When to be Operational and When to be Strategic
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Here is a powerful reflection that every private company board should undertake regularly: Are we too focused on operational detail and do we need to lift our perspective to a higher level? Indeed, finding the right balance between this strategic perspective and having an in-depth understanding of how the business operates is a critical balance point. Yet, if you are a non-executive director on a private company board, it is likely to be a challenge that you will wrestle with repeatedly during your tenure.
If you are the executive director of a privately-held company or a family business, or are perhaps even the founder or major shareholder, you would already have an intimate understanding of the business and its challenges and cycles. In the boardroom, this sets you up to err on the side of what we call the ‘manager hat’ or the hat we wear when we focus on operational performance alone.
In the boardroom, only the director hat should be worn as all directors focus their collective strategic mindset to lift the value and performance of the company.
While keeping the manager hat off in a board meeting can be a challenge, it also provides you as the executive director with good information and an in-depth perspective.
If you step into the role of a non-executive or independent director, your perspective is quite different. Initially you will have a limited understanding of how the business functions and what drives its growth. You will rely on the reports provided to you by management and their ability to answer your questions.
The learning curve is indeed steep as you accelerate your own understanding and immerse yourself in a new industry and context. A non-executive director does not have the luxury of time and must add value from day one.
Retain a strategic mindset
In the Sirdar Applied Directorship Programme, a ten-month director development journey, we see this challenge presenting itself through the simulated board meeting process our trainee directors embark upon. For the first board meeting, there is a volume of information to unpack as part of delving into what the company is all about. It’s overwhelming, just as it is in ‘real life’.
In the simulated process you do not have management present for questions and insight, and all directors on the board are essentially independent. Yet it highlights the challenge of getting stuck into the detailed understanding of the company while retaining the strategic mindset of the non-executive director.
We have had lively debates on whether the information received in the board papers for the simulation is too detailed and operational, while others argue that there is not enough detail. We have witnessed our trainee directors struggle with how to immerse themselves in the detailed financial statements yet remain strategic. The board resolutions passed in each meeting also pinpoint those boards that have become lost in the detail and those that have used the detail to steer their visionary leadership.
Learn to cut through the detail
This wrestling process is essential and is due, to a large extent, to private company directorship being different. On the programme we see this clearly with non-executive directors who have a history of serving on large boards of listed companies. They often struggle with the realities of the private company board, where you roll up your sleeves and get involved, yet always retain your strategic perspective and keep asking challenging questions that drive growth and performance.
In a private company board, you cannot sit back and rubberstamp from a distance the decisions that management has made. That simply does not add value to the growth and development of private companies. Yet you also cannot lose yourself in the detail.The key takeaway then is that the challenge of strategic detail is a necessary journey. Only you as a director can find your own balance point that makes sense — you have enough information to understand the dynamics of the organisation you serve, yet you retain your elevated and long-term perspective that adds value. You ask the challenging questions and address the levers of growth that will accelerate sustainable performance of the company into the future, backed by your detailed financial insight.