Human Capital Briefs

Root Out Dysfunction in the Boardroom

February 27, 2014

Almost all directors look promising before they enter the boardroom, but not all perform equally well once inside. Sometimes a prince in other realms can even turn into a petty gabber at the table, the very opposite of what English novelist George Eliot had championed: “Blessed is the man who having nothing to say abstains from giving wordy evidence of the fact.”

Consider the case of director Frank Whyte (as we’ll call him): “You show a 3 percent increase in productivity,” Whyte snapped at the executive vice president of the largest division of a very successful consumer-goods company and likely CEO successor. The executive was in the middle of a routine presentation to the board. “You’re sandbagging,” barked the director. “You ought to have at least 6 percent.”

The chief executive and the rest of the board rolled their eyes, but no one intervened to rescue the highly regarded but now hapless executive. Their mad-dog colleague was off on one of his rants. Not surprisingly, executives at the company hated making presentations at board meetings. Whyte kept them on the defensive by peppering them with personal opinions and demanding lofty goals that could not be met. He never listened, executives complained. He never asked questions or made constructive suggestions. He just declared, an intimidating tone implying he knew others were wrong, whatever their clarification or explanation. And he always delved into minutia.

Whyte considered himself an expert on productivity management, but his condescending attitude and disproportionate use of airtime made the entire board unproductive. He sapped energy from other directors and executives who entered the room. Worse, he detracted from critical problems that the board should have drilled into and resolved. He was a dysfunctional director.

Let us be clear. We are not critical of directors who disagree with management strategy or voice alternative directions. We are not even talking about hostile directors sometimes forced onto the board by a hedge fund trying to take control of a company or about partisan factions that have formed for whatever reason. Dysfunctional directors have their own modus operandi. Some see themselves as the smartest person in the room, others seek recognition, and still others are frustrated would-be CEOs. Whatever their personal motives, they tend to micromanage or take boardroom discussions down dark alleys. We have seen a director interrupt the first five minutes of a CEO’s boardroom presentation and sour the mood of both board and management for the remainder of the day. The result is to impair, even negate, a board’s capacity to lead the firm. As in any group, a dysfunctional member can sabotage the entire team.

In our experience, as many as half of Fortune 500 companies have one or two dysfunctional directors. Not infrequently, an intimidated management ends up kowtowing, fine-tuning its presentations in the boardroom to anticipate the difficult director’s reactions or consulting with the director in time-consuming ways accorded to no others. It becomes a drain for everyone involved—except the dysfunctional director.

If such directors were recruited too quickly, however, many boards still respond too slowly. One would think that a board chair or lead director would be quick to call out a dysfunctional director for disruptive behavior. In fact, though, that seldom happens, largely because of the traditional decorum of the boardroom. Collegiality and comity still prevail; board members are still reluctant to criticize a fellow director. Directors focus on reasons to be respectful of one another, few want to be known as a director who told others to rein themselves in, and fewer still feel strong enough to openly call a troublesome director to account. Boards often find it easier to fire a CEO, itself a hugely daunting task, than to remove a director.

Yet it does happen. In one instance, when the chief operating officer of a major company was making a presentation to the board, Charles Smith, a recently elected director trying to make his mark, kept interrupting the presentation with minor questions and a caustic tone. Finally, after unsuccessfully suggesting that Smith defer his issues to a later executive session, the lead director acerbically inquired, ‘“Charlie, do you want the job?” So ended the disruptive interventions, and the directors and executives got on with the board’s business. Such interventions are rare but also indicative of what a lead director can do to bring the mood of a board discussion back to the right level.

Here are a set of questions to consider in dealing with a nonperforming director:

• Does the director bring few useful skills and a lack of relevant experience to the boardroom?
• Is the director often unprepared for board meetings?
• Does the director fail to grasp the firm’s central idea and business strategy?
• Are the director’s questions distracting or inappropriate?
• Does the director bring few ideas or leads on business development?
• Has the board established norms on what is expected of directors in the boardroom?
• Has the line between leading and staying out of the way been made clear by the lead director and chief executive?
• Have directors and executives been asked for confidential feedback on a dysfunctional director?
• Has the lead director privately coached a director whose behavior has been disruptive?

 

This blog first appeared on Harvard Business Review on 1/10/2014.

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