Challenging the status quo

August 2010 » Columns » BUSINESS Q & A
Doug Thompson

Dear Doug,
I recently moved up to the CEO slot in our firm. In my new role, I am stepping back and looking at our governance practices and challenging the board to determine if they still make sense. One of the issues I recently put on the table is the Executive Committee of the Board. Do we really need this committee?
K.H., Fla.

Dear K.H.,
First, you are to be congratulated for challenging the status quo. Too often old practices remain in place for no better reason than, “this is the way we have always done it.” The Executive Committee is a good place to start. Usually it is a subset of the board that meets more often than the full board does and is made up of senior management. While this committee is often very efficient — decisions can be made quickly — it is not very effective.

The Executive Committee becomes the place where decisions are made, or discussed in detail, before they are presented to the full board. When an issue is presented to the full board after it has been reviewed by the Executive Committee, it often seems like a fait accompli and any hope for meaningful discussion is lost. In his book “Boards at Work,” management consultant Ram Charan notes, “More than any other committee, the Executive Committee tends to lead to, or reinforce, a two-tier power structure that is a major drag on board dynamics.”

The committee usually exists for convenience. It’s a lot easier to discuss issues in a smaller, usually more collegial, group that meets regularly. It can usually meet more quickly as well. However, this convenience comes at a cost to a firm’s governance model. The two-tier structure discussed in “Boards at Work” can put the other board members at a disadvantage since the real power of the board exists with the few that comprise the Executive Committee.

Once the shareholders have elected members to the board, they have a right to assume that all of the members will be actively involved in board decisions. Each person on the board has the same job — the existence of an Executive Committee, or any other committee, does not change a board member’s responsibility. The Executive Committee can make the other members of the board feel like they have a limited role. This often starts a vicious cycle where board members feel less responsibility to the board, and the less they participate, the more it appears there is a need for an inner circle of board members that are truly dedicated (e.g. the Executive Committee).

Ask your board what would be different if the committee did not exist. The issues that are really board issues should be discussed with the whole board. If you really think that the board is too large or that the membership of the board may not be able to “handle” the discussions, maybe it is time to rethink the composition of your board. Do you have the right people at the table? If the Executive Committee is used to circumvent this problem, then it is a patch and not a solution.

Finally, chances are that much of the content being discussed in the Executive Committee meetings is not board material anyway; it is operational. If this is the case, call the group something other than a board committee. They should be sitting at the table with their manager hats on, not their board member hats. If you decide to eliminate the Executive Committee, you should evaluate your by-laws with your attorney and determine if any changes are required. It may be that the by-laws provide for the committee, but do not require it.

Getting rid of the Executive Committee might not only make for a more engaged board, it might also help to clarify the line between management/operational issues and board issues. In either case, you should examine how your Executive Committee has worked in the past and consider its usefulness in the future.

Doug Thompson is a management consultant for Thompson Strategy Consulting, which specializes in governance for A/E firms. He can be contacted at doug@thompson-strategy.com. Get answers to your questions about design firm and project management, finances, marketing, international engineering, and related topics by sending them to bdrake@stagnitomedia.com; subject: Business Q&A. Include your name and telephone number in all correspondence. Your name will not be used in connection with published questions.


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