JV Board Culture: Re-Architecting the Tower of Babel

“Chair, where art thou?”

JV board culture is wildly idiosyncratic, often entirely unmanaged, and frequently detrimental to the performance of the business. Consider a few choice comments heard over the years from JV Board Directors and JV CEOs:

• “This board makes junior high school student government seem like a highly disciplined and professional affair.”
• “Our board is a perpetual negotiating table – a place where shareholders battle out their interests, sometimes directly but mostly indirectly.”
• “Our Board is a 3-hour act of performance art – an entirely ceremonial charade to please the senior most directors from our state-owned partner.” 
• “We silently tolerate lack of preparation, off-topic monologues, and other bad behaviors. No one is willing to call out a director from another shareholder.”

Not all JV boards have negative cultures. Some JV boards are highly engaged, efficient, and leverage the skills, wisdom, and differing perspectives of individual directors. Positive or negative, culture carries a profound impact on the working of a JV board.

DISTINCT CHALLENGE OF JVs

Culture is the set of informal and unwritten beliefs, assumptions, attitudes, rituals, and rules of the board – essentially “how things to be done around here.” It drives how decisions get made, how risks are managed, and how the board sets the overall tone for management. Culture acts as a hidden steering system that shapes priorities and sorts issues. Board structures, processes, and practices can be designed. But board culture tends to develop over time, operate in the background, and can be difficult to touch and even harder to change.

Building a strong board culture is never easy. All boards – public, private, non-profit, and joint venture – operate under unique circumstances that impede traditional team building. Boards meet infrequently, often for short stretches and in mostly formal settings. Boards have specific legal obligations, and individual directors can be exposed to intense scrutiny and personal liabilities if things go wrong. Boards involve opaque rules and ambiguous power relationships and are often composed of senior individuals more accustomed to leading, rather than being equal members of a team.

But JVs are especially tricky places to build strong board cultures. The explanation starts with the fact that JV boards are composed of directors from separate shareholders.

• This means directors arrive with separate corporate cultures and, often, different national traditions of governance, such as those related to board size, relationships between boards and management, fiduciary duties, tolerance for uncertainty, and time orientation (read more).
• It means that directors are inherently organized into different shareholder “camps,” often meeting as shareholder group before board meetings to align positions and messages, and agree on influencing tactics.
• It means that directors tend to be deferential to their colleagues from another shareholder, making it hard to enforce desired cultural norms and replace disruptive or poorly-behaving directors.
• And it means JV boards are a place where at least some negotiation of asymmetric value- and risk-sharing will occur, which adds tension into the room.

There are other reasons why it’s tough to build strong cultures on JV boards.

• JV boards have extremely high turnover (median tenure of 36 months vs. 108 months for public co boards), making it hard to build trust and cohesiveness.
• JV boards often have directors who report to another director in the shareholder company, [keep the underline as shown] which introduces subtle and not-so-subtle power dynamics that can squash candor and promote grand-standing.
• JV boards and directors operate within broader corporate decision making and approval context, which means the board’s culture is impacted by individuals and actions outside the board.
• Depending on the structure, JV boards may be a place for the controlling partner or operator to simply secure needed approvals from the minority partners, rather than act as deliberative body.

And JV agreements may structure board voting such that each shareholder votes as a block rather than “one director, one vote,” which reinforces the culture of camps and suppresses individual accountability. 

It ain’t easy.

BUILDING A JV BOARD CULTURE     

JV board building entails understanding what the culture is today and what the board wants the culture to be in the future – and defining the practical steps to effect those changes.

We’ve developed a tool, the JV Board Culture Navigator, to help JV boards map their current and target culture, and thus begin a structured and facilitated conversation on what can be a nebulous topic. The JV Board Culture Navigator charts 10 overall dimensions and more than 40 specific elements of board culture. The tool captures standard elements of all board cultures, such as level of director engagement, candor, preparation, mutual respect, and constructive challenge. It also incorporates unique cultural features and dynamics of JV boards, such as balancing shareholder vs. venture interests, how directors manage communications and information flows, and take direction from their broader shareholder organizations.

This allows the board to see culture through multiple lenses, including current vs. target board culture; differences between shareholders and between shareholders and management; and comparison of the board’s culture to other high-performing JVs. The JV board tool allows the board to see the big picture and to zoom-in on individual dimensions, such as engagement shown below.

A culture-building process will also capture the stories, catchphrases, values, and beliefs in the heads of the directors – that is, the inner voices as to what is good and bad about the board’s culture, and what it should be. This is best discussed in a workshop setting, typically after individuals share perspectives in an upfront conversation and complete some survey data to bring structure to the discussion.

DRIVING PRACTICAL CHANGES

Ultimately, the board must decide where and how to change, and build a shared commitment to those actions.

Some changes will entail behavioral shifts, such as:

• Showing up prepared to meetings
• Avoiding shareholder debates in front of management
• Seeking out and building personal relationship with other directors

The board should consider memorializing key concepts into guiding principles that serve as reference points and rallying cries. Some examples of cultural guiding principles include:

• “We’re a board of directors, not a board of managers”
• “We limit the ‘governance tax’ on management so that management can focus on running the business”
• “The board owes it to management to read the pre-reads, and management owes it to us to not present those materials in the meeting”

Other changes will entail alterations to key board practices. For instance, to promote a more strategic and candid board culture, such practices might include:

• Limiting non-board members in meetings
• Sending pre-reads further in advance
• Establishing a monthly call to review operating performance
• Holding strategic offsites and board strategy days
• Changing out board directors who do not share the desired culture

STEWARD OF BOARD CULTURE 

All directors need to be committed to fostering a functional, high-performing board culture. But someone needs to feel truly accountable for delivering it – the keeper of the cultural flame.

The most obvious candidate is the Chair.

• Here again, JVs face unique circumstances. In many JVs, the role of the Chair tends to rotate between the shareholders – sometimes annually. Rotating chairs are most common in 50:50 JVs and JVs with three to five owners where none holds a majority.
• There are alternatives to the Board Chair as the primary owner of culture-related processes. Other candidates include the Lead Directors from each shareholder, the Board and Committee Chairs collectively – or, if present, the Chair of the Governance Committee or an independent director.
• Whomever it is, the board’s cultural steward needs to be someone who deeply values creating the right culture, and has the personal skills and temperament to role model desired behaviors.

The work of the cultural steward – and the board as a whole – is clear. The board needs to periodically assess and refine its culture to ensure it is healthy and consistent with what it wants. The board needs to establish director onboarding practices to effectively integrate new members onto the board and its culture. And the board needs to commit to addressing unhealthy behaviors, including problematic directors.

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Many JV boards have a general sense that something isn’t quite right – but can’t quite put their finger on exactly what’s not working. Bringing structure and discipline to the task of mapping the current and target culture can go a long way – whether that’s done as a targeted exercise or part of a broader governance review.

Give me a shout if you’d like to talk.

James Bamford

james.bamford@ankura.com

+1.202.253.7076