IN THIS ISSUE:
Feature of the Month
- Recognizing and Avoiding Tech Board Blunders
As we reflect on 2003, we can all cheer
for the Sarbanes-Oxley Act, and the myriad legal and consulting
empires that have subsequently evolved. We can breathe a
sigh of relief that accountability, fairness, and balance
are now infiltrating tech boards in every corner of the
world.
Or…we can get real to the work ahead
of us in the coming years.
I spent time with a friend and colleague,
Philip Lay of TCG
Advisors, to compare notes on the worst tech board blunders.
I also collaborated with three business groups who help
companies design highly productive board meetings, and include
their advice at the conclusion of this month's newsletter.
First a little history to provide context.
In the past seven to 10 years, board dynamics ran amok.
Philip says that "venture capital, followed by increasing
numbers of investors unaccustomed to dealing with the volatility
of technology markets, began to jockey for the lion's share
of board seats." Many began treating tech as a glamour
industry, and securities analysts became disproportionately
important in swaying the investment decisions of institutional
and individual investors.
To add insult to injury, some CEO's accepted
the dual role of Chairman and COO - thus effectively "loading
the dice" in board meetings. Some nominated their buddies
and personal mentors to help defend themselves against pressure
from warring board factions.
A classic dysfunctional corporate family
was born. Without further adieu, here is our all-time favorite
Board Blunder List.
CEO--or Presentation Planner?
Have you ever tried to arrange a business
meeting with a senior executive to discuss a new venture,
only to find that she is off limits due to a "very
important upcoming Board meeting?" These marathon "meetings
to plan the meeting" can quickly monopolize an executive's
calendar at the expense of customer face time, employee
issues, and market demands. The CEO's purpose and role quickly
shifts to presentation planner. The consequence of such
a persistent distraction is that those very same leaders
cannot protect the real interests of the shareholders.
PowerPoint Parades
I recall one software company CEO who
developed reams of PowerPoint presentations before every
board meeting. He often used these meetings to invite (or
shall I say, parade through) his key executives to make
board presentations. Their sales antics caused a stronger
and stronger rift between the VCs, the key executive team,
and the board members in search of the truth. That company
no longer exists. After much tension between these factions,
they CEO resigned. Within months, they liquidated to a supply
chain software company for pennies on the dollar.
Lay goes on to say, "Scripted presentations
became the default language of board meetings, and took
on the high-pressure characteristics of a sales pitch. Instead
of having an opportunity to exchange ideas, board members
found few opportunities to discuss sensitive topics in any
depth."
In this ritualistic parade scenario, board
members are left feeling cheated, incomplete, or just plain
drained. The flaw with this approach is that trust for the
executive team plummets.
Binders Create Board-om
Ever wonder what it takes to produce the
"Board Meeting Binder?" It's not uncommon to see
a dozen or more people working late nights for several days
prior to the climactic day. They are busy putting finishing
touches to the package that needs to be overnight expressed
to board members so that they can review the materials in
advance of the meeting. Sadly, this process does not preclude
board members from sitting through four to six hours of
"presentation hell!"
To add insult to injury, these binders
do not prevent very lengthy board meetings. Scott Stanton,
a Partner with law firm Gray
Cary in San Diego, has specialized in corporate governance
for over 8 years. He indicated that some status reports
are so detailed that some meetings can run 1½ days.
(I'm exhausted just thinking about that!)
Putting the "fun" back in
Dysfunction?
When Philip Lay interviewed one experienced
board member, he quickly learned the dangers of compliance
and collegiality on a Board. The board member told him "these
meetings are fundamentally a passive-aggressive parent/teenager
ritual, in which the board's only resort is to censure and/or
fire someone."
The supportive role that many board members
are ready to embrace gets all mixed up with whether or not
to grant the 'kids' their allowance or not. This dynamic
generates compliance, not empowerment, and problems are
concealed until they have become critical.
In any transactional, superficial relationships,
one person will typically react like a child when one party
acts like a parent. According to Lay, "Such behavior
almost always causes marginal results in non-family settings."
Now you've heard some of the biggest tech
board blunders of 2003:
• A lack of clear purpose
• Over-investing in multimedia preparation
• One-way conversation
• Dysfunctional relationship dynamics
This is a great time of year to assess
the value we bring to leading and managing tech businesses.
To avoid repeating the absurdities of corporate excess and
poor accountability, tech companies urgently need to redefine
the 'raison d'etre' of their board of directors.
If you want to avoid sabotaging board
meetings, here are some tips:
Build "Smart" Board Preparation
Materials
Instead of preparing and presenting 100+
PowerPoint slides, focus on specifics. Require that each
director reads the materials and prepare their comments
or questions 1-2 days ahead of time. That way, everyone
can focus on what's really important, and not try to plow
through every aspect of each business topic or functional
area.
Also, be sure to send out board binders
at least 3 days prior to the Board meeting. Scott Stanton
of Gray Cary, has a software client who has mastered their
preparation process. "I've been attending their board
meetings for three years. The Directors can ask intelligent
questions that they have formulated in advance."
