Disaster in the Boardroom

Posted: April 20, 2016 by Robert Craven

The PowerPoint presentation shouted “record sales and profit growth”. Charts and figures screamed of success. The Managing Director punched the air: “onwards and upwards… The elephant in the room was…” You could see the success written large, hear it in the voice and feel it in the room. Or so it seemed.

That was a year ago with a FTSE100 multinational. Then Groundhog Day: the next conference I attended (for an entirely different company) was entirely the same, but they were claiming to be a growing business.

Unfortunately all was not as it seemed.

Today both of these businesses are sinking.

Their boardroom process displayed similar tendencies: they were incapable of reading or interpreting the world around them and made the wrong decisions, incapable of acknowledging what was really going on internally and externally, bad business strategy in my opinion. The consequences were inevitable.

So what happened?

The growing business had ignored collapsing customer demand by a factor of about ten.

The multinational blamed the bank for pulling the plug… or actually they hadn’t identified the inevitable; the terminal decline of a product that was out-of-date, dull and inappropriate for today’s market?

These two stories of how the board can get out of touch need a little reflection.

If you ask what the role of a director is, most start mumbling about the board and responsibility for the business strategy and share options and so on.  Like parenting, you are not given a manual and most make it up as they go along. At all levels.

The board is the business brain – it links the short term and the long term; it links the external and the internal perspective (focusing on policy formulation, strategic thinking, supervision of management, and accountability).

These two boards failed to deal with the most basic of ‘directorial dilemmas’:

• To simultaneously be entrepreneurial, driving the business forward whilst keeping it under prudent control
• To be sufficiently knowledgeable about the workings of the company and yet stand back from the day-to-day management and retain an objective view
• To be sensitive to the pressures of the short term and yet be informed of the broader trends and competition
• To be focused on the commercial needs of the business while acting responsibly.

Both boards were irresponsible. Incompetent and negligent.

What about yours?