Resolving Boardroom Conflict
Major disagreements between directors can spell disaster for any business but particularly an SME. When individuals become entrenched it can be almost impossible to resolve the situation without external help. Thankfully getting expert independent support before it’s too late can lead to transformation as we see in this business success story.
Boardroom Conflict
A few years ago Secantor was invited into an IT business to resolve a serious boardroom conflict. The firm had been founded 10 years prior by four IT specialists who had broken away from a Big Tech corporate. On meeting the quarrelling Board we suggested we carry out a strategic business review to identify the issues and recommend actions to ensure the success of the business.
Strategic Business Review
The directors accepted our suggestion and engaged us for the two day review where we were faced with the full bombardment of arguments. The review involved one-to-one interviews with each of the four directors plus a few other key players in the business. We also studied all meaningful financial & operational information to check the facts alongside the conversations, opinions and anecdotes.
Following our analysis of all the facts & opinions we were able to conclude with a summary set of findings & recommendations for the way forward. This method is a very powerful tool for the business because we are given a unique insight into the hearts and minds of the participants. This allows us to arrive at the consensus view that best serves the business as a whole as well as the directors & staff.
Relationship Breakdown
The problem that needed resolving was the fact that one director was lagging behind the others both in performance but more critically that he was holding on to old technology perpetuating a stale product in a mature market. By contrast the market and the business had embraced & developed new methodologies which opened up significant opportunities. The other three directors had been pursuing these new innovative technologies and were leading the way forward. The whole situation had culminated in two of the directors having a total breakdown in working relationship which had gone beyond recovery. The only subject they agreed upon was that one of them had to go!
Amicable Exit
The directors recognised their need for an independent expert to resolve their ongoing dispute. The review process built an excellent working relationship & trust between ourselves and all four directors such that they asked Secantor to oversee the resolution process. Secantor facilitated an agreement in principle for the underperforming director to exit the business with a legal settlement and a negotiated share buy-back based on an independent valuation of the business.
There was an amicable parting of the exiting director and the three remaining directors were visibly relieved and freed up to focus on developing their business.
A New Beginning
Following the exit, the remaining directors needed to re-group and establish a shared vision for the future. They asked Secantor to act as their Non-Executive Director (NED) to provide them with ongoing independent strategic support. We assisted them in establishing their strategic vision for the business and guided them through preparing a business plan including forecasting sales, margins and overheads. A Secantor Management Accountant prepared a 3-year financial forecast to turn their plan in to numbers.
Board Discipline
Our NED introduced the discipline of regular monthly Board meetings for the directors to ensure they had time set aside for a structured forum that they could use to manage their own business. We ensured a published agenda with all relevant MI (Management Information) ahead of the meeting. The meeting was followed by a record of all decisions and actions allocated to identified individuals with timescales. Accountability was paramount – there was no hiding place. This was especially beneficial to the three directors who were all heavily engaged with their own client’s businesses and previously prioritised this work over their own business – a challenge for any professional services business. This was the key reason why the directors originally fell out because they never addressed their differing agendas.
Our strategic business review had revealed a host of recommendations for performance improvements and management techniques for planning & controlling the ongoing business. These became part of a roadmap of improvements with progress being monitored at the board meeting.
Board Unity
Now the three directors had their unified business agenda set out in the business plan objectives which they monitored and controlled rigorously through the Board meeting.
Personal objectives were aligned to the business goals which using our metrics each director was held accountable to the Board for their individual business performance. They all took their responsibilities to each other seriously working in harmony. This was partly because their Secantor NED was present as an independent person but mainly because they had learned a hard lesson from their experience of conflict & dysfunction. They extended the accountability principle to their senior managers and introduced them to the Board meeting rigour and steadily learned to delegate some duties. However they always maintained a healthy involvement in the technical innovation to ensure they maintained their competitive advantage.
Positive Outcomes
From a deadlock position the four original directors managed an amicable and successful outcome. The exiting director, using his share pay-out found fulfilment in a 2nd career outside the IT industry. Meanwhile the continuing Directors have worked well together to build strong value in their growing business.
“We need Secantor to visit each month to chair the Board otherwise we would probably go for months without meeting together as Directors”. Managing Director
How to Resolve Boardroom Conflict – Key Lessons
Prevention is better than cure. Hold regular board meetings and keep conversations honest and open. Use objective data to review performance to balance subjective measures like gut feelings and opinions.
A certain level of conflict is healthy as it ensures everyone’s ideas get considered. But if things escalate, act early to nip it in the bud. Any directors not involved in the conflict should act as mediators wherever possible.
Get independent help. An external business expert is emotionally detached so can view things objectively. They can act as a mediator between those in dispute and can be trusted by all involved to put the needs of the business first.
It isn’t always possible to resolve serious disagreements but you mustn’t ignore the issue because it will do long term damage to your business, not to mention personal relationships. If two or more directors cannot get on, it is better to find a suitable exit that everyone can agree on. Independent help is essential here.
Once you have achieved a resolution you must rebuild stronger. This means developing a shared vision documented in a plan. Ensure you meet at least once a month as a board to talk about business performance and ensure all directors remain aligned. An independent NED adds great value here ensuring expert external and impartial advice is taken. They will also help to resolve any friction that develops.
Independent Expert Support
If you know of a business that is suffering due to a dysfunctional board or conflict between directors / shareholders please book an online meeting with one of our team. Secantor’s seasoned business experts are perfectly placed to help resolve disagreements for the benefit of the business and the individuals concerned. Why not book an initial online chat today?
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