effort will move towards a negative infinity and the goal never reached. This same circumstance is exhibited each day as individuals chose to pull back and not fully apply all that is necessary, essentially doing either not enough, or just the minimum to get by.
Author Jim Collins, in Good to Great, speaks of the flywheel, a concept that suggests that ongoing and consistent pro-organization behaviors will lead to a more perpetual and sustainable progress. Many directors, through a lack of the conscious effort to apply consistency and quality, are more so on a hamster wheel. They can spin as much or as little, but ultimately never cover any ground because they lack a clearly defined goal and organizational purpose to align to. This is the disengaged director. Research forthcoming by this author suggests that perhaps two-thirds of all directors do not fundamentally understand their fiduciary role. When asked, commentary suggests that they believe the director role to be a more executive form of management rather than governance and oversight, demonstrating a lack of understanding of the agent status of the management team. While I honor and recognizing that many private and family firms lean into the board to provide management guidance, some of these directors realize that they don’t get to “be in charge”, and therefore find difficulty settling into the appropriate behaviors and engagement of their assignment. Beyond individual agency is intention. Like context, intentions matter.
Self-Interest or Duty
For many in the director’s seat, the decision to serve may have been for any number of reasons. In many public and private companies, the director’s role is often considered an exit strategy or diversification, and a chance to add value based on past experiences. An opportunity to serve on a board may represent a chance to mentor executives, and share wisdom gained through your experience. Directorship can allow you perhaps to stay involved in business, without being overly involved in the day-to-day. Depending on compensation and potential stock, it can be lucrative too if you are your fellow directors can be successful in growing the firm or navigating to and through a buy-out. These are not inappropriate motivations. There are many however that use these opportunities to build their personal brand and who come from a position of entitlement or self-importance. I have served on boards where their role was noted prominently on LinkedIn, but they rarely attending meetings. Recently, a board I am serving on was faced with a need to remove a director due to inappropriate behavior. The individual felt they were above accountability because the title was of greater value than the charge to serve. Often familiarity, politics, and cronyism can be hidden drivers in the selection process of new directors rather than relevant competency or in considering the complimentary leadership and skillset that is needed on the board.
Private companies and family-led firms may have additional motivations such as continuing a family legacy, supporting a peer’s firm, or social purpose driven agendas, but they are not immune from the same risks. Selection committees or board chairs often go to their own network to fill open roles. I can’t fault this idea as you know who you can trust. A challenge though is that not everyone comes to the table competent or interested in the organization’s desired outcomes. Worse, when we dip into our own circle, we more often than not find that the majority think exactly like we do. This homogenizes the board through a lack of diversity of thought. When we select other directors that think like we do, and then justify it as a “cultural fit”, then everyone will come to the same conclusions at each decision point. No one will even think to challenge the narrative because no one has a different perspective. If you add to this self-interested agenda for being there such as resume-building vs. increasing stakeholder value, then decisions are at great risk of being filtered.
Intentions and motivations for the director to serve do matter and will often be reflected in the value provided while in the service of the appropriate shareholders and stakeholders. Each firm is different, but private companies again have the opportunity and flexibility, and are often ground in the principals, of stakeholder value. Often less threatened by quarterly metric calls, some private firms have space to consider not only profits, but also the workforce, the customer-base, and the surrounding community. This takes a maturity of thought – not age – to consider the larger picture. In the context of individual agency, the director will best function with an others-focus, in contrast to a self-focus. Simply, the director is there to serve and not only to gain as reflected in a duty of care and loyalty.
