Identifying a fragmented board

A lack of agreement or, worse still, outright conflict at board level is one of the biggest barriers to success that a company can face.

A lack of agreement or, worse still, outright conflict at board level is one of the biggest barriers to success that a company can face.

A lack of agreement or, worse still, outright conflict at board level is one of the biggest barriers to success that a company can face. Mike Robson, director of Azure Partners, explains four reasons why your board might not be aligned.

Boardroom argument frequently leads to a muddled company direction, slow and ineffective decision-making, confused staff, and personal stress for the directors. The end result is usually a company that is underperforming significantly.

But actually conflict is rarely due to some directors being ‘difficult’. There is usually a problem that can be analysed, understood, and then solved – or at least reduced to a level where both company and individuals can thrive.

Some of these issues may be historic, and will even stem from the businesses start-up phase: accidents of birth if you like. While in an initial launch phase, it is much more likely that there will be proper alignment, this does not mean there are not sometimes issues right from the start; different levels of the initial shareholding allocation are often a cause for friction.

More commonly we find that once a business has been trading for a number of years the initial impetus and alignment that helped get the business started can begin to disintegrate. In my experience there are four main underlying causes of this boardroom friction.

Firstly, there may be divergent personal circumstances and therefore divergent personal needs, goals and attitudes to risks among directors and shareholders that lead to different views about the course the company should take. People marry, have children, divorce, get bored and/or lose ambition.

For a number of our clients, differences in personal wealth or personal financial needs have led to different levels of commitment where some shareholders treat the company as a lifestyle business whilst others need the business to create significant wealth for them. As retirement approaches, differences in the age of directors and shareholders can result in opinions as to the direction of the business that may be difficult to reconcile.

Secondly, the personal characteristics of individual board members have an effect. For example: an innovative and highly driven marketing and sales director may have difficulty in communicating his plans and ideas in a way that highly technical and analytical colleagues from an engineering or scientific background can understand and endorse. The marketing and sales director feels his ideas are being stifled, the technical people wonder why he cannot support his ideas with verifiable data. Paralysis may result.

Thirdly, a perception of different value sets can lead to a breakdown in trust and conflict can occur unless some fundamental processes and communication mechanisms are in place. You need more than just good people on your board; they need to be able to understand colleagues’ motives and trust them to work effectively together.

And finally, a number of boards, particularly in family businesses, have little experience of what a board does and why it is important. Parents set up a business; children join it; it expands; it hits a ceiling because the skills and processes needed to move it to the next stage are absent. In some cases directors and shareholders will identify and fill the gaps, but in many cases inexperience leads to sterility.

One or more of the above is likely to result in individual frustration, conflict and dysfunctional working relationships. It happens to numerous companies, and it will invariably act like a anchor, holding back the business from growth.

Business owners need first to identify which of these scenarios applies to them and then, with that self-knowledge, create a plan of action that addresses these fundamental issues.

Todd Cardy

Todd Cardy

Todd was Editor of between 2010 and 2011 as well as being responsible for publishing our digital and printed magazines focusing on private equity and venture capital.

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