Everything seemed to be going well for a public software company. Growing at a rate of 50-100% for three years straight, the company was gaining momentum until one day it all came to a screeching halt. Just weeks before the annual 10-k report was due the board uncovered that the CEO and CFO had been taking a few too many creative liberties with expense reports and were stealing money from the company…yes, they were embezzling funds – a nightmare scenario for a public company.
The board went to work, firing both of the full-time executives for cause. They immediately appointed an Interim CEO and reached out to us at InterimExecs to bring in an Interim CFO to help them navigate through murky waters.
“It was a full-fledged crisis that included issues with culture, staff, investors, analysts, debt holders, Board members, auditors, the SEC and activist shareholders,” said a board member.
Bill Merchantz, founder of Lakeview Technology, has done pretty well. His first company went public after he exited and his second sold to a big PE fund. But he told me he had one regret in forming a company – he wished he’d had a formal board of directors early on.
An active board filled with diverse skillsets can save an entrepreneur from himself.
Successful entrepreneurs forming a company have to master the paradox of being both stubborn and thick-skinned while simultaneously listening and being open to change. The best vehicle for that sounding board is a board, so why don’t more entrepreneurs create a brain trust?
The concept of an Interim Executive Director (ED) isn’t well known in the nonprofit arena…yet. But, it’s becoming more mainstream and for many good business reasons.
Did you know? On average, it takes a Board of Directors 9 months to recruit a new Executive Director. By the time they are on-boarded and contributing, a year may have passed since the departure of their prior leader. While Board members may step up to “mind the gap”, the truth is that employees, partners and funders can lose confidence in your organization during this leadership transition and key employees may leave. Just organizing payroll, developing a budget and/or supervising the employees may keep the lights on, but without professional leadership, your organization can be harmed and stymied while the Board should be focused on finding your next leader.
Interim executives deliver real results, in real time, real quick. An interim is unique in the depth and breadth of experience they bring to bear. This allows an interim to see hidden value in existing products/processes/systems, implement actionable strategies and gain true alignment necessary to optimize the business. The interim will review the investments the company has made into processes, organizational structure and systems. This will lead to a focus on the areas which can be easily measured and might yield the quickest return on investment such as profits, systems and process efficiency.
*This article is an excerpt from Dennis Cagan’s upcoming book “The Board of Directors for a Private Enterprise”.
When interviewing a candidate for a senior executive role he or she will most likely be a subordinate, or a peer, but nonetheless an employee. Personal chemistry and cultural fit within the company are of course most important. However, a director is not a peer, nor are they an employee, and it is not mandatory that they are a good fit with the company culture – still of course, it is desirable. In general they will not be working side-by-side, or socializing with employees. That said, they are required to understand, appreciate, and respect the company culture. On the other hand, the culture of the board, their personalities, and the dynamics between the directors, is critical. Board interviews will usually be conducted by the board chairman, the lead or presiding director, a member of the nominating or governance committee member, the CEO, or any combination of these.
Defense manufacturers that head blindly into uncharted territories are asking for peril.
The nation’s shift to a peace-time economy is forcing many companies into a real battle for increased sales. Their defense conversion efforts may be a matter of new products, new markets, or both.
Some companies are finding new, peaceable applications for their military technology. Others remain committed to their product core. But all defense companies are in search of new markets.
Corporate directors are expected to participate in the strategic planning process. If you are a director of a company seeking to find new markets for defense products, you are not only expected to participate in the planning process; you may be needed to lead it.
A hint of disapproval wafts across the meeting table as directors watch a colleague shuffle through the board packet for unread financial statements. I took the time to prepare, why didn’t you?
At another table in another boardroom, the air is toxic with a plot to oust the CEO. Should I believe what I’m hearing or your lying eyes?
Certainly, it’s a long way from attending a meeting unprepared to attempting a boardroom coup. Most corporate directors approach
their board responsibilities seriously and with good intentions. And legitimate contingencies can sometimes prevent full engagement.
But directors can and do create problems. Whether through inattention or ill intent, they can detract from board effectiveness and disrupt the balance of interests, ego, and power.
Boards of directors help set a tone that seeps throughout an organization’s culture, and confirm that an organization actually behaves in the way it promises to behave. When the board doesn’t do its job, things can go very wrong.
A recent Grant Thornton webcast, “Reputational risk: Protecting the good name and reputation of the not-for-profit organization and its board,” explored ways to keep a non-profit on track, with the recent Penn State scandal emerging as the prime example of inadequate governance. Penn State wasn’t on the prepared webcast slides, but clearly on presenter Larry Ladd’s mind as he fleshed out how things can explode when a board fails.
Ladd currently is Grant Thornton’s director of national higher education practice, and a past administrator at both Harvard and Tufts universities.
A BOARD “NOT DELVING DEEPLY ENOUGH”
“Think of how culture and governance of the university allowed bad behavior to remain unreported for approximately 2 decades,” Ladd said in reference to the Jerry Sandusky sexual abuse scandal.