Blog

Boards of Directors: the overlooked engine of growth?


For a long time, societies have suffered from an excessive dependency on superheroes. There’s a tendency –natural to all human beings– to delegate on a few individuals the responsibility of accomplishing our most ambitious goals: economic growth, the elimination of poverty, even the battle against climate change. This translates into an unhealthy relationship with our leaders – we blindly trust the leaders in our communities, nations, and businesses with our future. Flash forward a couple of months and we are labeling these same leaders as inefficient or incapable for their inability to accomplish the change we dreamt of.

According to Harvard’s University professor Ronald Heifetz, this version of heroic leadership suffers from an elemental issue – its failure to recognize that there are two kinds of challenges: adaptive challenges and technical ones. The latter consists of challenges that can be solved through the expertise from an authority on the subject. A classic example is when a patient suffers from appendicitis – it suffices with the diagnose and further intervention by the doctor in order for the challenge to be solved. A technical issue that required a leaders expertise.

Adaptive challenges, on the other hand, cannot be solved through mere technical knowledge. They require substantial commitment from the people involved. They must change habits, customs, and behaviors in order to bring the situation to a happy resolution. This category ranges from micro issues such as diabetes in a patient (which cannot be solved by prescriptive medicine but rather needs the patient to alter his habits) to macro issues such as climate change (who could we single out with the responsibility to solve it?), migratory crises, and, of course, economic development.

There isn’t a leader capable of achieving economic development for a nation, let alone the world. Not even the most prepared, intelligent, or witty – the challenge simply has a different nature. A nature that, according to its label, requires adaptation from everyone involved. Even so, and this is particularly true for underdeveloped countries, we continue to put our hopes in a small number of individuals to achieve the much-wanted economic development that has avoided us during multiple decades of lagging behind.

Its natural for us to point out to the usual suspects for this lagging behind – the president, the congressman, the CEO. It’s a tactic that has never worked and will never work. We are, plain and simple, looking for an expert to solve a challenge that cannot be solved by experts. Economic development is a team effort that doesn’t depend on lone players. One in which the private sector has a crucial role to play.

In order to achieve progress, we need excellence from businesses. Such excellence is lacking now a days because we don’t have the necessary discipline, order, and focus. We don’t need individuals who promise to save us, we need virtuosity among our enterprises! And there can be no such enterprise without a board of directors that demands it to be so.

This may sound weird. We have this image that board of directors are packed with highly respected and experienced individuals whose job is to consult and advise on the company’s strategy. However, there is another task which is as important (maybe more important) in a board of directors’ operation – to control the high executives and CEO and demand results from them.

Now a days it seems that to be appointed in the board of directors is a privilege rather than a responsibility. Just another acknowledgement in the executive’s career instead of a golden opportunity to eliminate inefficiencies, demand greater results and thus to imprint the private sector with excellence.

It’s not just a matter of wrong mindset from the members of the board, there is a systemic situation that promotes such passive attitudes from them. In Latin American countries the compensation of the members of the board of directors is insufficient, specially when compared with the standard compensation in developed countries (as if being given the privilege of being part of the board was enough compensation). This results in a lack of commitment from the member that, seeing his compensation as mere symbolic and having no true incentives to exert control over high management, limits his job to give his opinion on the company’s strategy.

Companies are in debt of structuring boards of directors that follow high standards. In the core of that discussion lies the issue of compensation. Poorly compensated boards, as is true in most Latin American countries, will always be complacent of high management and its members will remain mere advisors instead of true boosters of excellence in business.

Without private sector development there can be no progress. Its as simple as that. And without boards of directors committed to demand the best from their executives, companies will remain (with few exceptions) immersed in the same cycle of mediocrity, in which the aim instead of thriving, advancing and exceeding is merely trying not to look bad.

Boards of directors are sleeping giants. Giants that have escaped the public scrutiny when we have searched for the people responsible of our inaction on our biggest challenges. Giants that hide behind the usual suspects – the president, the congressman, the CEO. Its time for a mindset shift. What if we get past the privilege and become responsible for our company’s excellence? What if we awaken the sleeping giant? What if we turn on the overlooked engine of growth?

Leave a Reply

Your email address will not be published. Required fields are marked *