How a line of questioning is worded can also indicate whether a director is micromanaging. The difference lies in how the CEO could respond. Does the inquiry put the CEO in a box, as opposed to shedding light on a subject and opening the door for a richer discussion? Let me give you an example. In the middle of 2007, most boards across the globe were keen to learn how management was responding to the steep rise in commodity prices and the impact on margins. Many boards debated the potential impact on margins and what could or could not be passed on to customers. That was a vital discussion to have. Directors who had to increase prices at some point in their careers know how difficult it is to sit face to face with a customer when the management had not increased prices for ten years.
A micromanaging director might initiate the discussion of pricing by lecturing on her personal experience in dealing with a price increase, implying that the CEO lacks the courage to address the issue and that he should do exactly as the director has done. The implication is that management can do it if it has the will.
A different approach to the topic is to say, “I’m curious about several aspects of inflation and our pricing strategy. What is our process of adjusting prices as inflationary conditions change? How are decisions initiated? Who gets involved and with what tools? What training is being given to people who are looking at pricing and to the sales force that brings it all home? Are the regional sales managers buying into it?” This lets management explain what the company is doing and what alternatives it has considered, an explanation that might include things the director didn’t think of, like issuing a press release.
The director could then ask, “What benchmarking are you doing to improve pricing processes and reduce our exposure to margin compression? Are there any strategic implications that the board needs to learn about?” In that way, the director opens the door to several possibilities without insisting on his pet course of action. It opens the door for other directors to join the discussion. This kind of questioning becomes an imperative when the company is highly leveraged and commodities prices increase several times in a year. It gives directors insight into whether the company has the organizational mechanisms to move and is not awaiting orders from the top.
The difference in approach has a profound impact on the boardroom dynamic. Asking questions at the right altitude, with the right tone, and about the right things refocuses management’s attention while respecting the CEO’s decision-making authority. It is, after all, management’s job to deal with the margin compression and decide on its pricing practices, not the board’s. The board is there to make sure management has a plan and that it is executing that plan.
— Ram Charan
Reprinted by permission of the publisher, John Wiley & Sons Inc., from Owning Up: The 14 Questions Every Board Member Needs to Ask by Ram Charan. Copyright (c) 2009 by John Wiley & Sons Inc. All rights reserved.