Dennis Ellmaurer recently wrote an article that appeared in the May 14–27 edition of Biz Times entitled, “You Can’t Help But Ask: Are CEO’s idiots?” Talk about an attention grabber! Mr. Ellmaurer went on to cite several examples of once highly-successful companies that failed…companies like Joseph Schlitz Brewing Company, Allis-Chalmers Manufacturing Company, and Midwest Express Airlines to name a few. The balance of his article stated several reasons why these companies failed including “Bad Strategy, Rotten Execution”, and “People (in wrong jobs).” However, the caption “The Reality Check” caught my eye and provided the spark to write this article. In this caption, Mr. Ellmaurer states, “my guess is the CEO’s of some of these failed companies would have been better served with a strong board of directors that knew when and how to challenge the strategic thinking of the CEO.”
I would like to take his “guess” to the next level on this issue. A weak board is a major cause as to how and why companies fail. My evidence? Jonas Walters & Associates Inc. is a Milwaukee-based retained executive search firm that focuses exclusively on identifying and selecting key executives for manufacturing companies ($50 million to $250 million in annual sales) throughout southeastern Wisconsin (and the Midwest). Our work includes the identification and selection of board members. For the last several years, I have interviewed dozens of CEO’s leading highly-successful organizations that are not just surviving, but flourishing. In virtually all cases, these CEO’s are not serving on boards, nor have they been asked to serve on boards in spite of their success. Digging a little deeper, one discovers that these CEO’s have boards that are made up of true outside directors from a broad-range of industries that tend not to include friends, golf buddies, or too many family members. In short, these board members were selected because of their expertise, successful track records and the inclination to challenge the CEO. These board meetings are not boring quarterly reviews but include robust discussions that include short- and long-range strategy development, new product development, overseas opportunities, business development, etc.
This leads me back to the question, why are CEO’s of these highly successful companies not being asked to serve on the boards of companies that are stuck in the mud or failing. There is a virtual treasure trove of talented CEO’s that are willing and able to offer vital assistance for these troubled companies. Mr. Ellmaurer cited several specific examples of once-successful companies that have failed. I would like to cite several examples of companies that are profoundly successful in spite of a lousy economy.
· Super Steel
· Waukesha Foundry
· Phoenix Products
· Dedicated Computing
· The Oldenburg Group
· Magnetek, Inc.
· Dickten Masch Plastics
· Waukesha Electric
· Strattec Security Corp.
· InPro Corp.
There are many more. Interestingly, several of these companies have been featured in prominent business publications including BizTimes, so it is not like these CEOs are hard to find.
So my advice to CEOs whose companies are in dire need of help:
1. Does your board challenge you or are they “bobble heads” who tend to agree with everything you say? Do you have real board meetings or “bored” meetings that are basically quarterly reviews? Consider separating the Board Chair (ideally an independent director) and CEO functions. It is important that the CEO not be able to entirely control the agenda or Board discussions. This facilitates Board oversight of issues that the CEO may want to avoid or minimize. It is not very comfortable for the CEO, but really enables good governance. Bottom line? Take a close look at your current board. Are these members truly making contributions to the success of your organization?
2. Seriously consider adding proven, highly-talented CEO’s that are already leading successful companies; there are many out there and willing to serve on boards of both private and public companies. As I said, they are not hard to find…reading the Biz Times is a good place to start.
Bill Walters is president and chief executive officer of Jonas, Walters & Associates Inc. in Milwaukee.