Corporate success often begins with composing the right board of directors with just the right set of skills. Board dynamics play a strong role in whether any combination of board directors will work at peak capacity. Strong boards remain independent of thought while forming connections with their peers and with the executive team. A disjointed, dissatisfied board is a weak board. Boards that have difficulty aligning their goals and objectives with those of management will stifle the company’s progress. When everyone can’t agree and everyone can’t be right, it’s generally time for someone to part ways, to create a strategic alignment of the board and the executive team.
According to Harvard Business Review, boards go through four distinct developmental stages — foundational, developed, advanced and strategic. It’s essential for high-performing boards to have agreement and alignment with senior management on where the company is within those four stages and where they want to go next.
Getting into alignment requires having a joint sense of clarity of purpose, alignment on the company’s strategy, good team dynamics within the board and with the executives, and a strong board that is capable of objectively evaluating themselves. Boards and executive teams can face disruption anywhere along the line, causing disagreement and misalignment on major issues. When boards and executives aren’t able to get on the same page, it can have devastating effects on the company, its shareholders, its employees and its bottom line.
A recent incident where the board and executives of the travel company, Expedia, couldn’t come together on the same strategy demonstrates the negative fallout of misalignment. While there are no easy answers on how to ensure foolproof alignment every time, by taking a modern approach to governance and utilizing digital governance tools, boards and executives can more easily assess the marketplace and how to best position the company within it.
Misalignment Between the Board and Executives at Expedia Prompt Resignations
In an attempt to gain an edge over the competition, the corporate leaders at Expedia agreed that they needed to create an ambitious reorganization plan. They decided to bring their brands and technology together more efficiently. All agreed that the plan was a good one – until they began to implement it. It soon became apparent to the executives that while they were in support of the new plan, it didn’t leave enough time and attention to the current operations. As executives presented the third-quarter results, things weren’t looking good. The near-term outlook wasn’t looking any better.
The board of directors took another stance. While acknowledging the recent drop in revenue, they still believed that their plan would lead to greater success in 2020. That was the point where the rubber met the road. Both sides were unwavering in their beliefs and they weren’t able to find common ground.
Ultimately, the misalignment led to the sudden resignation of CEO Mark Okerstrom and CFO and Executive Vice-President, Alan Pickerill. Okerstrom had been with Expedia for 13 years and had moved up from CFO to CEO in 2017, when the prior CEO, Dara Khosrowshahi, left Expedia to become the CEO of Uber. The resignations sent shock waves throughout the company. Shares dropped 6.3% immediately after the announcement and then rose again by 6.2%.
Board Chair Barry Diller announced the resignations to employees in a memo, describing the events as difficult and unfortunate. Diller, along with Expedia’s vice-chairman, Peter Kern, was planning to meet with employees on December 19 at a town hall-type forum in Seattle to discuss the future of the company’s leadership. Okerstrom cast the blame on poor visibility in Google’s search results, along with weak revenue in Expedia’s other brands, including Vrbo and Trivago.
Diller and Kern are remorseful about the parting, and they’re doing the only thing they can — they’re moving forward and calling it part of a new beginning. For the interim, Diller and Kern will oversee the company’s executive leadership team and manage the day-to-day operations. The rest of the board will work together to determine the long-term leadership of the company. The current chief strategy officer, Eric Hart, will serve as acting CFO.
Diller also noted that the company is creating an Expedia Business Services organization, which will be comprised of Expedia Partner Solutions and Egencia. The company also noted that they will be promoting Ariane Gorin, who previously served as president of Expedia Partner Solutions. She will have an expanded role as President of Business Services. Rob Greyber will work under Ariane and the duo will work to sharpen their focus on EG B2B customers around the world in 2020.
Tips to Ensure Alignment Between the Board and Management Teams
Even minor fallings-out can cause a serious negative impact on the business. Companies stand to lose their reputation, top talent, employee satisfaction and competitive edge.
The secret to building a high-performing, fully actualized board lies in recruiting and developing directors who go well beyond basic needs. That takes time and effort, unless you’re taking the modern approach to board recruitment by using NACD and Diligent’s Nom Gov, a digital solution that streamlines the process for improving the quality and efficiency of nominating committee discussions by providing up-to-date intelligence and profiles on candidates and companies of interest. The tool offers nominating committees the benefit of searching through an extensive, global and diverse database of executive profiles, which will allow them to make a comparison against their current board’s skills and expertise to maximize combined strengths and weaknesses. To make things even easier, Nom Gov is fully integrated directly into Diligent Boards.
Beyond building a dynamic board, Diligent also offers Governance Intel software. This tool provides visibility into the real-time information that your board needs to stay current on all things governance so they can retain a competitive edge against the competition by aggregating the news and research that matters to your organization. Governance Intel will help identify market trends, sentiment scoring, risks and opportunities. The app is customizable and mobile-friendly.
With software solutions like Nom Gov and Governance Intel, your board can avoid the negative team dynamics and board and management misalignments that have plagued Expedia and other companies because the board will have the most current data available to ensure good decision-making.