Why Your Board Is In “Management’s Domain”
Reasons - and strategies to address them constructively.
Boards of directors play a crucial role in overseeing the organization while leaving operational responsibilities to management. However, there are instances where boards may reach for information or seek to make decisions more typically within management's domain. Sometimes that is management’s fault.
Michelle, VP Risk, found herself regularly receiving a request for additional information from members of the board’s risk committee. Some inquiries reflected a lack of understanding of key foundational elements of risk management. Other requests were for additional operational details in the risk report. Michelle was frustrated and wasn’t sure how to respond.
Seven Key Reasons
1. Management Reporting Takes Directors There
Boards rely heavily on management reporting to inform their decisions. Poorly drafted management reports can lead boards into management-level discussions:
Insufficient reporting may leave gaps that compel directors to seek additional information.
Overly detailed reports might inadvertently draw the board into operational matters.
Certain operational topics are easy triggers as most people can weigh in with a personal viewpoint.
It is unclear why management is including the information so the board may feel compelled to discuss it.
The way management presents information directly affects how boards engage with it.
2. Lack of Clarity on Responsibilities
Boards may occasionally intervene in management areas due to uncertainty over who owns the decision. This might be due to:
The board mandate, legislation, policies or delegation of authority may be unclear or create overlap.
Some board members or management have limited training on governance and responsibilities.
· Pressure from stakeholders who appointed a director to represent their interests.
This lack of clarity can prompt directors to seek additional information or provide direction, sometimes blurring governance boundaries.
3. The Grey Zone: Overlaps Between Board and Management
Certain areas are inherently ambiguous, such as risk management, compliance, and operational challenges. It can be unclear if an issue is operational, strategic, or overlaps both domains. It may not be known at the time whether there could be a material impact.
These "grey zones" often:
Involve both governance and operational input.
Require collaboration between management and directors.
Put directors at risk if they are too passive.
As a result, boards often navigate these areas by seeking greater operational details or guiding management more directly.
Sam was recently promoted into a manager role that prepared the reports for the Audit Committee. Looking at the past materials, Sam noted that there was a mix of high-level and detailed reporting, without any obvious distinction on when to follow one path over the other. When Sam asked for clarity from the corporate secretary, Sam was provided with committee mandates which were generic and hadn’t been reviewed in eight years, even though the organization had evolved and changed.
4. Lack of Trust
Trust is a critical element to the board-management relationship. However, management, or the person reporting on a topic, may not have the board’s confidence due to:
· Lack of experience with the topic or the organization.
· Failure to address a similar situation in the past.
· Conflicts of interest which may cloud management’s judgment.
· Lack of transparency which can imply that key information is being hidden.
· A past failure to seek board input or approval.
When trust is missing, the board will feel compelled to seek more information and take a more direct approach in guiding management.
5. The Situation Warrants It
Certain circumstances require the board to delve into management domains, such as:
Crisis situations, which justifiably captures the attention of all leadership.
Red flags, such as non-compliance events, concerning third party reports, unexplained discrepancies or recurring underperformance.
Strategic pivots, where the board may seek to assess the organization’s capabilities and to ensure alignment across management and governance levels.
In these scenarios, deeper involvement is often necessary to fulfill fiduciary duties and support organizational stability.
6. It’s The Way This Board Operates
Boards vary widely in their structure and engagement style based on their governance structure and the organization’s history, maturity and purpose. Examples of “operating modes” include:
Passive mode: Allows management near-total discretion in decision-making. Executive presentations aim to “sell” the board on decisions that have already been made.
Mentoring mode: Management proactively seeks advice and constructive feedback from directors on key activities.
Control mode: The board expects to make the call on all key decisions, even non-strategic and non-material issues.
These operating modes – which may vary depending on the topic or situation - often influence the level of board involvement in management domains. The more hands-on the board, the more deeply they may engage in operational issues to guide decision-making.
According to a Harvard Business, passive and control modes discourage CEOs from revealing vulnerabilities.
