Oversight, a critical function performed by Boards, is a component of good corporate governance, and is necessary to ensure that policies, plans, programmes and projects achieve the desired results, and comply with rules, regulations and ethical standards. In the course of exercising oversight, the Board usually ensures that due diligence is carried out before key decisions are made; key risks are identified, monitored and mitigated; business processes and systems are working as intended; and assets are being safeguarded.
Oversight – or “watchful care” – is a safety net. What falls within its ambit includes advising, approving, deciding, planning, reviewing, strategising, and taking corrective action. All this really demands full days at the office but Board members are rarely able to give more than a few hours a week to the organisation, much less manage the organisation’s day-to-day activities. It thus becomes the province of management to ensure that the “nuts and bolts” of these matters are attended to, so that business proceeds apace. It is not an easy job; sometimes micromanaging is inevitable, particularly on new or complex projects, where the CEO is new and untested, or where keeping a close eye on things is imperative.
But what happens when Board members start micromanaging on a regular basis? This happens when they are unable to differentiate between overseeing and managing, and could lead to awkward situations for both Board and management. In most cases, micromanagement by Board members is a symptom of a larger problem. It is often assumed that Board members know what they should be doing, but in some organisations, there may not be enough clarity about the role of the Board, leading members to micromanage because they assume it is their responsibility.
Micromanagement by Board members may also be the result of the organisation having experienced an event where everyone had to step up to overcome a crisis – and now they may feel hesitant to let go completely. This can be frustrating to management because they are then unable to do their jobs. But it also a waste of directors’ time because it is not their job to manage. It also gives rise to the perception that the Board does not trust management, which could be demoralising. While the Board should be informed about what is happening within the organisation, management is responsible for running it.
Besides, if the Board is distracted by managing, it cannot focus on its core functions of strategising, governance, risk and compliance; this may result in missed opportunities to increase the firm’s value. It is perhaps unsurprising to note that in this age of uncertainty, when there is more pressure than ever for companies to perform or risk losing everything, at the root of micromanaging may be fear. Boards that veer from oversight into micromanaging should not be regarded as control freaks; they may just be overly concerned about the possible failure of the organisation, and are trying to extend as much care as possible over the well-being and job security of everyone involved.
With a pressured Board putting pressure on management in turn, and veering into micromanaging as a result, how does a firm successfully walk the line between oversight and micromanagement? Senior management could start by ensuring the Board is well informed and kept constantly up to date via regular reports. Seeking directors’ perspectives of their respective roles and responsibilities, and encouraging discussion on this at Board level, is also helpful in developing clarity of purpose and a deeper understanding of what is required. The Board needs to set the right tone so that management understands its expectations without any ambiguity.
Open communication between Board and management is as crucial as clear communication between management and the workforce. One of the most insidious results of micromanaging is that it can cause employees to become dependent on being micromanaged, which is both disempowering and unsustainable in the long run. The same ensues when the Board micromanages instead of providing oversight. In the long term, micromanaging will become institutionalised, and a culture of micromanagement will prevail in the organisation, to its detriment. This will erode its competitiveness and affect its sustainability, possibly even decreasing its value.
It should be recognised that the reason for micromanaging is that trust between Board and management is not at the level it should be. Both parties should therefore work to restore it to appropriate levels, in order for the organisation to function optimally. Boards should not micromanage; it decreases their effectiveness. They should instead ensure that competent, capable people are appointed to manage the business in a responsible, accountable manner. Management cannot provide oversight; it should carry out the tasks it was hired to do, and be supported by the Board which hired it.
In providing this support, Boards should ask the hard questions because this is where risks and threats to the firm often lie. They can do this when they are equipped with the right information, data which is current and verifiable, that has integrity – which management must provide. Management needs Board oversight because it may inadvertently miss warning signs because of its preoccupation with day-to-day operations. But it should collaborate with the Board to determine organisational objectives, as well as the necessary frameworks, processes and procedures.
Board oversight, roles and responsibilities should be determined in tandem. Limits of authority should be clear and unambiguous to all; Board and management should complement, not work at odds with each other.