Design the Board's Purpose and Meetings
According to TCG Advisors' Philip Lay
(www.tcg-advisors.com), tech companies will serve shareholders
well by answering these questions:
1. What purpose should the board
serve? Here are two potential purpose statements to
consider when galvanizing a new Board, or injecting new
energy into your existing Board:
"The Purpose of a Board of Directors
is to:
• Monitor ongoing effectiveness of the company, and
provide perspective to help CEO and team to address critical
challenges.
• Ensure functional governance of the company in compliance
with government regulations."
2. What kind of relationship
do we want to develop with the CEO? Jay Goldberg, senior
managing director of Hudson Venture Partners in New York,
says "I believe in the partnership model. The idea
that at every board meeting I had to evaluate the CEO strikes
me as very unpleasant. I am there to help the CEO build
the business."
3. How will we best address
critical topics? According to Gray Cary's Stanton, "It's
very common to skip important legal topics until the very
end, and focus on the more attractive topics (such as sales
pipeline) at the beginning of the meeting. Serious potential
litigation gets short shrift."
4. How do we best design these
meetings? Most sources we checked discourage day-long
meetings. With the proper Board preparation kit, any Board
member should have at least 2 days to review the binder
materials so that they can develop laser-focused questions.
(a) Agenda of Routine Board Meetings:
• "Highlights & Lowlights:" This is an
opportunity for the CEO to share recent achievements, as
well as the three strategic and tactical issues that are
keeping the CEO awake at night.
• Select a critical topic requiring detailed discussion
and input from the board.
• Roundtable discussion of 1-2 issues on the mind of
each board member.
(b) Duration of Board Meetings:
Most well-run board meetings last for 2-4 hours. If a company
is facing M&A, emergency actions, or serious governance
issues, it's common to schedule a 4-6 hour meeting. Keep
formal PowerPoint parades to an absolute minimum.
Tackle Highly Sensitive Topics Off-line
Scott Stanton offers this advice: "Maintain
regular off-line conversations with each Board member. The
best place for each talented Board member to share their
abilities is not always in the group setting." If the
CEO is facing a tough issue, she should develop private
discussions to learn the perspective of each member.
Tap into Corporate Resources
Here are my three favorite resources to
help you improve the quality and output of your company's
board:
• National Association of Corporate Directors (www.NACDOnline.org)
• Corporate Board Member Magazine (www.Boardmember.com)
• Directors & Boards (www.DirectorsandBoards.com)
Some key topics every well-managed board constantly monitors
and addresses are:
• Board structures and processes
• Recruiting the best directors
• Overcoming problems that limit a board's effectiveness
• Succession planning
• Executive and director compensation
• Leadership behaviors in the boardroom
• Major market and government trends that will affect
the company's viability
Lay concludes, "Not all boards operate
poorly. Alternatively, I can confidently state that those
companies whose board meetings continually operate below
par tend to experience substandard results in their business
operations."
Every leader of a for-profit organization
will benefit from this advice. Diligently document and communicate
your purpose and meeting guidelines. Engage your Board in
real conversation, push for the truth, and - for goodness
sake-don't rent any fancy multimedia systems. You'll be
ready for a Happy New Year, indeed.
Holiday Gifts
Have you heard about our Top Performer
Program for IT and Services executives? Well, we have
had quite a lineup of guest speakers over the past few months.
Here is just a sample of what our clients have heard…
• The Ten Commandments of Leadership
in Today's Tech Economy
• Strategic Staffing: How to Avoid Costly Hiring Mistakes
• Using The Balanced Scorecard to Build High Performance
Teams
• Is it Time for a Marketing Makeover?
• Ten Steps for Qualifying Services Leads
Our clients pay thousands of dollars for
these audio programs and advice from our panel of speakers,
CEOs and authors. When we realized how excellent and timely
our speaker topics were, we said, "what if we could
share these informative business nuggets with our loyal
subscribers?"
Hey, it's the holiday season. We
have exceeded our goals for 2003 and want to celebrate with
our loyal subscribers! Here is our offer…
If you want a complimentary audio copy
of any of these topics, here's what to do:
1. Subscribe 1 new business associate
who will benefit from NirellNews and sign them up (click
on the SUBSCRIBE button. The process will take 30-45 seconds).
2. Select one of the five topics above. Then send
an email
us with the audio program title in the subject line.
(example: "Please send teleconference of "The
Ten Point System for Qualifying Services Leads.")
3. Reply before December 30,2003. After that,
the offer expires.
**Sorry offer has expired**
That's it! You can listen to your selected
audio program as many times as you'd like.
Holiday Thanks...
For me, the holidays are a song of celebration
and reflection. I've completed the first full year of Nirell
& Associates, and have many to acknowledge.
To my clients, business allies, MasterMind
group, family, husband, and loyal subscribers...
You inspire me to be the higher me.
(Credit goes to Lauryn Hill). That creates the possibility
of leadership, passion and adventure in my life.
Let the music play on for each
of you in 2004!
--Lisa Nirell
http://www.energizegrowth.com/
