ON FEBRUARY 14, 2007, the brilliantly entrepreneurial chairman of Starbucks, Howard Schultz, emailed widely the following message to his surprised CEO: "Over the past ten years, in order to achieve the growth, development, and scale necessary to go from less than 1,000 stores to 13,000 stores and beyond, we have had to make a series of decisions that, in retrospect, have led to the watering down of the Starbucks experience, and, what some might call the commoditization of our brand." However accurate his insights may have been, the media and the general public were instantly as confused as was CEO Jim Donald over who spoke for the company.
Similar board-level inconsistent finger-pointing has been witnessed over the last decade when crises broke out at such far-ranging firms as Ahold, Apple, AIC, AT&T, BP, Coca-Cola, Siemens, General Motors, Hewlett-Packard, Royal Dutch Shell, Motorola, Radio Shack, Toyota, and many others. These weren't situations of unscrupulous leaders plundering shareholder wealth, as we saw in Enron, WorldCom, Tyco, and HealthSouth, where we might have understood any board-level confusion. The communications breakdowns in the above enterprises happened in dealing with normal business matters: succession concerns, adverse markets, faltering performance, operations failures, executive health crises, unethical subordinates, credential misrepresentations, breaches in confidentiality, product safety violations--the range of normal disappointments over human imperfections and organizational systems.
A large part of the challenge is: 1) too many chiefs, and 2) too little crisis planning.
Top leadership, and the board of directors itself, has become somewhat hydra-headed, with a plethora of exalted-sounding imperial titles, such as chairman of the board, executive chairman, chairman emeritus, senior executive chairman emeritus (as really once was the case at Dunkin' Donuts!), lead director, senior director, chairman of the executive committee, president and, of course, chief executive. When disruption strikes, long-smoldering ambiguities can lead to dysfunctional internal confusion and external losses in credibility.
Boards must act in the following ways to clarify who speaks for the corporation:
* Halt the Proliferation of Imperial Titles. The many "chiefs," "senior," "lead," and "chairman" variations often are a political concession leading to vague overlapping roles and distracting conflicts that add...