The Dysfunctional Board of Directors

 

In our last article we discussed some of the difficulties with Company CEO’s that can cause problems for a company.

But, in many companies, the CEO reports to a Board of Directors. In this article we look at what happens when it isn’t the CEO that is having difficulties, but members of the Board of Directors.

 

CREATING CHAOS …

A dysfunctional Board of Directors has the ability to cause havoc with a business or organization.

Not only will a dysfunctional board often fail to make the decisions that are in the best interest of the organization, but the dysfunction of a board has the potential to move outside of the board room, often creating negativity with employees and other stakeholders.

Many of the issues outlined here come from our experience when serving as interim management or in receiverships.

 

IN TROUBLE FOR MANY REASONS …

Much of what the board of directors discusses should be kept within the organization. 

When board members do not keep this information confidential, problems often ensue.

Members of the board may think they are simply sharing the information with close friends, but it could be misconstrued and released to stakeholders, causing undue stress, or shared with competing organizations.

Leaking information is one sign
of problems within a board.

 

A LACK OF RESPECT …

Occasionally board members experience a lack of respect for the CEO of a company and vice versa.

This often happens when board members have been in place for a long time and a new CEO enters the company.

All parties must develop respect for one another based on their common interest in working for the good of the organization in order to keep the board from becoming dysfunctional.

A lack of respect between the various board members or factions is a sign that there might be dysfunctionality within the board.

 

CONFLICTING AGENDAS …

Board members need to be on the same page when it comes to the future of an organization and its initiatives. If board members have conflicting agendas related to the direction of the organization, it will be hard for the board to make decisions. 

In addition to being on the same page as one another, board members must also be on the same page as the head of the organization.

Conflicting agendas often represent conflict
within the board and often the company.

 

WHO’S IN CHARGE

Meetings involving the board of directors should function in an orderly manner.

If board members quickly jump from topic to topic, argue with one another or fail to discuss the most important matters at hand, the board is dysfunctional.

Board meetings should contain a designated leader and an agenda to make them productive.

 

 

A HOSTILE ENVIRONMENT …

A meeting of the board of directors can be a hostile environment, particularly when board members do not get along with one another.

This type of environment stifles productivity and prevents board members from sharing constructive opinions.

A meeting may become a venue for personal attacks rather than for focusing on coming to business decisions or providing constructive discourse.

 

SECRET MEETINGS …

While some information the board discusses should remain confidential, organizations should become concerned if a board of directors regularly holds secret meetings or meet on an unofficial basis.

Not only may some board members be left out of these meetings, but decisions could be made without the input of crucial members of the organization, or with unethical motives.

 

POLITICAL & PERSONAL AGENDAS …

Board members should not allow personal and political agendas to cloud their decision-making. 

If board members continually propose moves that would benefit them personally or take a political stance, the image of the company could be compromised.

Personal and political agendas also lead to more disagreements among board members and often means that the board is not focusing on the best interests of the company.

 

TRUST IS CRUCIAL …

Employees in an organization must trust the board of directors in order for it to be functional.

If the majority of employees do not trust members of the board, the advice and decisions the board makes may be ignored or may lead to high turnover rates within the company, among other things.

 

TEAMWORK REQUIRED …
Members of a board of directors should work as a team to make decisions to benefit the organization.

The board’s ability to make the best decision is compromised when one or two board members are allowed to dominate the meetings.

This may involve harassment of other board members, talking loudly to dominate the conversation or immediately shooting down any dissenting opinions.

When certain members dominate meetings, the situation requires agreement as to how to make certain that everyone has the opportunity to participate.

 

EXPERIENCE & NOT RELATIONSHIPS …

Many boards are created by company owners or CEOs as a company grows.

Often boards created in this way are based on personal relationships without regard for the member’s background or experience.

Boards of Directors should consist of members who each have particular experience related to the both the business of the company or overall business and finance.

These members should be independent of ownership or management of the organization so that they will be in a position to make the often-difficult decisions that enable the organization to move forward.

 

Revitalization Partners specializes in improving the operational and financial results of companies and providing hands-on expertise in virtually every circumstance, with a focus on small and mid-market organizations. Whether your requirement is Interim Management, a Business Assessment, Revitalization and Reengineering, a State Receivership or Bankruptcy Support, we focus on giving you the best resolution in the fastest time with the highest possible return.