Micromanagement: the dirtiest word in governance

Make no mistake, directors and boards that micromanage can be a problem. But it’s far from cut-and-dried. There are many reasons micromanagement occurs—and circumstances where it’s warranted
By Beverly Behan

“The board is micromanaging.” How many times have we heard this lament from CEOs, corporate executives and even board members, themselves? Essentially, it is an accusation that the board is delving into picayune details and/or making decisions that should be left to management. It typically is used to chide the board, suggesting a lack of understanding of a director’s proper oversight role. Yet on some occasions, it’s not a valid criticism at all but rather a tactic management uses to try to keep the board from asking tough, entirely appropriate questions.

The infamous “line between governance and management” is a wiggly one at best—and tough to define. The old chestnut, “Nose in, fingers out,” works as well as any. Refining the definition seldom has much impact on the problem. The most potent tool to tackle micromanagement is the board chair; a good chair’s intervention is what typically returns board dialogue to the appropriate oversight level if it’s drifted over the line. But persistent micromanagement warrants serious examination to determine what lies at the root of the situation and how it is best addressed.

What really causes micromanagement? Corporate executives will argue: “The board doesn’t understand their role. They like ‘being down in the weeds.’ ” And sometimes, this is true. The toughest transition most executives make in joining their first board is shifting their focus from management to oversight. Some never make this transition. Other directors fully understand the distinction but prefer to operate in “management mode” because it’s “more fun” and they can “have more impact.”

On many occasions, it is actually management that leads the board into the weeds. Too often, board pre-reading is more of a data dump than a thoughtful analysis with factual backup; the board is practically invited to micromanage because they’re drowning in details. Executives who repurpose materials from internal meetings take the board into the same level of dialogue the executive team had, rather than tailoring their board presentation to governance level.

Let’s also look at a few situational issues that routinely cause boards to micromanage:

1. Start-up/growth companies. Here, the board is more of a “kitchen cabinet” than a true governance body. These are typically fast-growing companies that have yet to build out their executive infrastructure; the CEO (often a founder) uses board members as advisers and decision-makers in areas of finance, law, marketing and so on. And frankly, it can work pretty well. But when the founder is replaced by a more seasoned executive charged with “taking the company to the next level,” the new CEO is generally shocked to learn how often the board meets and how it tends to focus on management–level decisions that appear “intrusive” to his/her purview as corporate leader. Transitioning a “starter board” to operate at an oversight level after years of functioning as a shadow management team is one of the biggest challenges in the governance of growth companies.

2. Crisis scenarios. Imagine a hostile takeover, possible bankruptcy, fraud allegations or a situation where the CEO really has been “hit by a bus.” In these scenarios the company and its shareholders need all hands on deck, and the board needs to support whoever is in charge on the management side in tackling the crisis. Nonetheless, it would be foolhardy not to draw on expertise on the board that can help in decision-making at this stage, particularly if one or two directors have direct experience in the issue the company is tackling.

3. Lack of confidence in management. When a board lacks confidence in the company’s CEO, it starts to micromanage. Typically, an erosion of trust or series of missteps on management’s part causes the board to become more directive, to get involved in more detailed conversations about how the company is run and to even start second-guessing management decisions. While this is what shareholders would expect in this situation, an acrimonious board-management relationship often takes hold—which may require the board to action their “emergency CEO succession plan” faster than anticipated. Any board that has operated in this way for a prolonged period before pulling the plug on the old CEO needs to be extremely cautious about continuing in this mode once a new CEO is appointed.

Although micromanagement has become “a dirty word” in governance, it’s actually a complex issue that deserves far more serious consideration than superficial finger wagging.

Beverly Behan is a New York-based board consultant who has worked with more than 140 boards of directors in the U.S., Canada and internationally in the past 19 years. E-mail: beverly.behan@boardadvisor.net.

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