7. Director Experience and Personality
Directors bring varied professional backgrounds and personalities that shape their approach to oversight:
Experienced directors may seek in-depth information to confirm alignment with best practices or to guide the organization to avoid a situation they have seen in the past.
New or less experienced directors could delve into management areas to fill knowledge gaps about the topic or the organization.
Specialist directors may seek in-depth information to leverage their expertise or to demonstrate their value in the boardroom.
Dominant personalities may be accustomed to sharing perspectives on every topic.
Strong personalities or leadership tendencies among directors may lead to active participation in management-level matters, intentionally or not.
Tactics & Tools to Return to the Strategic Level
Although there are times when boards are justifiably seeking management-level information or providing direction on operational activities, when that is not the case it is helpful to have some tactics and tools to encourage the return to a more strategic level. Apply some of these ideas:
1. Improve Management Reporting
Enhance the quality, clarity, and relevance of management reports to reduce unnecessary deep-dives:
Prioritize strategic insights over operational details. When including operational details, link them to organizational goals and key risks.
Avoid overwhelming directors with unnecessary information. Use dashboards, summaries, and KPIs to highlight key trends and risks.
Provide the deeper insights into future performance, high risk areas, stakeholder concerns, and other areas of board focus. Use a lighter touch when merely providing an overview for board information.
Provide context by clearly stating management’s goal for the discussion, the materiality and relevance of the information, and the purpose of each report (e.g., for information, discussion, or decision).
Use a consent agenda when the report is intended to share information rather than seek board input.
Better reporting empowers boards to stay strategic and avoid micromanagement.
2. Adjust for Board Expectations
Boards are not one-size-fits-all. To address varying needs:
Assess the board’s operating style and adjust communication accordingly. Or consider if the reporting can be modified to encourage a different operating mode.
Engage effectively by understanding individual directors’ preferences and expertise. For example, analytical directors need clear data-backed recommendations. Big-picture thinkers value concise summaries and strategic questions.
Provide directors with tailored briefings or educational sessions outside of the boardroom to address individual knowledge gaps or special interest areas.
Encourage the chair to proactively address poor board dynamics or director behaviours.
Regularly seek director and management views on the board’s oversight approach.
Recognize different needs an foster an environment where directors feel informed without needing to overstep.
3. Create Greater Clarity on Responsibilities
Define and document the respective roles of the board and management to minimize misunderstandings:
Deepen understanding of governance principles through training or mentoring.
Use mandates and decision matrices to establish ownership of key decisions.
Identify areas of overlap and agree on a collaboration strategy.
Regularly update role definitions and agenda workplans as the organization evolves.
Deliberately assess whether the board needs to be involved and at what level.
Implement a more deliberate process before adding new agenda topics.
Remove a lower value item whenever a higher value item is added.
Seek clarification whether directors are directing management or merely brainstorming ideas.
Use deliberate tactics and practical tools to reduce the likelihood of unnecessary encroachment or unintended confusion.
4. Build Trust Between the Board and Management
Trust between the board and management is the cornerstone of effective governance. To build trust:
Share accurate, timely, and balanced information.
Create opportunities for candid discussions that demonstrate respect for each role.
Proactively engage in strategic conversations to gain the value of the board as a thought partner.
Address concerns or misunderstandings promptly.
Consider facilitated discussions to resolve ongoing tensions or ambiguities.
A strong relationship fosters confidence and greater operational autonomy.
After Omar became CEO of a company owned by two private equity firms, he noticed the board reports were highly detailed. Omar decided to cut back the reports to a similar level that he used at his last company. The board members reacted poorly to the next board report and he overheard one board member wondering what he was trying to hide. In retrospect, Omar realized that he should have approached the situation differently.
By addressing the underlying reasons why boards may reach into “management areas” and implementing strategies to adjust for these dynamics, organizations can strengthen governance, enhance collaboration, and achieve their shared objectives.