top of page

WHEN BOARDS OF DIRECTORS FAIL

“What is not defined cannot be measured. What is not measured cannot be improved.

What is not improved is always degraded.” Lord Kelvin


It was winter of 2021, when in my mission as an advisor, I was attending a meeting of the board of directors of an important company in the industrial sector that we will call Omega (fictitious name). which had only been implementing the council meeting scheme for a few months, as a first phase towards the institutionalization process.

Today I still visualize as if it were yesterday, how the administrative advisor tried to explain the organization's costing process to the young owners and members of the board of directors, however, These young people, instead of paying attention to the advisor, were more focused on answering WhatsApp messages, or answering cell phone calls, or discussing inconsequential jokes, and one or another was dozing. The scene looked more like a high school classroom than a board meeting. With a tone of desperation, the aforementioned administrative advisor took out her keychain which, using it as a bell, shook it to attract the attention of the attendees while saying “children , children please pay attention.”

This singular event that I just told you about is very common in medium-sized, growing SME companies, where sometimes members lack characteristics and skills that make it very difficult for it to materialize. really what a real board of directors is.


WHY DO BOARDS OF DIRECTORS SOMETIMES FAIL?


1) Due to the False Belief that Mutitask (Multitasking) is Effective

The history of the company to which I refer, which we are calling "Omega", had the characteristic that the Council meeting dates were not respected and, when they were held, they started late and sometimes very late.

In addition, they did not have an agenda and a minute hand, so that between this and the high level of digression of the Council members, the meetings ended late, very late and sometimes with heated tempers.

Finally, the agreements (if there were any) were so simple and operational that they were normally sent through an email in a three-line wording through the secretary of the council that was a kind of "thousand uses" more than a true council secretary.


The worst part of this, was the fervent belief among them, that being "Multitask" It was a great virtue and synonymous with efficiency and effectiveness, so most of the meeting time was spent rambling between texts on their WhatsApp that had nothing to do with the meeting.

The assumption that many claim that during multitasking our attention is “divided” is, from the perspective of cognitive science, false. As Daniel Goleman says: “Attention is a narrow and fixed channel that we cannot split. Instead of simultaneously dividing attention, what we really do is move it from one place to another. It is as if there were a switch that quickly alternates attention between the open and concentrated mode”

Multitasking makes us move our attention from one side to another and, instead of concentrating on a task that could take us 2 hours by connecting and disconnecting our attention from one side To another, this activity will take us 3 or 4 hours, but it will give us the illusion that we are moving forward because we did other things and yes, maybe we did other things, but in an ineffective way, burning a lot of brain energy and using up the brain resource. attention and time.

Multitasking is considered the scourge of effectiveness. And by this we refer to changes in the content of working memory and routine interruptions of a certain focus of attention, which can divert us from the original task for several minutes. And it must also be said that regaining full concentration requires between 10 and 15 minutes.


2) Lack of Strategic Thinking Knowledge

The owners of "Omega" They lacked strategic knowledge and their approach was totally operational, which is why they did not usually prepare budgets and sometimes not even profit and loss statements. Of course, not to mention a two-year tactical plan and even less a three-year (strategic) plan.

For this and other reasons it was sometimes difficult for them to identify the factors of no success such as the drop in sales and the work environment of your organization: “What is not defined cannot be measured. What is not measured cannot be improved. What is not improved is always degraded.”

The lack of knowledge that exists in certain organizations about what an operational, tactical and strategic plan is is very common; Many companies end up reviewing operational indicators year after year that do not help them visualize their future in the medium and long term. They do not know how to differentiate between operational and strategic indicators.

The operational plan (present) does not guarantee the future of the organization, as Albert Dunlap said well “There are three types of executives in the world​, there are those who can obtain short-term results without having an idea of where they are going to take the company in the future conversely, there are those who have a great ten-year plan, but will be out of business in ten months​ and then there are those who can achieve short-term results along with a vision for the future. ​These are the good ones, but they are incredibly rare".

Because of the above, it is very important for companies and organizations to diagnose their current situation (Mission) and design their future (Vision), through information systems, through the use of tools (Pestel, External and Internal Factors Evaluation Matrix, Sectoral Analysis, Competitiveness Matrix and Competitive Analysis) and information technologies that allow the company to evaluate opportunities, threats, weaknesses and strengths, in order to make decisions that favor achieving expected results through new and better business models.


All of the above must be supported by Competitive Intelligence, whose objective is to help organizations understand their market, make safe strategic decisions and increase their profitability, through an analysis competitive that allows predicting challenges, risks and opportunities.

A Strategic Plan allows us precisely, a better understanding of the market, identification and implementation of safe strategies to increase the profitability of the company (and that it does not disappear) by creating new business models. more competitive businesses.


Competitive intelligence is nourished by marketing, since we must remember that this is a hybrid process of strategic planning and market research activities, whose objective is to collect and synthesize information related to factors external to the organization such as competitors, market, technology, innovation, research and development and contrasting them with the internal factors of the company.


3) The Lack of Discipline to Create Organizational Value

The lack of knowledge and humility of the owners and advisors of Omega prevented them from correctly understanding what a Comprehensive Chart of Command, in such a way that, during the meetings, they ended up spending little time on the Balance Score Card and a lot of time on operational and out-of-place topics.

