Why it is wise to pay attention to your
client's governing board.
The call came at 1:00 p.m. on January 30, 1996:
“Can you be on the 3 o'clock flight to Anchorage?” Every
consultant knows the only answer is “Yes!” So on it I
was.
Why me? Simple, really: a professional referral. The call to facilitate
a one-day strategic planning session first came to a fellow member
of our Institute of Management Consultants’ breakfast roundtable
in Bellevue, Washington, who had been marketing to the company. However,
he was a trade expert, so he declined the engagement and suggested
they contact me since he knew strategy was my forte.
Little did I know this one call would blossom into 20 or more assignments
with a family of companies that lasts to this day, add richness to
my practice, and expose me to a plethora of challenges I would not
otherwise have encountered.
The client was one of the 13 Alaska Native Regional Corporations.
It was a complex, confusing, and conflicting entity—structured
as a holding company—with two dozen operating subsidiaries as
disparate as construction, plastics manufacturing, tourism, and oil
field services. After leading the development of strategic plans for
the parent and eight of its subsidiaries, my role was to integrate
all the subsidiaries’ plans with the parent’s and with
each other’s.
A compelling strategic issue was to restructure the family of companies
to meet the parent board’s growth mandate—becoming a billion-dollar
company by doubling revenues in five years, while raising profitability.
Combining subsidiaries operating in similar arenas was one approach;
dismantling or selling subsidiaries was another. Acquiring subsidiaries
to strengthen existing capabilities or add new markets was still another.
These avenues and more were pursued.
The growth goal was met a year ahead of schedule; the profitability
target was not. The senior managements of parent and subsidiaries
alike were stretched far too thin.
As the various strategic initiatives played themselves out over the
next couple years, it became apparent that one particular subsidiary
should be dismantled. Two of its three disparate divisions would be
transferred to sister companies. The third would be sold outright.
A suitor, already waiting in the wings, had a representative on the
subsidiary’s board.
I was present at the memorable final board meeting of this subsidiary.
The main agenda item, of course, was to disband the company. The reasons
for doing so and the practicalities of the transfers and sale were
laid out clearly by senior management. A full discussion followed,
including suggestions of other options that might work. In the end,
the board voted unanimously on the motion to disband the company.
Afterward, I talked casually with two board members who remarked they
were looking forward to the next board meeting, originally slated
to be at a location known for fine fishing. When I told them there
was no such meeting because they had just voted the company out of
existence, they were dumbfounded: “Nah, we didn’t do that!
Did we?” Oh, yes, you did!
I was astonished, though tried not to show it, feeling there was no
point in talking about it then and there.
After discussing the matter with the parent corporation’s leaders,
I came to realize it was not the board members’ fault. Though
good and decent men, they were neither selected for nor educated regarding
their fiduciary roles, nor trained in how to exercise them. They played
at being board members, going through the motions without understanding
the rules of the game. They did not fully comprehend that they were,
in fact, the court of last resort and their decisions were final.
As a confidential advisor to CEOs on strategy, I work with boards
on essentially every assignment. Most comprise men and women of goodwill
and experience having a command of the issues and offering sound advice.
My memorable experience, however, taught me three useful lessons:
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Pay attention to governance, even when
not part of the project's scope. |
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Do not presume all board members are
fully aware of the roles they play and responsibilities they bear. |
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It
helps to know how various members came to be on a board and why
they’re there. |
