In The Board's Shadow

How Shadow Boards Raise the Fiduciary Board's Performance

(Originally appeared in the January 18th, 2023?'Across the Board'?digital publication, a Board Director, Board Advisor, C-Level, and Business Leader publication reaching 28,000+ exceptional business leaders in over 70 countries with articles focused on leadership, strategy, and governance topics - sign up?here )

All Boards cast a shadow. This shadow can be one of positive influence and?inspiration that the CEO as well as the?entire organization aspire to become. Conversely, this shadow can be one of darkness, adding little value or even undermining progress,?essentially stifling an organization from reaching its true potential. Both types of Boards exist in today's world. Some are completely oblivious to the shadow they are casting.?All Boards should ask themselves the question,?"what type of shadow,?positive or negative, do we feel we are casting over the organization?"

Another type of?shadow?is also associated with today's modern Boards. This particular shadow is quite interesting for all Boards to consider as it relates to elevated?decision making, prioritizing focus of?important initiatives, and receiving impactful input from?interested internal?parties. What exactly is this type of shadow?

We call these?Shadow Boards?(sometimes called?Shadow Executive Boards)?- and they are becoming more prevalent in recent years. A Shadow Board is essentially?"a group of non-executive employees who work with senior executives or Board Members on strategic initiatives."?In some cases, the Shadow Board is closely guided on specific drill-down issues of focus. In other cases, the Shadow Board is presented with the high-level challenge and?given full autonomy to perform research,?present their findings, and propose a recommended solution. Needless to say, many Boards are leveraging this helpful resource and increasingly taking the full recommendation of the Shadow Board?-?or at the very least, incorporating the Shadow Board's proposal in their decisioning process.

The fact that a Shadow Board is comprised of internal resources can also be quite helpful to a Board, presumably providing an?unbiased and culture-aligned?viewpoint without any hidden agendas. This clear and unadulterated?"boots on the ground"?lens is the envy of many a boardroom.

Some Shadow Board myths and clarifications:

• Shadow Boards are always made up of younger individuals within the organization. Myth. Although in a high percentage of scenarios this is true (with the majority of articles on the topic emphatically claiming that Shadow Boards are solely made up of Millennials and Gen Z'ers), there are also many outliers to this approach. Some Boards leverage?the Shadow Board concept as a training ground for up-and-comers within the organization being groomed for future leadership positions - regardless of age. In all cases,?Shadow Boards can provide visibility and the opportunity for?career advancement all while simultaneously supporting the organization at a strategic level.
• All Shadow Boards are made up of 13 members. Myth. I am truly not sure where this magic number got its start (message me if you know and I'll post viable answers in February 2023's?Across The Board), however, most Boards aim for proper expertise coverage that is representative of the organization. Some Boards will even create their Shadow Board?"in their own likeness,"?meaning the Shadow Board has the same?Board Architecture ?as the fiduciary Board. This approach can lead to some interesting and varying outcomes when decisioning the same challenges.
• All Shadow Boards report directly to the CEO. Sort of Myth. This was likely true in the early days of Shadow Boards, but is not true in all cases today. Although we can reference many instances where the CEO is indeed still leading or guiding?the Shadow Board, there is an increasing number of instances where the chair of the Governance Committee, Strategic Planning Committee, and even the Executive Committee are delegated this responsibility. Additionally, it is common to see the Human Resources department involved as a support arm?in this end-to-end?process. Interestingly, the Boards that prefer the Shadow Board to report into someone other than the CEO frequently state their reasoning of a?'checks and balances'?approach, especially when concerns exist that a CEO's influence?could be infused into the proposed solution.

An interesting article, which could possibly be?considered?a mini case study, was published in June of 2019 in the Harvard Business Review titled?Why You Should Create a “Shadow Board” of Younger Employees . Yes, in this case they advocate for the entire Shadow Board to be made up of younger employees, but the interesting data comes more so from the example comparison of market share competitors Prada and Gucci. The article states,?"Under the direction of CEO Mario Bizzarri, Gucci underwent a comprehensive transformation that made the company more relevant to today’s marketplace. Gucci created a Shadow Board composed of Millennials who, since 2015, have met regularly with the senior team."?At the time of the HBR?publication, Gucci’s sales had grown 136%, while in the same period, Prada’s sales had dropped by 11.5%, with Prada?ultimately admitting they had been?“slow in realizing the importance of digital channels."?Gucci CEO?Mario Bizzarri was additionally quoted as saying?that their Shadow Board?“served as a wake-up call for the executives,”?essentially giving a large?amount of credit for?the company's realized success to their Shadow Board's recommendations and proposals.

For some Boards, the creation of a Shadow Board can be a challenge. If big egos are at play, a Director being overruled by?a?"junior"?suggestion may be hard to swallow. For Boards that are seemingly always running out of time for scheduled discussions, reserving the required time to listen and process the Shadow Board's proposals may seem like extra work. Sometimes, being at the top can be lonely... but Boards must not forget that they report to their shareholders + stakeholders. Is it not their duty to make informed decisions? I am sure their Shadow Board has an opinion...

Is your Board scared of its own shadow?

Reach out to learn more?through?our?Board Director Education & Certification program , plus?Consulting &?Advisory ?offerings,?and?International Speaking Tour ?topics.

Mark A. Pfister - Non-Executive Director |?CEO |?Chief?Board Consultant?| Corporate?Strategist | Board Macro-Influencer?| Speaker?| Author - www.PfisterStrategy.com

About the Author:?With a strong focus in Strategy, Governance, and Technology / Cybersecurity, Mark A. Pfister is CEO & Chief Board Consultant of M. A. Pfister Strategy Group, an executive advisory firm that serves as a strategic advisory council for executives and Boards in the public, private, nonprofit, and private equity (PE) sectors. He is also Chairman & CEO of Integral Board Group, a specialized Board services & consulting company, as well as Founder & CEO of the?International Board Director Competency Designation?(IBDC.D) education and certification program, a Board Director certification course recognized globally. Mr. Pfister is a?'Board Macro-Influencer'?and his success has been repeated across a wide range of business situations and environments. He prides himself on being a coach and mentor to senior executives and Directors. In Board Director circles, Mr. Pfister has earned the nickname?'The Board Architect’...............<< read full bio?here ?>>

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