21 Boardroom Black Holes and Taboos

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Article republished with permission of the author, Gary Patterson. Originally posted in Corporate Compliance Insights.

patterson_articleIs your Board side-stepping the hard questions? Sure, some subjects are uncomfortable to talk about, but avoiding them isn’t a great solution. In some instances, turning a blind eye to a taboo topic could be putting your organization’s fiscal health at risk. Is that a gamble you’re willing to make? Follow these tips to pinpoint, prioritize and start to address your taboo issues.

When you are cringing in a foxhole dodging shot and shrapnel, it is tough to be strategic, candid and on top of your game.

We’ve all been there from time to time.

Your peers at the National Association of Corporate Directors (NACD) annual Board Leadership Conference Success identified a list of uncomfortable topics that Boards of Directors and CEOs sometimes gloss over. If you are not confronted with some of the problems that these taboo topics reflect, count yourself lucky to be living in the land of milk and honey.

How does this happen?

Pressed by hard financial realities, leaders say they made it through the recession by hunkering down through the mean times and getting lean. They were forced to cut fat, then muscle and finally bone. We all live in a world where there is never enough money, people or time to fix all problems and pursue all opportunities. Leaders can make very bad choices if their organizations do not think through their uncomfortable taboo topics.

Has your organization ever had a fiscal checkup? We’re not talking about some bean-counting exercise, but rather an operational and strategic assessment of how your organization reflects the true realities of the world you are living in.

Below are some key areas to help you look for your 800-pound gorilla and to position your Board to better prioritize which issues to address in more detail and in what order.

Over-reliance on information from management

It is easy to become too insular and rely upon reports and updates from management. Experts are calling for directors to work closer with management in assessing your business and updating strategy. Where might external activists better understand your business than you do?

getting_governance_right_photo_2The urgent overwhelms the important

Get serious about risk factors and how to mitigate them. This is particularly important for middle market companies that can’t afford to make mistakes. Where can you make the enterprise risk management process more strategic and operational in order to build shareholder value?

HR brings sexy back

Many Boards seem to look only at top executives. Everyone talks about people being their most important asset. Where can you improve your human capital base for the top three levels of your people?

Disrupt or be disrupted

Many times disruption comes from outside your industry. People become too complacent, insular or resistant to change. Is your organization a Motorola or Sears, or is it a Google?

Compensation risk profile

Management focus and performance follows reward. Where should incentive plans be tweaked or even rebuilt from the ground up to encourage actions that reflect your best longterm corporate interests versus this quarter’s or year’s results?

Need to update risk appetite

There always will be tension between the Board and management on how much risk to take on for the reward targeted. How well defined and mutually agreed upon is the risk appetite structure? This includes defined levels of risk that provide parameters for management behavior.

Lack of the right timely information needed for management and leadership

Some organizations’ information is forward-looking; other organizations are historically oriented. Management is only as strong as its metrics. Does your organization have the right information to make the right decisions at the right time? How well do you understand and measure the key levers for future growth?

Gold watch syndrome

Have one or more directors retired in place and need to be given a gold watch and a retirement party?

Opportunity costs

Do you keep doing the same things you have always done because it’s comfortable? Where should you reallocate resources and think bigger?

Unwilling to take enough risk

Failing fast and cheap in order to learn how to improve beats a long, slow death by inertia. How regularly do you make meaningful bets in terms of money, time and resources for “game changing” initiatives?

The Kodak syndrome

This former great innovator and disruptor now seems to be the poster child for spending too much time doing the wrong things right, but not doing the right things. Where would you benefit from actually going ahead and doing something?

Read Gary’s final 11 points by downloading the full article here.

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