It is pretty obvious that business alignment is a prerequisite for firms to success. This alignment is even more important in the two top layers of the firm, the board of directors and the management team. Thus, we can find companies underperforming which main cause is poor management, and the effect is the misalignment between the board and management.
What is board and management alignment?
Peter Drucker defined this alignment very clear and showed us that a clear responsibility definition is one of the main business Key Success Factors: “The board must not act at the level of tactical planning, or it interferes with management’s vital ability to be flexible in how goals are achieved… the board is accountable for mission, goals, and the allocation of resources to results, and appraising progress and achievement. Management is accountable for objectives, for action steps, for the supporting budget, as well as for demonstrating effective performance.”
Adapted from Peter Drucker: "Defining the board and management responsabiities"
How board and management misalignment used to happen?
Most of the time a board member does not understand his role. In this situation that member used to implement what we could call “micro-management.” That is entering in the tactical planning and interfering with management.
What are the consequences of this misalignment?
The consequences could be disastrous for the following reasons:
- The board member wastes his time with tasks that he should not perform.
- The management team waste their time and energy internally rather than externally making loyal customers and fighting with competitors for market share.
- The board used to overrule the management members. This is a common human being practice to demonstrate “they are adding value”. This attitude used to unmotivated the management team, and in the mid-term could provoke desertion of good managers who will prefer moving to others firm with less interference in their job.
- For seniority, respect and status quo the suggestions of the board used to be followed. However, those suggestions could be “wrong” because the board members used not to have the daily contact with customers and other regular issues to “properly understand” the importance, urgency, and consequences of those tactical decisions. The other reason why board members used to fail in tactics’ decisions is that most of them use what I call the “fishbowl approach.” I mean they prefer isolating themselves in their offices to improve their own productivity but that approach used to work uncorrelated with the capacity to solve tactic issues that required to be very much in touch with the staff, customers, suppliers, and so on.
There is one case in which could be understandable the practice of micro-management for a board member. It is the case in which the management team is not good enough. Nevertheless, the top management team have been hired for the board. So it is again the responsibility of the board to select a good management team and to replace underperforming managers, but no interfere with managers’ tactics. We should not forget that another Key Success Factor for board members should be their ability to hire the right people for the right position.
Before continuing, we must answer the question is micro-management always a bad practice? The answer is no. I mean micro-management could be needed it for managing young and inexperienced staff, or to manage inexperienced middle management in underdeveloped countries and/or organizations. However, board should not use micro-management under any circumstance with management.
Other way to identify poor management practices in the board is analyzing their tasks. Poor board members do what they do not have to do, and they do not do what is expected from their positions. It is easier to perform micro-management because those tasks used to be easier than board activities but this is not the expected work for board members.
How is business alignment and misalignment affecting turnaround initiatives?
In turnaround projects, we should wonder us:
- Do we have a poor management issue?
- Is there a misalignment between the board and management?
- Who is the responsible of this misalignment?
- Can we perform a success turnaround, if the people underperforming are still in the firm?
This misalignment issue probably is quite uncommon on large corporations. But it is quite common in small businesses that have grown fast, and the same people who used to be managers are now low experienced board members.