The board member’s dilemma: supervising when you don’t (fully) understand
Executives chosen to serve on top-level panels such as boards of directors or strategic steering committees face a common issue: such people are very busy running their own businesses, so how can they effectively provide oversight and leadership given their limited time and incomplete expertise?
Professor Christoph Loch, Dean of Cambridge Judge Business School, writes:
Whether in big business or non-profit organisations, negative headlines have flowed from events or decisions that escaped the attention of otherwise-engaged members of the board – or were tackled by the board far too late.
And within companies, many senior executives have a nagging and recurring sense of anxiety about some of their firms’ most strategic projects – and are frustrated by their ability to influence such projects or even get useful information to begin with.
Yet it needn’t be a losing battle. While the lack of sufficient time will always be a factor for part-time company overseers, there are some techniques to better tackle these important leadership challenges in order to avoid common traps that can lead to faulty supervision and failure.
A study recently published in California Management Review (by colleagues in France and Sweden, and myself) focused on two key themes relating to such supervision – “Intelligence Gathering”, and “Managing Surprises and Change” – and identified a few simple practices that could make a big difference between effective and flawed oversight.
While our research focused on company steering committees and their relationship with project teams, the basic findings apply also to serving on other types of oversight panels including boards of directors. In fact, board members of external companies may face even bigger challenges as they must master the business model and language of an industry not their own.
Based on interviews with 17 CEOs and other senior executives from various industries ranging from auto-making to pharmaceuticals to software (and involving both successful and failed projects), the study found that “Intelligence Gathering” problems often arise because people are either too busy to master the fundamental issues of a project or don’t want to admit that they don’t understand. “When you have reached a certain seniority, you become more reluctant to admit in front of the troops that there is stuff of which you are ignorant,” one senior executive told us.
Given time constraints, the most important thing board members can do is to understand the basic logic of the project – including key drivers of and barriers to success. Important aspects of this include: question assumptions throughout the project; look at the project through the project team’s eyes, perhaps through site visits; establish a no-blame culture for sharing negative information so (as one CEO told us) “the messenger is not in danger of being shot”; and to seek outside information to resolve inconsistencies – though the last route must be pursued carefully to avoid generating mistrust.
In one case we studied, a large engineering project was undertaken with inadequate understanding of technical challenges and customer-related legal regulations, and only after a third schedule delay did steering committee members realise the project was a “bottomless pit”.
In terms of “Managing Surprises and Changes” – which are common in complex projects involving multiple stakeholders – the key is to get to the true bottom and recover quickly, rather than grappling with multiple rounds of bad news. Then, show flexibility in doing the right thing rather than the convenient thing, and do it in a way that does not create winners and losers among the key stakeholders.
Our participants – from Germany, France, Belgium, Sweden and Israel – identified six approaches for steering committee members in dealing with inevitable twists in the road: agree in advance on procedures for plan modification; get informed quickly; understand whether the surprise reflects a correctable mistake or grounds for modifying the plan; work productively with the project team to avoid demotivating them; make clear decisions on any new project direction; and use experiments if time permits in order to break through problems.
In one case, an automotive electronics project foundered because steering committee members failed to enforce decisions across various company divisions, reducing ambition and progress, and the project never again approached its original mission.
Members of boards of directors and other high-level panels have a challenging task. They’re charged with supervising a company or a project on a part-time basis, while receiving information from a variety of sources and often in jargon, and need to right the ship if she steers off-course. Yet there are a few simple rules for performing this task better, including this one: there are no “dumb questions” in arriving at the smart answer.
Christoph Loch of Cambridge Judge Business School, Magnus Mahring of Stockholm School of Economics, and Svenja Sommer of HEC Paris are co-authors of a study – “Supervising Projects You Don’t (Fully) Understand: Lessons for Effective Project Governance by Steering Committees” – which was published in April 2017 by California Management Review (DOI: 10.1177/0008125617697944).
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