Many times, a non-executive board is instated at a start-up at the request of one or more investors. As the start-up grows into a scale-up, the board remains (Most board members are installed for a period of four years). One of the benefits of having a non-executive board is to clear the blind spots in the executive board and founder/CEO and give further guidance to achieve the set goals.
But having a board doesn’t mean that all blind spots are cleared. An interesting example of what could go wrong is the Council of Croydon (UK). It’s not really a scale up, but nevertheless an interesting case. ‘Council staff were summoned into a meeting at barely 10 minutes notice this morning, as the interim chief executive Katherine Kerswell laid out a report from the council’s auditors, raising serious concerns about how decisions have been taken about our finances and how they have been managed over recent years’.
The root cause (according to the auditor): Corporate blindness.
Corporate blindness is a risk that comes with every person who is somewhat tied to an organisation. The risk of corporate blindness increases as a person has spent more years within the company or organisation and specifically becomes more present when the person has spent more than a couple of years in a certain position. It is not that all sight is lost, it is more that you fail to recognize what is around you. It leads the mind to close off opportunities and bottlenecks within the organisation.
The installation of a board should (and could) decrease the risk of company blindness. However: assuming that installing a board is the silver bullet in avoiding this is a risk in itself. Apart from corporate blindness, ‘you don’t know what you don’t know’ is the superlative.
Managing the risk
Managing the risk of corporate blindness, as well as being in constant search of knowledge to fulfil the ‘you don’t know what you don’t know’ premise, is a daunting task. Which, when not effectively managed and instigated beforehand, will not lead to success. Especially in a highly volatile environment as a scale-up, it is likely that all eyes are focussed on achieving growth.
All nice and well, but how can you mitigate the risk of corporate blindness? Besides all arrangements and agreements that have to be set when installing the board, it is of importance to recognize that ‘you don’t know what you don’t know’ is a business risk. (In this case, I assume that at least an elementary form of risk management is implemented within the organisation.)
Of course, when adopting proper risk management, following the Deming-cycle is recommended. Plan – Do – Check – Act.
After recognizing the risk, measures can be taken. Possible measures are:
- Installing a diverse board, with members of different backgrounds and experience. Not only investors or investment managers, but also members with experience and expertise in the trade or, for example, marketing and HR. Even outside the trade when that would be beneficiary. (P)
- During board sessions, one of the closing questions could be: ‘What are we missing?’. That is hard to do, especially when the company rockets to the moon. But still, ask the question. (D)
- Another valid question is: ‘Which assumptions have we just made?’ Because assumptions are the mother of… well, you get the point.
- Invite guest speakers or experts on areas that are underrepresented in the board, or temporary advisors. They will boost your insights. (D)
- Ask school children or students to look at certain issues. They will surprise you. (D)
- Evaluate the non-executive board periodically. Anne Mieke Eggenkamp has developed an enormous amount of knowledge on that topic along with a self-assessment framework. It is recommendable to learn more about her approach. In the evaluation, there should be room for the question where the blind spots are – because there will inevitably be blind spots. (C)
- Don’t leave the meeting without defining measures. Perhaps additional knowledge is needed, or a change of (non-executive board) team. (A).
Managing the risk is one thing, but to do that consistently policies will have to be developed and implemented. The above-mentioned way of working has to land in a) board statutes and b) in the risk management framework and policies of the scale up. (P)
- “The Tragedy of Corporate Blindness”, Nicholas Ashton (2014) [LinkedIn article]
- “Council had ‘corporate blindness’ and ignored warnings”, Inside Croydon (2020) [Article]
- Anne Mieke Eggenkamp, self-assessment ScaleUpNation
Jorrit describes himself as both an entrepreneur with a different view of the world and an enthusiastic subject matter expert. He is currently the CEO of the Audittrail Group, a consultancy firm focusing on information security, privacy, governance, risk & compliance and quality. Jorrit is also a co-founder of PhishingTest, which protects organisations from phishing attacks using real-time tools. His expertise lies in information security, IT and operational risk, and process optimisation.
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