It is very common for certain types of companies to “confuse gymnastics with magnesia”, since, when developing, for example, the performance indicators known as KPIs for The balanced scorecard, which is a document that must be reviewed in these board meetings, administrators and directors end up measuring things that are not important, ignoring indicators that really are.

This is because the fundamentals of Competitive Intelligence and Business Intelligence are lacking.

As Lord Kelvin said: “What is not defined cannot be measured. What is not measured cannot be improved. What is not improved is always degraded.”


We are in a new era where knowledge needs to be converted into action. Peter Drucker, better known as the "Father of Modern Management" He said that "Dreaming without acting generates very good ideals, but no results.". This meant for Drucker that knowledge is generated through the interpretation of information and that, by processing knowledge, we generate innovation, which is the modern way of calling wisdom.

To address the issue of data management and knowledge creation, we must refer to the approach given by Dr. Russell Ackoff and his pyramid of knowledge.


Russell Ackoff's approach is very important because in the world of science and business, we are used to measuring past events, without establishing adequate mechanisms that allow us to acquire through the interpretation of information, adequate knowledge within the organization.

It happened to our friends at Omega that they were not used to measuring and documenting past events and therefore did not have the elements to correctly predict future events.

If we are not able to establish mechanisms to interpret information to create new knowledge, the less we will be able to process knowledge to innovate:

Knowledge is interpreted information.

Innovation is the process that translates knowledge into growth and social well-being.

Russell Ackoff's diagram, in its early stages (even before wisdom), has a similarity with the definition of Business Intelligence:

Business Intelligence aims to collect data in a repository (ERP), which allows an analysis of these (data mining), and create graphs and/or tables that help the strategic thinker make safe strategic decisions.


4) The Founder's Trap or “Snow White and the Seven Dwarves.”

Among the senior managers of "Omega" and the lower levels of the company, there was an economic abyss, such that the company began to show symptoms of internal and external stagnation, which could not be overcome because the lower levels sometimes did not have the economic motivators. and/or skills to innovate.

Not only young entrepreneurs fall into this error but also many of those who are already very experienced in business; The founder's trap is predicted by a very important tool, the Greiner model, which helps us predict how organizations, like human beings, go through stages and crises.

The Greiner Model helps us “Overcome Crises Early”, as it shows us the Life or Growth Cycle of organizations; It is very useful to manage (prevent) crises in a company in time, implementing the correct strategies and modeling organizational evolution.


This model allows us to locate and predict the next crisis (structural or functional change) that the organization will have to face and allows us to identify certain critical indices for its success in the past of a company. future, it also facilitates the understanding of the functioning of fast-growing companies (emerging companies).


When the founder(s) of a growing company, over the years, maintain close control over their collaborators (micromanagement), without giving them the necessary authority to make decisions. decisions, what they are achieving is an inept and incompetent team to make the company grow internally and externally. This is why, allegorically, the founder's trap is also called the Snow White and the 7 Dwarves syndrome, where Snow White is the top manager and the 7 dwarfs are the collaborators without sufficient empowerment to help him develop. to the company.


5) Organizational attention deficit syndrome

With this element we started this blog, when we said that, with a tone of desperation, the administrative advisor from "Omega" He took out his keychain which, using it as a bell, shook it to attract the attention of the audience while saying “children, children, please pay attention.”


Attention is an element that the majority of young directors in organizations, especially SMEs, do not practice, since attention requires willpower, and if you do not have it the will to focus attention on what is important, discriminating what is not important from what is important, will end up making distorted and poorly made decisions.

Do you want to evaluate your level of attention?

  • Do you remember what the person you just spoke to told you?

  • Do you remember the route you took this morning to go to work?

  • Do you taste your food?

  • Do you pay more attention to the person you are with than to your cell phone?

  • Are you reading this blog carefully?

The more “no's”, the more distracted you will be.


We need attentive leaders who must focus on three different aspects: our own well-being, the well-being of others, and the functioning of the larger systems that govern our lives.


Among the symptoms of what we could call the “attention deficit syndrome of an organization” we could mention, for example: making erroneous decisions due to lack of data or lack of time to reflect; the problems in attracting the market's attention, and the inability to concentrate at the right time and place.


CONCLUSIONS

In the advisory and consultancy process, especially to SMEs, it is very important that before starting the institutionalization process of a family business, some training seminars must be proposed as a prerequisite, touching on some of the topics mentioned above.


I remember that there is an organization called "National College of Independent Professional Business Advisors, A.C", where It seems that sometimes they forget that, according to some official figures, 99% of all Mexican companies are SMEs, which have the following distribution by economic sector:

Manufacturing 12%

Trade 49%

Services 39%

Total 100%

And, many of them fail to consolidate their Boards of Directors and much less become institutionalized because they are not aware (neither the companies nor the consultants) of the prior need that exists, to address issues as important and little attacked as:

1) The False Belief that Mutitask (Multitasking) is Effective< /p>

2) Lack of Strategic Thinking Knowledge

3) The Lack of Discipline to Create Organizational Value

4) The Founder's Trap or “Snow White and the Seven Dwarves.”

5) Organizational attention deficit syndrome




7 views0 comments
bottom of page