When talking about boards, it is hard to avoid the topic of strategy development. We hear CEOs complain all the time that board members aren’t providing good strategy ideas even though they are all individually highly intelligent and highly capable professionals. The problem is not that the board members are unable to create an effective strategy, it’s that their environment is not conducive to sharing.
The importance of a good strategy cannot be understated and we see examples of how stale strategy affects the company.
Take the case of American Express whose stock prices have been falling and has been seen as less and less competitive over the last few years. Recently their 16-year deal with Costco fell through and they lost an anti-trust lawsuit. With the negative consequences showing in their share prices, AmEx doesn’t seem to be changing their strategy which begs the question – what is their board doing? And how can the CEO inspire better strategy?
When a board member is appointed, there is a certain amount of excitement and enthusiasm that they bring to the team. They are usually teeming with ideas and are ready and willing to share. When they start expressing their opinions or ideas about strategy, we often see the more senior board members and chairs shut them down. This isn’t purposeful or malicious, but it changes the emotional connection within the board.
Let me illustrate with an example. I was working with a university board recently and one of the board members suggested that they reach out to students for more intensive class reviews. The university had been doing this, so the board leader responded with “We are already doing that”. This type of response depletes enthusiasm for ideas. When board members provide suggestions, they want to know they are providing value. If they are told “we are already doing that” or “we’ve already tried that”, the desire to provide more ideas may be discouraged. The best way to encourage board members and keep them engaged is to thank board members for every suggestion, even if you are already doing what has been proposed.
If a board member feels undervalued or like they are not coming up with good ideas, they will shut down and stop offering up their perspective which leads us back to our original problem – board members not providing strategy to CEOs.
It is the responsibility of the CEO and the board leaders to create a safe environment for directors to share and be heard without feeling embarrassed or inadequate. This is especially true for newer board members who are still gaining confidence in the boardroom.
It is important to note that most board members are completely capable of developing a strong strategy, it’s just a matter of putting them in a position where they feel like they can collaborate without judgement or vulnerability.
The goal is to create a space where everyone can share and expand upon their ideas with the help of their fellow board members. If they are able to do this, stronger and smarter strategies will become apparent and the entire company will benefit. See Susan Swenson’s comments on dialogue and relationships from our most recent Board Dynamics Session:
If you would like to learn more about creating a safe environment for strategy to flourish, please contact us at [email protected].
Ten Ways to Unite Your Board During a Hostile Takeover in NACD Directorship Magazine
Commonsense Governance Principles in Action: Succession, Compensation, & Asset Managers
Part 2: Dismantling a Lock-In in the Boardroom: An Emotionally Focused Approach to Board Effectiveness