UK: Dysfunctional Boards: Time For A Rethink

Last Updated: 5 May 2016
Article by ICSA  

A consequence of poor leadership is invariably dysfunctional performance

The recent publicity given to governance issues at the RSPCA highlights the issue of dysfunctional boards and the consequences that arise when the management of an organisation fails to deliver what is expected for its successful operation. The RSPCA has been without a chief executive since Gavin Grant resigned in February 2014 on grounds of ill health. Two years is an inordinately long time for a body with a turnover in excess of Ł125 million to be without a permanent CEO.

It is reported that two of the three trustees who have resigned have cited their concerns over governance issues, which include a senior trustee acting as interim CEO while remaining a trustee. According to Third Sector and Civil Society News, former trustee Sally Phillips stated in her resignation letter that this was 'an appalling blurring of the governance and management of the RSPCA'.

Alongside this was the behaviour of the selection group appointed to find a new CEO, who amended 'the criteria for the role without reference to the Council'. It was also questioned whether the existing governance structure of the RSPCA was likely to deliver the best possible trustee board, because the candidates for election are drawn from a very narrow pool of RSPCA members.

A 25-strong board, some of whom have been in office 'for decades', was perceived as too large and unwieldy. The third trustee is reported to have resigned due to concerns that the issues may affect her professional reputation.

Leadership is a key issue for any group or body, be it a government, an army, a rugby team or any corporate body. An organisation that has a good leader, or leaders, invariably performs well and outperforms its competitors. Good leaders have the ability to raise the performance of those around them to a new level. A consequence of poor leadership is poor morale and invariably dysfunctional performance.

Succession planning

The issues reported at the RSPCA, one of the UK's oldest charities, raise questions about its governance arrangements. Were there no succession plans in place to deal with the loss of a key employee? Where was the nomination committee? Why has it taken so long to appoint a suitably qualified CEO? Where was the leadership? Perhaps the resignations suggest that it is an unhappy governing body, with issues to be resolved, including the size of, and qualifications for election to, its council. However, we understand that there is now to be an external evaluation, which hopefully will address the relevant issues.

Succession planning is a key area for any organisation, be it to plan for programmed departures or to deal with unexpected ones. It is the responsibility of a board, and primarily its chairman, to ensure that it has an appropriate nomination committee, which has approved plans, including agreed job specifications, so that it can handle vacancies as they arise. Leadership in this key area must come from the top − pre-planning prevents poor performance.

Size and tenure

It is often difficult to determine what should be the optimum size of a board. Current thinking is that there has to be sufficient people so that committees can be properly serviced. The overriding consideration however has to be one of ensuring that the board and its committees have the appropriate balance of skills, experience, independence and knowledge of the company to enable them to discharge their duties and responsibilities effectively.

The executive directors and the non-executive directors need to work together as a team and to do this they need to know each other well and develop a solid level of trust between them. The chairman should facilitate the process, which can be aided by arranging briefing sessions on key topics, away days and board dinners. Only by working well as a team can they be truly functional.

When directors are appointed to a board it is generally for an initial three-year term, to be followed by a further three-year term. In some instances, where an individual has made an exceptional contribution to the business, he/she may be asked to continue for a further period. This is an area, which if not properly managed, can result in ill-feeling among board members.

It is essential that the process for the appointment and re-appointment of directors is rigorous and transparent. Directors look to the chairman to take charge of the process and to terminate the appointment of any director who is not pulling his or her weight and making a worthwhile contribution to the team.

Out of touch

In my experience of evaluating boards, some do not realise that they have a problem until it is too late or, if they do, they are reluctant to tackle it and hope it will go away. In the course of one evaluation it became clear that the board was not functioning well and at least two NEDs were on the point of leaving because board meetings were dire and they did not look forward to them. It transpired that a former executive director had become a non-executive director and persistently challenged the strategy from a personal perspective and his view of the strategy's possible effect on the company's shares, of which he had a significant holding.

Full details of the situation were highlighted in our report to the chairman, who was 'surprised about the strength of feeling about Mr X's behaviour' and, as a result, he had asked for his resignation, which was forthcoming. How could a chairman be so out of touch with his board that he ignored inappropriate boardroom behaviour and was unaware of his colleagues' strong feelings?

The structure of an organisation and the size of its board or council may not be an easy one on which to opine. It may be subject to statute or royal charter having been established years ago, when they fitted what was required at that time. If, after careful evaluation, it is agreed that either one or both no longer deliver what is required, appropriate steps should be taken to effect change, so that they can then fit the current needs of the body concerned.

A3 good fit

Many chairmen have strong views as to the optimum size of a board, a broad one being that it should be of a size that is manageable and which enables everyone to contribute appropriately. It is the chairman's responsibility, together with the nomination committee, to pick the team and ensure that, together, they are a good fit.

It has been said that boardrooms are not meant to be comfortable places, but that should not prevent them being a forum for robust challenge and debate among directors. One CEO told me that if his proposals were challenged and rejected by his NED colleagues, then perhaps it was for him to think again. Clearly he respected the views of his co-directors.

Trusting the judgement of colleagues, both executive and non-executive, and understanding and appreciating their skills, can go a long way towards ensuring a functional board. Maybe it is time for the RSPCA to have a major rethink about its structure, its governance, its strategy and where it can find the best people to execute it. Hopefully its forthcoming evaluation will ensure that is done.

Geoffrey Shepheard is Head of ICSA Board Evaluation

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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