Time
Some individuals and organizations supporting director training and credentialling have suggested that degrees of limitation on the number of board seats a director can hold can reduce a portion of the risk. This is centered around the idea of spending appropriate time, and having the necessary mental focus associated with their role, is crucial to fulfill their fiduciary responsibility. If they are still employed in an executive capacity, they will most likely hold that role as a priority over outside director positions. This isn’t unreasonable to consider, but these limits (or the lack of limits) alone do not mitigate the risk. Director selection with a full understanding of both competency and the intentions to serve, are perhaps more vital than a count of board and executive commitments. In my own board experiences, I have witnessed those that served with a sense of altruism, while others were there only to receive the additional credibility that a board role might provide. Their candidacy and application to the board may also be associated with motives not aligned with the board direction as a whole. These disrupters have a singular agenda that could strive to reduce costs, oust other directors or management team members, or to force acceptance of a tender-offer or buy-out. This isn’t within the intent of board directorship, though I am not so naïve as to neglect the prominence of these actions.
Board Self-Accountability
A rarity among boards is a measure of self-accountability. Bylaws typically require certain measurements regarding attendance yet omitting the essential ingredient of expectations and accountability. I have participated in board meetings, both in-person and remote, where I could not determine if a particular director was actually participating or simply attending as a fulfillment of their role. There are many who actively write on the needs for risk assessment at the governance level, or emerging trends surrounding DEI, activist investors, and other issues. I would suggest that while those are of value, they are impotent if individual directors are not fully engaged for the common welfare of the organization to which they were elected or appointed. Obviously, this is best accomplished by directors who personally commit to engaging to the full measure of their role and expectations. In absence of this, I would recommend to directors and especially board and committee chairs, to identify any gap and directly and succinctly bring it to the attention of the offending director. Peer-directors should raise the bar of expected engagement so that those falling short can more easily be identified. As a consequence of a shared expectation for purposeful engagement, underperformers or those with the wrong intent will either rise to the occasion or go elsewhere.
Executives and Board Oversight
Organizations and their key executives can also be guilty of the same shortfalls of the board. Organizational leaders can fail to fully execute on their strategic plans and the accomplishment of the vision cast by the board. Organizations, like the boards, are made up of individuals that in sum form the whole. A given organization may desire to succeed, yet the many individuals that comprise the company or who are involved in a particular endeavor are not as equally committed to putting in the respective work. Again, justifications will be unique to each individual, and perhaps to each initiative. I have worked with or advised for a number of organizations that set out on a path with the best of intentions, yet in the end lacked the will, or even courage, to fully execute their otherwise valid plan. The consequences are well beyond simple failure. The lack of results may generate missed opportunities, produce favorable conditions for the emergence of toxic cultures, and other unintended results. Boards, in their oversight of management teams, should expand their vision beyond risk assessment to include an expectation and cadence of accountability regarding full engagement. This might include reviews of associate survey reporting, summaries of lessons learned and after-action reports for various initiatives. It likely involves spending time within the organization where and when appropriate. I do not suggest that the board supersede or step into the role of executive management, or to become mired in the day-to-day responsibilities. There must be an appropriate separation and appropriate aloofness for the board to see the larger picture. However, if the board relegates themselves to only committee work, then individually and collectively they can be more easily be diverted from fulfilling the true expectations and value of the board.
Missing the mark is admittedly common, yet most often organizations, their executives and often the boards do not recognize it nor do anything to mitigate it. Digging-in to each motivational factor is beyond the scope of this commentary, yet having this conversation is fully within the capacity of each firm, certainly by the board. As a leader, you can choose to have the difficult conversation with individuals and groups to review why a full effort is not being applied to a particular task. Take the time to identify innate concerns, absences of appropriate skills or simply the will. Transparency and openness are crucial for high-performing teams, and it all starts with asking the question of why. Choosing not to have these conversations is exercising your agency to fail, and ultimately to miss the mark.
ABOUT BRYAN HUGHES
Dr. Bryan Hughes is a speaker, author, consultant, and board director. With over two decades of executive leadership experience in both service sector and product-centric firms, Dr. Hughes now shares his time between consulting, teaching in higher education, and board participation. Research and practical expertise includes focus around organizational alignment, toxic leadership culture recovery, and board governance.
Disclaimer: The views and opinions expressed in this blog are solely those of the authors providing them and do not necessarily reflect the views or positions of the Private Directors Association, its members, affiliates, or employees.