Mark’s question about asking questions

Mark asked about questioning a strategic plan. I’ll answer his question in two parts,
1. How do you ask questions
2. What questions should you ask

If you know how and what to ask, the courage to ask follows.

Questions are the directors’ tool to gather data. If you don’t ask questions you don’t get information. If you ask in a way that threatens or embarrasses, you risk defensiveness or anger. If either happens, the effectiveness of the board declines.

How do you ask questions?

The questions below solicit the same information but in very different ways. They are from a real situation.

1. Why should we continue to support the Vancouver branch? It’s losing money.
Or,
2. Would you help me to understand your strategy in keeping our Vancouver branch open?

The first question challenges the CEO. It suggests the CEO is wrong in keeping Vancouver branch open. It puts the CEO on the defensive, particularly in a sensitive meeting dealing with a company’s struggle for profitability.

The second question is open and non-threatening. Is offers the possibility of an explanation that goes beyond current profitability. (In my example, the CEO responded by describing a strategy to keep valuable and talented staff in the branch while rebuilding sales–which he did.)

The Directors around the table are bright. They want to do the right thing. They also have egos. The board is more able to help the CEO find solutions in a calm and deliberate environment, than in one marked by confrontation.

Sometimes you can use a series of questions to make a point or find an answer. Each successive question uncovers a part of the issue, building logical path to an answer, or a better understanding of the issue. This is the Socratic method of questioning. To learn more about the Socratic Method I suggest reading two papers by Dr. John McCallum of the University of Manitoba. The references are at the end of this discussion. *

What questions should you ask?

Ask material questions that add useful information to the board’s discussion.

1. If, in a planning discussion you ask about the cost of postage stamps, you will (or should) get groans from around the table.

2. If you ask whether management has the capacity to handle a new initiative, then you have asked a material question.

The value of your question increases if it carefully works down to underlying issues that may not be obvious. The Socratic Method aids in asking these kinds of questions.

How do you decide if a question is about a material issue or not? I use the risk screen from GovernanceTools. It identifies ten risk windows Directors can use to question and understand most management proposals.

The risk windows are:

1. Direction, strategy, and goals (the plan and execution).
2. Management strength (quality and stability of the management team).
3. Financial systems and controls (including all information technology).
4. Financial strength (balance sheet).
5. Compliance (both regulatory and non-financial).
6. Communication transparency (with shareholders, regulators, employees, and other stakeholders).
7. Security and use of corporate assets (human, intellectual, and physical).
8. Relationship between the board and CEO (mutual accountability).
9. Competence of the CEO (capacity to lead into the future).
10. Competence and effectiveness of the board (capacity to provide appropriate advice and supervision).

Ask yourself, “Are we examining an issue of direction? Are we examining an issue of management strength? Are we examining an issue of communication?” The list will help you to discover most material issues worthy of questions.

We hear a lot about how Directors should to ask “Tough Questions.” The name, “Tough questions,” implies they should be challenging and put the CEO on the spot. Nothing is more counter-productive in a board meeting. Tough questions are careful, material, questions. They get to the root of an issue without destroying the calm and deliberate process required for an effective board meeting.

Mark asked a good question. Material questions, asked in a non-threatening way, make an important contribution to a planning discussion. The risk windows help with materiality.

* Directors: The qualities that matter, Dr. John S McCallum, Ivy Business Journal, July/august 2005, Reprint # 9B05TD05
The Socratic Director, Dr. John S McCallum, Ivy Business Journal, May/June 2003, Reprint # 9B03TC01