One of the top complaints we hear about the state of governance is that boards are too accepting of the status quo. While the causes for concern are varied – low returns on investment, stalled growth or progress, high debt levels, poor service levels, un-deployed cash reserves, or high administrative costs – they often lead to unimpressed investors, dissatisfied donors, or critical partners voicing frustration that boards are either too complacent or simply resigned to current levels of under-performance. So, how can boards inspire confidence and rebut these perceptions?

Understanding Board Complacency and Resignation

Complacency reflects an uncritical satisfaction with current outcomes, often when things are going reasonably well. Resignation, on the other hand, is borne out of a belief that poor results are unchangeable. Both diminish board effectiveness, leading directors to disengage or avoid probing critical issues. Whether complacency or resignation occurs individually or collectively, the result is a stagnating board.

Common Causes

There can be many reasons for complacency and resignation, and they often show up in similar ways:

• Unquestioning trust in leadership: When an organization is performing well, directors may no longer feel the need to engage deeply in critical issues or oversee management to any great degree. When results are poor, affection for the management team can obstruct tough conversations.
• Overbearing leadership: A domineering CEO or Board Chair may, actively or subtly, stifle critical dialogue by discouraging questions or dissent.
• Director fatigue: Long serving directors may become less engaged over time, losing the energy or courage to pose probing questions, especially on familiar issues.
• Lack of diversity of thought and experience: A boardroom lacking in diversity or a non-inclusive one may suppress curiosity or respectful challenging.
• Prioritizing preservation over growth: Without an intentionally curated growth culture, a mindset of asset preservation and risk aversion can settle in.
• Lost connection: Boards and their directors can lose sight of the “why” of their work, mechanically focusing on fiduciary items at the expense of more generative discussions centred on the organization’s partners and beneficiaries.

How to Overcome Board Complacency and Resignation

Complacency and resignation arise in different contexts, but they often result in similar boardroom behaviours. As such, the practices and considerations for preventing both from taking hold are similar:

For Board Chairs and CEOs:

• Focus on the future: Prioritize strategic goals over historical successes. Encourage a future-oriented perspective in board discussions.
• Clarify priorities: Carefully consider and align on the necessary cadence and level of urgency behind reaching the organization’s strategic goals. Frame issues for board discussion to help directors focus on key issues.
• Actively solicit feedback and divergent views: Create an inclusive culture that welcomes feedback and encourages respectful challenging.
• Centre interested parties: Ground the work of the board on the investor, beneficiaries and other interested parties, and bring discussions back to their interests when needed.

For the Board:

• Select good leaders: Choose a Board Chair and CEO who are transparent, inclusive, and interested in others’ perspectives.
• Foster diversity: Bring in directors with varied experiences and perspectives. Embrace dissent and discomfort.
• Monitor external changes: Stay vigilant about market and industry trends and assess the impact on the organization. Benchmark against competitors.
• Encourage reflective practices: Use in camera meeting time to reflect on how discussions balanced past, present, and future priorities, and the time spent operating in fiduciary, compliance and generative modes.
• Solicit input: Regularly include review of investor, donor, and other interested parties’ feedback in the board’s agendas and forward calendar. Invite third party perspectives on the organization and industry.
• Discipline: Focus on the things within the organization’s control with a view to building up adaptability and resilience.
• Assess and adjust: Conduct annual board and director evaluations, with independent third-party facilitation every three years. Make changes where levels of engagement or contribution has slipped.

For Individual Directors:

• Trust, but verify: When engaging with Management in discussion, adopt a posture of ‘smart trust’ that marries a propensity to trust with sufficient analysis. Have courage to ask the questions that are on your mind (at the right level).
• Adopt a continuous learning mindset: Stay current in your areas of expertise and learn areas relevant to the company.
• Maintain accountability: Be self-aware and identify any tendencies towards complacency. Know when it’s time to move on.
• Know your job and stay attentive to it: Stay focused on the business objectives that underpin every aspect of your governance work.

Communication is Key

Even boards doing all the right things can be faulted for complacency or resignation, which underscores just how crucial communication is. Review annual reports, disclosures, earnings call scripts, member and other interested party communications, with an eye toward demonstrating accountability and a commitment to actively elevating the organization’s performance.

You can’t please all of the people all of the time, nor can you totally prevent occasional performance plateaus. However, by actively working to challenge the status quo and transparently showcasing your efforts, you can inspire confidence from your investors, beneficiaries and partners in both good and challenging times. While they may not be immediately satisfied with the results, they at least won’t assume you’re another complacent board resigned to the outcomes.

Let’s Elevate Your Board Together
Reach out to discuss how we can help your board overcome challenges and enhance its effectiveness. Contact us.