Boards That Listen – The Art of Engagement

Dr. Earl R. Smith II
Managing Partner, The Federal Circle
DrSmith@Dr-Smith.com
Dr-Smith.com

Board leadership is not limited to the boardroom. Leadership is the ability to exercise change and restraint and to recognize those qualities in others. Boardroom leaders must establish a governance structure for leadership development that supports open dialogues with corporate management, employees and stakeholders on an on-going basis. Inviting the outside in is becoming a more common practice as information is more easily accessible, and reports that are more detailed as required by regulations such as the Sarbanes-Oxley Act of 2002.

Corporate directors are finding it useful in their assessment of management’s performance to engage stakeholders, outside auditors, and even government regulators as they work to address complex issues. Engaging non-board stakeholders allows directors a view of the company and its practices often difficult to achieve from within the boardroom. This engagement is also useful in improving transparency and holding the CEO and corporate management accountable for public relations.

Directors with an open leadership style will listen to stakeholders and measure the board’s performance with public perception. Directors will listen to and assess how operational changes affect customers, employees and suppliers. Open and committed directors will listen for unintended issues arising from corporate strategy and compliance management attempts. Coaching of corporate management is even more effective when backed up by data collected from stakeholders, customers and employees. A true assessment of a company’s performance will include data from outside the company, and will more accurately reflect the assessment customers and institutional investors will have of the company’s value.

Seasoned directors understand the value of information gleamed from engaging institutional investors and customers. Institutional investors play a leadership role in establishing the value assigned to individual company stock. Boards confident of their strategy will invite the opportunity to allow investors to assess their leadership style and governance structure. Chairmen authorized to speak at trade shows or other industry or investing conference events are putting their company’s strategy and leadership style on display for the purpose of building investor confidence.

Focus groups and town hall meetings grew out of the idea of placing value on the insights of stakeholders. Wise directors and CEO’s will value the information collected and incorporate it into operational strategy as they strive to move their company toward operational excellence. Some of the stakeholders corporations should listen to include:

• Employees: They offer insight into the morale of the company on the sharp end of the stick. Employees “turning the wrench” will often see inefficiencies no one else would ever see.
• Customers: From the CEO down, everyone must understand who actually writes the checks. Customers will offer honest feedback of how a company is performing. Directors listening to customers should ask open-ended questions and make sure someone is taking notes.
• Community Leaders: This is especially important to manufacturers exporting goods outside of the host community. Engaging community leadership will allow the company to affect conditions within the community where their employees work, and provide an opportunity for community leaders to assist the company with governmental affairs
• Business Partners: Business partners can be a very important source of intelligence. Business partners can raise issues with a director an employee or customer may feel uncomfortable addressing.

Listening to others is difficult for leaders unaccustomed to receiving honest feedback. Open leaders can use these opportunities as an assessment tool of board and corporate management performance. Open forums are also an opportunity for leadership development. It also gives outsiders a glimpse into the corporate board’s leadership style and governance model boosting shareholder confidence.

© Dr. Earl R. Smith II

~~~~~~~~~~

Related Articles:

• Board Governance – Engaging Leadership
• Visionary Boards of Directors
• Leadership Development – Good Board Governance
• Assessment Programs – Important Governance Tools

~~~~~~~~~~