Avoiding Unforced Errors in the Boardroom – Part 2

Avoiding Unforced Errors in the Boardroom – Part 2

Last month I began to explore the idea of unforced errors – how they can lose sports matches and games and cause major losses in business. An unforced error is when you weren’t forced into making a mistake, you did it all on your own, without any help from your opposition.


When Novak Djokovic overwhelmed Rafael Nadal to win the Australian Open in January 2019, unforced errors were said to be a major factor by many commentators. Djokovik won 40 of 50 first serves, 16 of 19 on the second attempt, hit eight aces and had a mere nine unforced errors.


Boards have to be able to tell the difference between a forced error and an unforced error.  Are they in a bad position because of poor judgement? Would they have taken a significantly different approach if they hadn’t made the wrong assumptions, neglected some of the basic disciplines or ignored key governance principles?


In order to reduce unforced errors, boards should take time out to reflect on the items within their control as a board and to execute good governance consistently across those areas.


I’ve put together a top 10 of examples of unforced errors in the boardroom.


Ten examples of unforced errors in the boardroom

  1. ‘Doing a Ratner’ – How many times have business owners, politicians, or boards shot themselves in their foot because of things they have said? The infamous ‘Doing a Ratner’ expression comes from jewellery chain boss, Gerald Ratner, making a misjudged joke at the 1991 Institute of Directors annual convention that cost the business £500m.
  2. We didn’t sort succession –If boards fail to plan for the future, they are planning to fail. The departure of a key figure, or two, through retirement or to take up new opportunities can leave the business bereft of vital skills. It’s essential to create a pipeline of talent that is continually nurturing and upskilling the next generation of leaders.
  3. We took our eye off the ball with regulationChanges in legislation are flagged up well ahead of their introduction, but despite the warnings, some boards still fail to adapt their processes to important changes in environmental or health and safety legislation. Results can be costly as well as damaging to the reputation of a business. In May 2018, the General Data Protection Regulations (GDPR) came into force, which strengthened the powers of the UK Information Commissioner’s Office (ICO) to take action when businesses broke data protection rules. British Airways and the Marriott Hotel chain were among the first to be targeted by the ICO with fines totalling almost £300million. Under GDPR, businesses which allow consumers’ personal information to be used or shared without their informed consent, or fail to prevent it being stolen, can be fined up to £18million or 4% of annual global turnover, whichever is greater.
  4. We didn’t anticipate the impact of technology –Music streaming is an example of technology disrupting traditional ways of buying and listening to music. Boards need to know what’s on the horizon and not only adapt but embrace technologies to give them a competitive edge.
  5. We talk a lot about diversity but haven’t really done anything about it –  We are seeing the beginnings of action to address the gender balance of boards but when it comes to appointing board members from ethnic minorities, there is still serious underrepresentation. Companies must do more than just ‘tick the box’ to redress this imbalance. It is in their best interests to find and develop the best people with a cross-section of life experience and skills from across society. In 2017, an independent review into the ethnic diversity of UK boards was carried out by Sir John Parker. The Parker Reviewset a target for the FTSE 100 to appoint at least one board-level director from an ethnic minority background by 2021. One year on, in 2018, a progress report found that just 84 of the 1,048 director positions in the 100 biggest companies on the London Stock Exchange were held by a business leader from an ethnic minority, which was one less than in 2017.
  6. We didn’t keep an eye on the big picture Boards sometimes get distracted by short-term challenges, urgent issues that have an impact on reputation or finances, but don’t see the bigger picture. It’s vital to join the dots and recognise major changes ahead, such as the replacement of video and DVD rentals by on-demand TV and streaming services or the growth of low-cost Voice over Internet Protocol (VoIP) services that have transformed the telecommunications industry.
  7. We have not engaged with our stakeholders effectivelyA corporate plan and strategy needs to be relevant, clearly communicated and understood. The three elements of purpose, values and vision must be aligned. Failing to engage with stakeholders throws everything out of balance.
  8. We have become complacent and over-confident –When things are going well there’s a risk that a board becomes a little smug and self-satisfied and misses warning signs until it is too late to take action. If the board members stop paying attention to the performance management framework and key indicators, making an unforced error becomes more likely. Consider the case of the high-profile charity Kids Company that closed in 2015. In the wake of the closure there were claims that the board and stakeholders had relied too much on the charity’s charismatic chief executive and founder Camila Batmanghelidjh and failed to scrutinise what was happening.
  9. Underestimating the significance and importance of the relationship between the CEO, the Chair and Company Secretary –Boards need to ensure that all three are involved in leading the company and carrying out their clearly-defined roles effectively. Boards need to invest time with the CEO, developing trust and confidence and maximising the skills and expertise of the company secretary to ensure that governance is not just a box-ticking exercise.
  10. Ineffective meetings –The board meeting is where it all happens. The essential paperwork and the interaction between members are crucial ingredients in reaching the right decisions. How do we ensure that the board spends the majority of its time discussing the complex and material issues? Having meetings just to get an update, or getting side-tracked with inconsequential details, or being derailed by dysfunctional behaviour or poor boardroom dynamics, or information-overload are all obstacles that good boards need to navigate.


So there you have it, some of my thoughts around unforced errors. Do you agree with my top 10? Is your board susceptible to any of them?


To win in sport or in business we must make as few unforced errors as possible. Confidence can be a major factor in achieving success and avoiding mistakes but we need humility too because arrogance is as damaging as lack of confidence.


Let’s pay attention in the boardroom to all the things that are within our control, including paying close attention to the compliance and performance of our boards. But it’s important to remember that we’re all human and every winner makes unforced errors. Even Simona Halep made three unforced errors during her 56-minute demolition of Serena Williams to take the 2019 Wimbledon Ladies’ Singles title.


We are all human and mistakes will happen. What matters is having the strength of character and the drive to come back from unforced errors, recover and put things back on the right road.


A handful of oversights and fumbled chances are unlikely to cause irreparable damage to your company. It is your board’s performance over time that will determine success. By taking all reasonable steps to minimise your unforced errors, you can be world class.


Until next time…