“Experience is the name everyone gives to their mistakes” (Oscar Wilde). For any entity it is a perilous path to manage by using more of the rear mirror than the windscreen. Looking in the rear mirror often, is akin to giving a comb to a man who has lost all his hair. Looking at the distance covered does not provide for probing the path ahead. The done, cannot be, undone.
The board of any entity, irrespective of it being a business organisation or a non-profit social welfare institution, will comprise of persons, with some having experience of direct relevance, while others may not have a direct exposure. The internationally accepted standards of governance encourage all types of diversity at the board level. Essentially, therefore, they are a broad mix of individuals who are tasked to develop the vision and mission of the organisation, and later are required to assign the relative responsibility to the management.
It is amongst the best practices to keep the board separate from management, particularly the day to day management of the organisation. The bridge between them is the office of the CEO. The CEO is invariably part of the board, either as an elected director or a deemed director, because of the office held.
Management of any institution must be, ideally speaking, totally insulated from the influence of the owner and the board members. The executive director on any board, has responsibilities that are almost similar to the role of the CEO; albeit on a subdued basis. The executive directors’ role in the assistance of the management must be fairly and clearly documented. The role of the ED can become a tad difficult and tricky in cases where the ED is not an independent director and is related to the owner/ chairman. His responsibilities must be clearly demarcated from the responsibility of other directors, the non-executive and the non-independent, representing the owners.
Against the backdrop of such governance structure, it is imperative to have a professional manager, who must have command over his professional team to lead the organisation. A critical growth aspect of the CEO’s responsibility is to possess sound technical knowledge of the ‘system’ that would best deliver envisaged results. The CEO and the senior management team must have direct and relevant experience; in fact they should be subject matter experts. Trust, the word of the experienced. Knowledge beyond experience yields absolutely nothing, except fear of the Unknown. The reality of management is that you cannot put an old head on the young shoulder.
The management led by the CEO, has to assist the board in formulating the vision for the institution; due to diversity, leaving this development of vision, and entirely to the board would be a great folly. The in-depth knowledge that is necessary for forming the future charter of the organisation will most likely be not available. This heterogeneous group (Board) is required to come up with a homogenous governance structure. This can only be achieved if the management is consulted in a significant manner by the owners. If there is a tussle between the board and the management, the cultural waters of the organisation will most likely get even muddier and commands relating to everyday management will fall through the cracks.
A cursory glance at a typical agenda of any board meeting would reveal that a significant amount of boards’ time is spent in reviewing the past. This review is of both, process and numbers achieved. In other words, the balance sheet, profit and loss account numbers are exhumed from the books and are deliberated upon endlessly -- unfortunately the exercise is not to find areas of misjudgment and miscalculations, so that they serve as guiding lights , in the future; instead the review is done more to find faults, and to get personal with the management.
The CEO presents, as per local laws usually at the end of every quarter, a report on the performance of the corporate sector. This story telling becomes the longest narrative for any board meeting. A regular item of agenda that draws much attention from the board and from the senior management too, is the Compscan (scanning the output of competitors). These are usually ‘numbers’ compared between own performance and the market -- the elements of profitability, earning per share, return on assets, return on equity, etc. In my experience, very little attention is paid to discover what strategies were either followed or discarded by the competitors which may have been the reason for their better results and growth or for their poor performance and regression.
Reviewing past performance is a standard practice, the intent has to be, to take from it, lessons learnt. The CEO must therefore sift through the details with speed and dexterity, and not waste much time upon it. The conclusions must be drawn for incorporation as features to be considered for future planning.
A major part of the time of the CEO and the management must be spent on analysing and evaluating the emergence of fresh trends in the marketplace. These can relate to shifts in product preference, productive efficiency, varying costs of raw material and the advancements in technology relating to their own industry.
To drive towards newer milestones, the wiper on the windscreen of imagination, has to operate more rigorously, than the heater on the rear screen which helps to evaporate or defrost the fog. While it is important every now or then to look into the rear view mirror it should not become a habit, to keep staring at it for long periods.
Those leaders who are trapped in their past, fail in meeting the expected demand of being able to offer guidelines for threading onto newer pastures. No manager can continue unabatedly to live for very long on past laurels; markets are unforgiving. They move forward at lightning speed, with fresh ideas and initiatives that are expected to give better rewards and sound success.
The board’s diktat to the management must be ‘cease to look in the rear mirror, look at the windscreen. Keep that clean and clear. The path must remain visible’. The milestones must be placed with timelines defined for surpassing them.
Most corporate entity’s boards know that it is their responsibility to frame vision, mission and policies for their institutions. In doing this they rely heavily on the CEO and his/her team. The management has to educate board members, in as much as, the board has to guide the management. If the board member has hands-on experience of the business, the contribution will usually be in relation to that experience which can (and in most cases, as per this scribe’s experience) is normally outdated and irrelevant to changed circumstances. This is staring into the rear mirror, from where, no one gets a sense of direction. If the board is surrounded by the courtiers of the past, they are, mostly, those who have neither learnt anything new nor have they forgotten the past.
Too much of yesterday should not consume a lot of today. Forward looking management, with an open mind, are recipes for a successful organisation.
The writer is a senior banker & a freelance columnist.