Boards - Part I
Part II will appear later this week. The full article can be found at my newsletter, Base of the Pyramid. If you would like to read more about business transformation, restructuring, turnaround and value creation from a middle market perspective, please visit and subscribe.
?-??????? Richelle Mead, Blood Promise
Overview
It is May of 2017, and my client is locked in a desperate battle for survival. The organization, a nonprofit ranking as one of the largest child welfare agencies in Illinois, had experienced considerable losses over the prior five years, and it was apparent that the downward trend had persisted into the current fiscal year. Six weeks earlier, following the presentation of an assessment report to the organization’s executive leadership, I had joined the team as Interim COO. Since then, I had been working with leadership to craft a business transformation plan. The plan was now ready, and it was time to present it to the board.
?
The members of the board of trustees of this organization had no financial stake in the outcome, but their commitment to the organization’s mission and history (over 140 years at that point), was unquestionable. In common with many nonprofit boards, the members were an eclectic group, composed of academics, attorneys, clergy, executives, and retirees. These were kind and civic-minded people, many of whom had a personal connection to the organization.
?
The leadership team was nervous. The plan was complex and ambitious, and though we all supported it, we did so with varying levels of enthusiasm. But time was our enemy now. We had invested all the time we could afford to invest in crafting our business transformation plan internally. We had to act, and soon. We did not have time for recriminations, nor did we have time to consider alternate paths (beyond what we had considered already, in exhaustive detail). Liquidity was declining rapidly, our relationship with our incumbent lender was deteriorating, we were stretching vendors to keep things going and very simply there was no “plan B”.
?
My task that day was a simple one, but that simplicity did nothing to obscure either the challenge or the stakes. I had to lay out the crisis in which the organization was currently enmeshed, relay the full scale of a financial disaster that had gestated for more than half a decade, present and explain a plan that would have been frankly unthinkable for this organization in any other context, and somehow garner majority support for a plan that would radically transform the organization. And I needed to accomplish it all on that day.
?
In a career of driving organizational change, I have had more than my share of high-stakes meetings and presentations. There have been plans and models and discussions, I have seen key decision makers overcome with the full gamut of emotions, from despair to rage. But on that day, in a conference room in Springfield Illinois, I implored a dozen people I had never met to allow me to remake an organization they loved dearly, and to give me that authorization immediately.
?
I left the room a few hours later having received unanimous board approval of the plan, and today the organization, having recently celebrated 150 years in operation, is profitable, and has expanded both organically and through acquisition. The business transformation worked, but only because on that spring day eight years ago, the board placed their faith in a stranger and his analysis.
?
For many leaders, board meetings are performative exercises to be endured. These gatherings of talented and often well-connected professionals tend to devolve into bland reporting exercises, with executives in the role of old-school radio DJs, consumed with a fear of “dead air”, and so seeking to run out the clock on meetings with incessant reporting that simultaneously diminishes the ability of the board to be impactful and its ability to “interfere”.
?
This is a sad state of affairs, because boards can be incredible partners in business transformation. Boards can also be impediments to transformational change regardless of urgency.
?
How should transformational leaders think about and engage with boards to maximize positive outcomes and minimize negative ones? Let’s dig in.
Governance Basics
The key responsibilities of a board of directors are as follows:
1.?Financial oversight. For the purpose of ensuring the financial health of a company, boards generally review financial statements, approve budgets, oversee major resource allocation decisions, and receive reports from outside auditors.
2.?Strategic guidance. Boards will often be deeply involved in the crafting of a company’s strategy and will monitor the progress against the strategic plan. Additionally, boards are generally called on to approach major strategic initiatives including mergers and acquisitions.
3.?Hire/fire CEO. The responsibility for hiring, monitoring, and if necessary, terminating a CEO is held by the board of directors. In many cases, boards will also be involved in other senior leadership hires.
There are noteworthy differences between a board of directors and a board of trustees (see Exhibit A).
Exhibit A: Boards of Directors and Boards of Trustees
Part II will appear later this week. The full article can be found at my newsletter, Base of the Pyramid. If you would like to read more about business transformation, restructuring, turnaround and value creation from a middle market perspective, please visit and subscribe.