Leave Your Ego At The Door
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In a privately-held company or family business, where there are perhaps four to six director seats available around the boardroom table, there is simply no room for a large ego at that table. Yet too often the super ego looms over the board or has indeed prevented the board from forming in the first place. This is sadly a frequent challenge for companies led by founders or major shareholders who are simply unable to let go.
My way or the highway
This challenge was highlighted in a recent conversation I had with the founder of a reasonably-sized private company, where the founder is also the major shareholder and the chief executive. In their company there is a board in place, or so he thought. When I asked him about the value of his independent directors, who were in the minority compared to shareholder-managers, he replied that their greatest contribution was their valuable strategic insight. If he agreed with their insight, he may indeed put their advice into action.
I was perplexed. Surely the key driver of having independent directors on your board is to create an organisational and board-level culture of accountability for performance? Why would you invest in independent directors when all you seek is advice that you might ultimately choose to ignore if it does not match your world view? What if the advice they were giving you focused on their concern that you, as the chief executive of the company you founded, was not performing at the level the company required, given its strategic growth path?
Could you be fired?
I replied with a challenging question: “If the reason was justified, would your board be willing and able to fire you as the chief executive of the company you founded due to non-performance?” In my view, if the answer is “yes” then your board has the capacity and willingness to function as a high-performance board. Think about that carefully.
If your board process is functioning the way that it should, you, as the chief executive, should be held accountable for your performance just as you would expect any other employee to be held accountable. Why should this critical leadership function be any different just because you happen to hold shares in the company you founded?
He looked at me as if I had just flown in from outer space, and, shaking his head slowly, replied: “Why on earth would I give away the power to control my company to someone else?” And there it is in a nutshell — the nexus point that blocks the growth of private companies.
A high-performance board
Do not get me wrong. I don’t believe in getting rid of every founder chief executive as a matter of principle. Far from it. What is critical for a high-performance board is that you have a board structure that is willing and able to hold its chief executive accountable if need be.
We often mistakenly think that as shareholder-managers we simply could not perform better or show more commitment than we currently do. Yet I can guarantee you that if your board has a majority of non-executives who are expecting you to deliver, you will be amazed at how much growth and performance is still required of you. Without the Sword of Damocles hanging over our heads, we become complacent and believe the story we keep telling ourselves about our excellent performance.
A high-performance board will make sure that the chief executive is being held accountable against defined measures while being mentored and supported by the board. It is in the best interests of the board that the chief executive thrives. Yet the board is primarily responsible to ensure that it acts in the best interests of the company. So, what happens when the shareholder-manager’s desire to control the board or the company does the exact opposite? The business will simply hit a glass ceiling in its growth and no further shall it go.