Leadership and Courage

As we usher in yet another New Year, a story hits the airwaves this week that causes me to believe that 2022 should be a year dedicated to seeking courage in the boardroom. We have spent a great deal of time in recent years talking about the importance of empathy, compassion, and listening – all of which are important leadership traits. Equally important is knowing when to take a difficult position – one that bucks that system, causes discomfort, and perhaps results in conflict and disagreement. Without courage change doesn’t happen. Without courage complacency can take hold. Without courage, the wrong people can stay in power.

The first Theranos trial is concluding. As of today, Elizabeth Holmes is found guilty of 4 of the 11 charges filed as the jury continues to deliberate. How did this woman successfully deceive her investors, her board, and her business partners? The trial is about her, and the alleged crimes that were committed. But where is the accountability for others? Titans of industry and politics who sat on her board never questioned her lack of data and her secrecy. Not a single director challenged or questioned her integrity. In spite of individual achievements in politics, military, and business, none of them cared enough to have the courage to ask uncomfortable questions. Had they done that, damage could have been mitigated, careers resurrected, and even lives saved.

As one who has served on numerous boards, I believe in the importance of collegiality. It’s important for directors to have trust, respect, and generally like one another. In times of challenge, camaraderie is important to weather the storm. Equally important is the character trait of personal courage. There have been many instances where crisis has been averted because someone at the table dared to say, “Is it just me or does this seem strange?”. Chances are that concern is held by more than one person. Being that one person who possesses the confidence and courage to speak up is never easy.

The higher you sit in an organization, the more difficult this becomes. I’m not surprised that the whistleblowers in this situation (as is most often the case) are those in lower levels of the enterprise. They see the real day-to-day. They know how people behave and when they are allowed (and not allowed) to know details. Board directors show up 4-6 times a year, listen to  prepared presentations, and can be comfortably made to think that everything is on track and headed for success. The Theranos board was made up of people who should have known better. They were duped. So how does a board prevent this from happening?

Leadership

Strong board governance recognizes the importance of balancing collegiality and challenge. Pre-meeting communication and preparation facilitates the right kinds of conversation and active understanding of the organization that can mitigate being “blindsided” as the Theranos board embarrassingly experienced.

• Whether you are a Board Chair or a Lead Independent Director, the importance of having one-on-one conversations in between board meetings is crucial. We all know that outcomes can be different when someone has an opportunity to bring up an idea in an individual conversation versus in a group. Teasing out concerns and hearing speculations can often be much easier in a private phone call than while sitting around a board table.

• When a concern is expressed by multiple directors privately, it needs to be addressed on the agenda. This could be a deep dive into a topic that requires more understanding. This could be a walk around an office or plant to examine working conditions. This could be a dinner with executives at different levels to test organizational culture. Shared concerns that are ignored create the sense that some opinions matter more than others.

• On the topic of culture, this is an obvious area where Theranos directors failed. It wouldn’t have taken much to figure out something was amiss. I’d venture a guess that they rarely met with executives other than the CEO and COO. Some companies I work with institute mentoring relationships between directors and executives. Others create special committees to address operational issues, which leverage directors with specific expertise to spend time with operational leaders dealing with particular business challenges. Both of these offer an easy opportunity to get a sense for how it feels to work in an organization.

Board Makeup

I’ve always told my CEOs that their Board of Directors are their most important (and least expensive!) group of advisors. With the right people sitting around the table, there should be no business challenge someone hasn’t gone through or thought through. Having the right set of skills and perspectives around the boardroom is essential in providing support, encouragement, inspiration, and challenge to an executive team.

• Theranos’ board of directors, assembled by Elizabeth Holmes, was a who’s who in powerful men at the time. And yes, they were all men. Kissinger, Shultz, Perry, Nunn, Frist, Kovacevich, Foege, Roughhead, Bechtel, Mattis were all blue-chip names that attracted confidence and investment. None of these individuals had experience in the field of pharmaceuticals, and none of them had experience in how start-up businesses worked in Silicon Valley.

• Pulling together a list of blue-chip CEOs and leaders ensured for Holmes that the “default” of the collective group was to keep the conversation at a very high level. I doubt any of these men had spent much time with the “rank-and-file” of their organizations in a very long time. It is doubtful any of them made time to mentor Theranos executives or have conversations about anything in detail who was more than one level below the CEO. They likely had no interest or understanding of the working culture.

• A lack of diversity of the board assures a board culture of mutual comfort and collegiality but maximizes the probability of “groupthink”. The men on the Theranos board were probably thrilled to be in one another’s company and didn’t have to deal with anyone who hadn’t achieved the level of orbital success that they had. Being the “odd man out” in a conversation would have been uncomfortable and questioning anything presented by the CEO would have made one unpopular in the fraternity.

Importance of stakeholders

I always believe that as a public company board director, I have an accountability to shareholders, and a responsibility for stakeholders. As a result, I’m tremendously interested in how shareholders are faring in the performance of the company, and I dedicate equal time to the interests of stakeholders. 

• Creating regular means of connecting with employees – via employee meetings, mentoring programs, speaking to special interest groups creates opportunity for two-way dialogue between directors and employees. Building that trust and creating forums for transparency gives insight into the culture and areas of priority.
• Learning of how talent development is managed and measured provides an understanding of the importance being placed on long-term strategic success and succession. If this is lacking and empty executive positions are always filled by outside candidates, there is undoubtedly an ambivalence about career satisfaction and upward mobility.
• Asking for metrics regarding customer satisfaction in an organization can inform a board about attention being placed on service and quality control. Revenue retention and customer loyalty measures are great indications of this stakeholder satisfaction.
• Partnership evaluation for strategic alliances provides a window into how well an organization is working in channels of strategic growth and revenue expansion. Theranos’ alliance with Walgreens/Boots was always tenuous at best. A simple request to probe this relationship could have indicated red flags.

In any situation where bad leadership results in people getting hurt, the absence of these above-mentioned governance practices can still be overcome by personal courage. Being willing to be the “lone voice” that questions a comfortable narrative isn’t easy, but tremendously important. In an ocean of conformity and comfort, it’s essential to have at least one person who is willing to question and challenge. The value of that individual is tremendously high and can begin conversations that others want to have but who feel less comfortable to initiate.

Be the brave one in your boardroom.