Degrees of freedom

As a prelude to a recent board meeting, I had a long meeting with a portfolio CEO who was seeking counsel on the myriad of budget alternatives available to him. The company is performing quite well, but not surprisingly, given the uncertain macro environment, many well formed opinions have sprouted regarding the going forward budget. Essentially, the age old question of whether it is nobler to be brave, or wiser to be conservative is rearing its head.

Oftentimes, these discussions at the board level become granular, delving into number of hires, departments to reduce/expand, and where to allocate suddenly scarce resources. My experience is that where a board maintains confidence in a CEO, such discussions, usually dominated by one board member (while the others seek an accommodation), rapidly become counter-productive as they reduce the degrees of freedom the CEO has available to produce the results desired by all stakeholders. Moreover, from a cultural perspective, granular, board driven, mandates separate authority from responsibility. Thereby, violating a timeworn good management tenant.

I am fully supportive of a board's role in providing advice and consent and have often found the advice part of the equation is best proffered in an informal setting. But too often I have seen the broad interpretation of this responsibility crossing a critical, yet invisible line where well-meaning thoughts on budgets, personnel, or (heaven forbid) product management, become the law of the land, tragically diminishing shareholder potential value.