[IMGCAP(1)][IMGCAP(2)]Nobody likes a back-seat driver, and nobody feels safe when the two people in the front seat are arguing about every element of a road trip. The same is true in a partnership. When management and the board disagree on direction, managing growth or any other key decision, the entire organization is at risk. Partners feel unsafe.
We’ve seen it many times: Promising organizations led by visionary managers and experienced directors suddenly become paralyzed when top leaders can’t agree. Like two people in a car both trying to grab the wheel and control the gas pedal, the results aren’t pretty.
This is particularly true in accounting firms and other partnerships. Power struggles abound. Managers and directors sometimes view each other as hurdles to be cleared —and they keep information from each other. Issues of pricing, client acquisition or talent management get ignored, and ultimately, overall growth suffers.
But these kinds of battles are avoidable. We’ve seen how leaders at many partnerships can follow guiding principles and implement governance solutions to keep managers and directors comfortable with their authority, focused on the business and confident that their firm is in the right hands.
Like the rules of the road, knowing how to manage complicated situations — who yields to whom in a traffic circle, for example — is the difference between orderly traffic flow and a fender-bender. In a business organization, these rules are just as important, and they usually exist in a partnership agreement, the “hard code” of an organization.
Too often, organizational leaders sign these documents and stash them away. They find the language too hard to distill. There might be a high threshold for change. Or the partners may simply get caught up in the daily management of the business. After all, who needs to look at the owner’s manual until there’s a serious problem?
But partnership agreements are the first and most comprehensive place to look for decision-making authority. Leadership ideally should review these agreements every five years, with a goal of making sure the firm’s future is secure and ensuring the agreement is flexible enough to change with trends in the marketplace, especially the evolving roles of the board and management. It’s a living document that should make it easier for managers and directors to know who is accountable, who needs to make decisions and how hard issues should be handled.
Effective governance also requires partners to look closely at the needs of the entire organization. Partners simply need to be involved — and not just have a few superficial discussions. They need to look under the hood and really understand all aspects of the business.
We’ve found that some of the most successful leadership transformations involve this kind of engagement. First, the partners commit to necessary change. They oversee the process and don’t walk away without achieving measurable results. Second, partners commit themselves to learning about governance issues, so that in addition to focusing on meeting client challenges and developing talent (two areas where partners are expected to deliver), they can work closely with directors on broader firmwide issues.
And no matter where leaders stand, they should back up their decision-making with data. Justify and support recommendations with facts. A full explanation of options, benefits and ultimate recommendations for changes in governance adds rigor to the effort and ensures that only the most important changes are made.
While the “hard code” — partnership agreements — is critical to high-performing governance, it won’t do the job alone. Understanding the “soft code” — where to focus — is just as important and is frequently a major governance challenge.
We see it all the time: The board and management may start with different agendas and different priorities. The board might rank succession issues as a priority. Management might see strategic acquisitions as an imperative. Having multiple and different priorities is a surefire way to achieve nothing.
There are ways to avoid this. For instance, the board, management and partners might aim for a regular exchange of ideas. The format may vary to suit the organization’s needs, but the results should be the same: meaningful communication, full participation and clear alignment on priorities. Set a scorecard for personal and organizational results before these interactions. Be rigorous about how you evaluate options. Hold each other accountable while working together on execution. And remember: As long as leaders respect the priorities, the likelihood of achieving them goes way up.
Even among well-intentioned leadership teams, some things are bound to break down. Uncertainty creeps in. Directors may assume incorrectly that managers know what information and considerations to bring to the board. Managers may assume that directors know when to provide oversight and when to step back and let managers handle specifics. This is especially true in moments of crisis, when the stress on a governance structure is at its greatest and the need for communication is at its highest.
A smart way to avoid these conflicts is to agree to no surprises. Learning of a board decision or management effort through the media or some other outside party is unacceptable. Leaders have to make time to invite questions, discuss goals, communicate tactics and evaluate progress. And they must regularly assess how well they are engaging each other.
SPEAK AND ACT WITH ONE VOICE
One of the most critical behaviors for directors and managers is to speak with one voice. Partners tend to behave differently if they hear inconsistent messages among the board and management. They should always walk away from leadership meetings with a clear and unified perspective on progress, decisions and potential challenges.
Leaders have to set aside time to agree on these messages. Decisions should be supported by all outside of the board room. Leaders should follow an integrated communication plan so that critical messages are issued, repeated and put into practice across the organization. Focusing on the message and its impact from the outset can lessen the burden on the board and management — and give all partners confidence in the future of the firm.
These steps are all essential elements of a strong governance structure — knowing the responsibilities of key leaders, agreeing to address problems as they come up, promoting firmwide understanding among key players and focusing on the value of consistent communication. Ask any two friends on a road trip: A few rules at the outset of the adventure can create a smoother ride.
Dave Wedding is chairman of the Partnership Board and managing partner of the Mid-South Market Territory at Grant Thornton, and Mark Masson is a principal at Axiom Consulting Partners.
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