Is Your Board Color-Blind to Hazardous Conditions?

What color is your boardroom flag?

 

by Dan Busby and John Pearson

 

Our board was lulled into complacency
and did not recognize the color of the flag flying in the board room.
We thought the flags were green long after
they had turned to yellow.

 

Living near Indianapolis for several years, Dan occasionally stopped by the Indianapolis Motor Speedway, also known as the Brickyard, to experience the pre-race time trials.

At race tracks, flags are used to indicate track conditions and communicate important messages to drivers. The starter waves the flags atop a flag stand near the start/finish line.

The solid green flag is waved by the official to start the race. During a race, it is displayed at the end of a caution period or temporary delay to indicate that the race is restarting.

The solid yellow flag, or caution flag, requires drivers to slow down due to a hazard on the track—typically an accident, a stopped car, debris, or light rain.

The solid red flag is displayed when conditions are too dangerous to continue the race.

In every board meeting, there are flags that fly—green, yellow, or red—corresponding to the current atmosphere in the boardroom. The color of the flags can go through the entire spectrum in one meeting. In some cases, a flag of one color may fly for the entire meeting or most of it.

Hopefully, every board meeting starts out with a green flag flying. However, a red flag may have been flying at the end of the last board meeting, and there could be a carryover impact on the current meeting.

Does your board recognize the color of the flag flying in the boardroom, or is the board color-blind? Boards that know the color of the flag are in a position to more readily address issues that may cause “hazardous conditions.”

Here are four examples of yellow and red flags:

  • Too much intensity. The boardroom discussion begins positively; great input and collegiality—green flag. Then a new topic is introduced, and there is passionate discussion. Suddenly passion turns to intensity—too much intensity—yellow flag. Intensity changes to some harsh words between two board members—red flag.

Recognizing the change in the flags during this discussion can help the board chair diffuse an otherwise ugly situation.
 

  • Too little intensity. You have likely attended a board meeting that suffered from boredom. There was little engagement by the board—the board members were simply going through the motions. Some members were texting; others were answering emails. It was a yellow-flag meeting from start to finish.
  • Financial concerns dominate the agenda. A minor deficit for one year probably doesn’t even rate a yellow flag. However, a large annual deficit qualifies for at least a yellow flag, and the larger it is, the more likely it is to become a red flag.

Here is a principle you can depend on: Yellow flags are on the income statement. Red flags are on the balance sheet. Boards that focus too much of their attention on the income statement may miss the red flags on the balance sheet.
 

  • Financial issues not on the agenda. Although in some board meetings, financial details dominate the agenda, at other times the key financial issues are absent from the agenda. This can even occur when financial details dominate the agenda, because the wrong details are shared.

If staff does not present key financial issues (for example, borrowing of designated funds, lack of timely payment of obligations, unhealthy giving trends, and more) to the board, these issues may never be discussed in the boardroom.

There are hundreds of reasons why boards miss the color of the flags in the boardroom. These include disengaged boards, weak fiscal controls, misunderstanding of roles and responsibilities, and lack of timely information. More frequently, boards are just unaware of the three colored flags—and what they mean.

“Sensitivity to the atmosphere is one of the most critical competencies for any board member. Some people feel a room easily and others have little or no sensitivity to the atmosphere,” says Danny de Armas, senior associate pastor of First Baptist Orlando. “One who is more aware of atmosphere will be able to make a speedier adjustment as the atmosphere changes during a meeting. This can be very useful to move the meeting back to green quickly and appropriately. In time, we can all learn to avoid the natural red flag factors. Doing so will keep our meetings productive and pleasant—ensuring continued participation by high capacity leaders.”[1]

 

BOARDROOM LESSON
_______________________________

Though we may dream of only green flags, in nearly every
board meeting there are yellow or red hazard flags that fly.
Boards that recognize the color of the flags
are in a better position to navigate the race track.

  Board Action Steps:

  1. Rate: How would you rate the sensitivity of your board to observing the colors of flags in the boardroom? If the rating isn’t high, determine how to increase the board’s sensitivity quotient.
  2. Recognize: Commit to discerning the color of the flags that are flying in future board meetings.[2]
  3. Reflect: At the end of each board meeting, assess how the board is doing in its sensitivity to the color of boardroom flags.

 

Prayer

Lord, help our board to be sensitive to the boardroom
atmosphere and the color of the flags that are flying. Amen.

 

 

[1] Danny de Armas, “Is Your Board Color-Blind to Hazardous Conditions?” Lessons From the Nonprofit Boardroom (blog), July 18, 2018, http://nonprofitboardroom.blogspot.com/2018/07/lesson-35-is-your-board-color-blind.html.

[2] For an excellent guide to growing in discernment as a board, see Ruth Haley Barton’s Pursuing God’s Will Together: A Discernment Practice for Leadership Groups (Downers Grove, IL: InterVarsity Press, 2012).
 

From Lessons From the Nonprfit Boardroom: 40 Insights for Better Board Meetings, 2018, www.ECFA.org/KnowledgeCenter.


This text is provided with the understanding that ECFA is not rendering legal, accounting, or other professional advice or service. Professional advice on specific issues should be sought from an accountant, lawyer, or other professional.

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