Smart is Not Enough
Boards must be smart AND healthy to succeed today
Bill Dimma is a distinguished veteran of governance with experience on more boards than anyone I know. In his marvellous book, Tougher Boards for Tougher Times, Bill reminds us that right up to the time of their demise, the boards of Enron and Nortel were composed of people with outstanding talent and credentials. He calls it a case of individual competence and collective incompetence.
The fact is, the vast majority of directors of public companies in North America are qualified, hard-working leaders. But it’s becoming obvious that having the skills and knowledge to perform as a ‘smart’ board is not enough. It’s also imperative that boards be ‘healthy’. Although the terminology of a healthy board may be unfamiliar, we’ve all seen unhealthy boards in action. A frustrating example occurred at a board meeting I recently attended as a guest. I watched a director repeatedly turn his swivel chair so his back faced the rest of the board. That’s how he positioned himself during parts of the discussion, sometimes even while he spoke. I bit my tongue because my invitation to their boardroom that day gave me no licence to speak to the situation. The Chair didn’t raise the matter. The meeting just continued, uneasily.
A healthy board wouldn’t allow this to persist. The behaviour would be addressed because the board members would realize it betrays a damaging force within the group. Board health refers to matters such as the level of trust and candour that exists in the group, the clarity of the respective roles of board and management, the relationship dynamics within the board, and the determination the directors have to subordinate their personal interests and serve the interests of the shareholders.
This concept of ‘smart’ and ‘healthy’ was introduced to us by my friend Patrick Lencioni and his team at The Table Group. They observe that successful organizations share both qualities. He agrees with us that the principle applies profoundly to boards as well. We are convinced that in order for boards to succeed today, they must become both smart and healthy.
Smart Boards
Smart is good. Smart boards use the modern tools and techniques that have enabled organizations to grow and thrive for decades now. Examination of trends and emerging opportunities. Thorough analysis. Strategic planning. Thoughtful application of creative approaches for leveraging the company’s resources. Bold acquisitions of complementary or competitive firms. Failing to employ these tried and true tactics is not smart. It’s careless. Perhaps even stupid.
But countless companies are using them but floundering nonetheless.
Healthy Boards
Be very clear. Healthy boards aren’t just about people getting along well. The object isn’t to simply enjoy our meetings, it’s to add value to the company. Healthy boards are determined to direct the business so its mission is accomplished and shareholder wealth is increased.
The best boards work together as a team, capitalizing on the strengths that each director brings to the table and demanding full engagement by everyone. David Nadler described this well in the Harvard Business Review when he wrote, “The key to better corporate governance lies in the working relationships between boards and managers, in the social dynamics of board interaction, and in the competence, integrity and constructive involvement of individual directors.”
Healthy boards do what smart boards do, and much more. They work with determination and diligence to direct the business to greater success and demand value from each person around the table. They confidently encourage the best people to join the board and courageously remove underperformers. They build on each other’s strengths and ideas. And they realize that smart is not enough.
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