Why are you surprised?

TUESDAY - GOVERNANCE TIP

Governance Tip?#1: Do Not Surprise Boards - Boards Do Not Like Surprises

When I was younger, I used to love surprises. Birthdays, Christmas, you name it.

These days, I don't like surprises so much. Surprises seem to cost me money - extra hidden fees, parking fines, newly located red light speed cameras and the price of any service at either the car mechanic or the dentist.

Boards in my experience have no tolerance for surprises. Zero. In fact I have never met a Board that liked them.

Boards expect transparency. They need it to discharge their accountabilities. They want to know and trust that management is providing the right information and insights at the right time so that they can consider all the options available and establish the next move.

Let's face it - delivering bad news to the Board is hard at any time. Delaying the delivery of bad news until there is only one option available is even harder and the results can be confronting and potentially career limiting.

Leaders need to communicate early and communicate often to their Board.

When Boards are painted into a corner because of managements inability to communicate early, often results in them making decisions about both the immediate issue at hand as well as the escalation process failure on the issue.?This erodes TRUST between the Board and Management and can result in irreparable relationship damage.

Boards have an expectation that all of the right information and insights are being provided by management at the right time and in the right way.?Do not be fooled boards will sense when management avoids being transparent!

When management have bad news, Boards need to have early and clear indicators of potential trends to inform their decision making.

Here are my top 5 tips on how to inform your Board early and often on matters that may turn into bad news:

1. Include succinct information on the matter in the Managing Directors written and verbal report to the Board?- briefly providing a heads up on the potential issue and its impacts. Report early and often.
2. Discuss the matter in light of the actual or potential risk it poses to the business. Link the matter to your risk management processes and discuss what actual or potential controls you have in place or need to mitigate the impact of the matter should it come to fruition
3. Provide the Board with a forecast or several potential scenarios and related timing so that the Board are aware which way the matter could go?as well as provide the organisations planned approach to manage the situation for each scenario. Ask the Board for their insights and form a plan for each scenario so that everyone is clear on potential next steps.?NEVER present a problem to the board with viable suggested solutions
4. Provide brief ‘out of session noting papers’ to the Board if or when matters progress?or key milestones are reached that potentially change the direction of the matter (for the worst) so that the Board are continually informed in a timely manner
5. Own it - if the issue is the result of a decision or indecision by management, be open and frank with the Board on how it occurred?and the learnings that have been gained from the experience. While no one wants to make mistakes, no one is perfect and most Boards will likely treat the situation as a learning experience for all involved instead of laying blame.

Ultimately, how open and direct you are with your Board enhances your reputation and builds trust so that regardless of what you need to raise with the Board, a timely and real conversation is ultimately in everyone's best interests including your organisations.

If you want a hand to position your important matters successfully with your Board or want more information on any part of this article, book in for a 1 hour complementary discovery session at www.governancecollective.com.au.