VIEWPOINT - An out-of-touch board can spell disaster for a growing company

The on-screen PowerPoint boasted record sales and profit growth. The MD punched the air: “onwards and upward." You could see the success writ large, hear it in the voice and feel it in the room. Or so it seemed.

That was a year ago with a FTSE 100 multinational. Then, "Groundhog Day": the next conference I attend (for an entirely different company) was identical. But all was not as it seemed. Today both businesses are writhing in their final death throes.

Both boardrooms displayed similar tendencies: incapable of reading the world around them they made the wrong decisions and refused to acknowledge what was really going on internally and externally.

The multinational blames the bank for pulling the plug. Pardon me, but how about identifying the terminal decline of a product that was out-of-date, dull and inappropriate for today’s market? I think they missed that one! The growing business had ignored collapsing customer demand.

These two stories of how the board can get out of touch need a little reflection. Ask what the role of a director is and most will start mumbling about the board, responsibility for the business and share options. Like parenting, you are not given a manual and most make it up as they go along.

The board is the business brain – it links the short term and the long term; it links the external and internal perspectives (focusing on policy formulation, strategic thinking, management supervision and accountability).
Our boards failed to deal with the most basic of ‘directorial dilemmas’:

• To be entrepreneurial, driving the business forward while maintaining prudent control
• To be sufficiently knowledgeable about the workings of the company and yet retain an objective view
• To be sensitive to the pressures of the short term while remaining informed of the broader trends and competition
• To be focused on the commercial needs of the business while acting responsibly.

Both boards were incompetent, negligent and irresponsible. What about yours?

about the author

Robert Craven shows MDs and owners how to grow their sales and profits and focuses on how to do this in recessionary times. His latest book is “Beating the Credit Crunch – survive and thrive in the current recession” For more information visit: www.directorscentre.com

Robert Craven©2010

publication details

First published in Growing Business Magazine - December 2010/January 2011.