THREE BARIERS IN THE BOARDROOM

First publication in the Boardroom Dynamics series

There are three barriers in the dynamic of Boardroom which unaddressed lead to lack of focus on core results in the entire organization. As a result the organization is driving towards lower revenue, decreasing market share and shrinking margins long term.

A Chairman of a large FMCG organization said: "We were not aware about how much the way we drive our Board meetings impacts the whole organization. After performing deeper analysis we identified a strong link between our EBITDA and market share issues and the quality of our management teamwork".

It is obvious, when you think about the link, but it is getting more complicated when you decide to do something about the quality of teamwork in the Boardroom.

Hidden barriers and conflicts between board members lead into barriers between trade marketing, operations and supply chain functions in retail organizations. Barriers in the Boardroom in production companies lead into immediate issues between sales, production, maintenance and supply functions. In financial institutions risk division may be constantly disturbing sales from driving revenue and operations are getting blamed by all for poor efficiency. Sometimes small things matter and have a big impact on long term performance of an organization. The challenge is to find time and courage to address it.

"Yes, but its normal that we argue in the Boardroom, we challenge each other, confront ideas with reality. This is our job" said a non-executive director of a FMCG company.

Yes it used to be normal when markets were not saturated, revenue was growing and margins were huge. Businesses were concentrated on developing new products, services, new channels of distribution. Cost issues were addressed by downsizing or reorganization. Nowadays when the market is more demanding, most obvious cost and inefficiency gains were already realized. The culture, atmosphere and the collaboration are still the areas which hold lots of fat to be uncovered. 

The CEO of a financial group gathered top managers in the conference room and said: "we have to get rid of our organization’s fat". Most managers were shocked, as the organization was growing 30% year by year, gaining huge profits.

He said that “we need to look deeply into our inefficiencies, areas of unproductively and spaces for improvement right now, before it is too late”.

Two years after his speech his top team was surprised by the correct predictions of the CEO. Market had changed and the organization was able to survive. Through close teamwork and openness the team was able to leverage its position on the market, whereas competition was forced to run drastic downsizing initiatives. 

What are the three specific fundamental barriers?

Disrespectful reactions in the Boardroom, like: blaming, ignoring and sarcasm are the hidden forms of aggression.

Those reactions result typically from powerlessness and irritation. Managers say that things should have been done, and when they are not - they push more. The more they push or get pushed, the more pressure it creates. The more pressure in the business, the more space for disrespectful toxic reactions. 

A new CEO of a retail company, operating in 7 countries, has decided to run a session for his team a few months after he joined the organization. The discussion was toxic. COO was disturbing discussion by sarcastic and ironic comments every time others were pointing at problems in operations. Head of trade and marketing was blaming stores for poor performance. Other members were pretending that this is not their issue.

During the brake the CEO was asked: "Why he does not react when he sees this toxic behaviors?” He said: "I thought this is the local culture".

There were managers from four nationalities in the room. Nothing explained his believe about the local culture. After facing a difficult discussion about visible behaviors and reactions the dynamics in the Boardroom has changed. Managers stopped playing games, stopped hiding issues under the carpet and started dealing with real business challenges.

Deteriorating trust within the team, resulting from blocked emotions, feelings, hidden conflicts and false beliefs.

"There is no space for emotions in business" said the Chairman of the group of companies operating in heavy industry sector.

The purpose of the meeting was to discuss issues related to trust between him and the CEO. It was evident from the discussion that the trust is directly related to emotions and feelings. The CEO was pretending that everything is OK, for long time not showing up what is really going on in the business. The Supervisory Board was focused on verifying reports and plans.

The emotional pressure from the Boardroom was passed down into the organization by the CEO unconsciously. The conflict started from the moment the Chairman has realized that he is not being told the whole truth. Months after months of frustration on both sides rose to the level the only solution was to fire the CEO. Did anybody in the Boardroom notice the true reality? Of course. Most of the board members saw issues within the organization, but nobody realized what is the root cause. The problem was ignored.

Managers confronted with emotions prefer to ignore them and play safe. They hide behind reports and action plans, as it is more convenient to pretend that plans will move us forward. Nothing more wrong.

"It is safer to play the game, hide and do things by myself": very typical comment of managers below the board.

When you do create a space for venting emotions and conflicts then you are on the path of trust.

Limited Openness to opinions of others, to new ways of doing business - resulting from a need to prove ourselves and our own way.

"I know better and who he/she is to tell me how - this is my area of expertise" - the most common hidden believe of managers.

Business pressure combined with internal emotional conditioning of managers create an environment in which the higher you are, the more alone you feel. The only way to prove their worth for some of the managers is to show they are right and successful. 

Seeing others faults, indicating mistakes, creating more expectations and proving my way are the strategies to survive emotionally. Those were the strategies which helped leaders in driving organization for many decades.

The conditioning was: “The more negative you are the more risk, issues and failures you will find. The more you can find, the more you will improve and the better your organization will be.”

A CEO of a financial institution was spending every Monday in a Steering Committee meetings, analyzing more than a hundred projects and initiatives. His extended leadership team was observing how the boss gets into detail of any project. After months all got used to the dynamics: managers need to wait and see, as the CEO is to dig into details. 

The dynamic has changed after the CEO has realized that she is so tired that she cannot afford to go this way any longer. It turned out during an offsite meeting that she has planned that 80% of the overall time will be occupied by her. What has helped her was a discussion about positive aspects. After venting some issues, problems and frustration the team spent one hour on indicating what they appreciate in each other. This session was a seed of a new balancing practice: looking for positive things to the same extend as to the negative ones.

The three barriers can lead any organization to a disaster, but worked out systematically can lead to respect, trust and openness in the entire organization. When you see non-executive directors challenging executive directors in a respectful way, when the Chairman trusts the CEO and you notice openness for real listening and sharing during the board meetings you can be sure you are on the right path.

How can you start working on the Boardroom dynamic? 

Organize a few hours’ session which will be dedicated only to the barriers mentioned above. Start with a discussion about perception of the organization. Split your team into smaller groups and ask them to discuss their perception of the entire organization and its link to the quality of the top team. Splitting into smaller groups is key to let everybody ventilate. Ask each of your team members about how he/she feels about the situation and how current board dynamics impacts top or bottom line. Making space for each person is crucial. Very often people who say little provide the most important voice into resolution.

In the second step invite your team to discuss disrespectful reactions. Ask each member to choose one reaction he/she sees mostly in the entire organization. Let them choose from: blaming, ignoring and sarcasm. You can add more, depending what you see.

Ask questions like: How do you notice these reactions? What is their impact on your organization and business, how do they impact trust and openness within your organization.

After hearing the last member of your team ask everybody to choose again. This time it is the reaction they have when they feel irritated or powerless. Repeat the same discussion focusing on each individual contribution to the dynamic. Do not forget about yourself.

Finally you can take a short break. After the break ask your team members to figure out what they appreciate in each other. The tendency in the board room is to find problems and faults. You job is to drive a different discussion. Ask one person from the team to be silent and the others to say what they like and appreciate about that person. Repeat the process, remembering about respect till everybody gets appreciated.