Warren Buffet says, “The best way to affect the behavior of board members is to embarrass them.” While this statement may have some truth, there are better ways, to advance change for competitive advantage from the boardroom.
To have the board aid in creating a competitive advantage is an important mindset. Think of it this way. In a pre-IPO company, a board may decide that the best board candidate is an executive who has taken a company public. The candidate’s knowledge and experience in the investment banking world and contacts on Wall Street will add value at the top of the house. However, once the company is moving forward, this board member may not have the same value.
Now, maybe the strategic plan for the company is to grow the business in China. The board may then decide the best candidate is an executive with extensive knowledge and experience in China. This does not mean that there is a lack of competency in the director that was recruited to help with the IPO. Rather, it is an alignment of knowledge and experience based on strategy and risk.
The overall philosophy is that knowledge and experience do not go into perpetuity. Even the best-managed companies aren’t exempt from the inevitable clash between whirlwind change and corporate inertia. With the pace of change accelerating, boards need to be flexible and agile. They must be able to understand the task that management has in the 21st century—to be able to quickly adjust to market developments and be wise in reallocating resources to new opportunities.