Dr. Earl R. Smith II
Managing Partner, The Federal Circle
DrSmith@Dr-Smith.com
Dr-Smith.com
It would not make much sense to put a stop sign at the wrong end of a one-way street, but governments have never been afraid of looking foolish or wasting money. A corporate board of directors on the other hand is supposed to work to enhance shareholder value and to instill a sense of confidence in corporate leadership. Too many companies operate like our government and then wonder why morale is down, profits are down and strategic issues remain unaddressed.
Fast companies with professional governance understand the need for de-centralized decision-making. Directors who understand human nature know the value of listening to others ideas and understand the potential of empowering others to improve upon the corporate basics. Corporations must have a governance structure that allow innovations, but also provides a framework of acceptable standards. Directors and CEO’s with a right sized ego know a good idea when they see it even if they did not come up with it themselves.
Innovative companies empower local managers to work within the corporate framework of core values to achieve goals in a cost effective manner. Seasoned directors understand the fact that local managers know their markets and their employee’s abilities better than a board of directors located hundreds or even thousands of miles from the plant. Directors understand the board’s job is to establish principals of corporate management and corporate ethics that address broad issues and allow local managers and employees to exercise good judgment in executing the strategy. This flexibility can cut cost allow managers to make decisions that make sense for their situation, but more importantly it can boost morale by showing confidence in employee judgment.
Innovative companies also show a strong sense of urgency in executing operational directives. Flexibility encourages managers to assess minor issues and act to achieve goals and not be hindered waiting on replies from on high. Corporations with strong leadership development programs enjoy competent, confident corporate managers capable of carrying out and improving strategy and complying with corporate guidelines.
Fast companies also are quick to review strategies. Strategic plans are famous for the dust they are capable of collecting. Innovative corporate governance understands market trends and is quick to supply a trendy need and even quicker to drop a product no longer in demand. Innovative companies are constantly remaking themselves in terms of who their customers want them to be without dissolving corporate identities or corporate ethics. Strategies no longer profitable drag down confidence in corporate leadership in addition to profit margins and morale.
Corporate boards are the governance model of choice for most public and private companies. Sarbanes-Oxley regulation established many good governance policies adapted and adopted by companies falling under the regulation and many companies that fell outside of the regulations. Boards are excellent at establish strategies, and when properly equipped with dedicated directors and resources, boards are very effective at compliance management of regulations as well. Boards are not close enough to the action to be effective with executing plans, but they are often just far enough away to slow the pace of execution to a near stop. CEO’s should protect corporate management by serving as a filter between the communications coming from the board of directors to the corporate management. The CEO should clearly communicate the strategy and the goals and establish expectations and standards for the corporate management team. A CEO with competent trained managers will be confident in leaving the actual execution to his managers. As they execute the strategy, the CEO must regularly communicate back to the board the results and the major issues that arise.
Many directors and most CEOs underestimate the positive impact that a well run board of directors can have on a company’s performance. If you want to learn more about highly productive boards, send me and e-mail and we will arrange a time to talk.
© Dr. Earl R. Smith II
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Related Articles:
- Good Governance – The Chairman’s Role
- Developing Visionary Leadership – Board Contributions
- Visionary Boards of Directors
- Board of Directors – Standard Bearers of Performance
- Board of Directors: Cultural Evolution
- Board of Directors – Evolution through Devolution
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