Shareholders can toy with their investment by placing friends and family on the supervisory board or appoint a team of experts who will challenge and coach executive management towards quality growth and profits.
More and more investors opt for the latter and this post reflects on a few good reasons why.
Need for Change
Successfully managing a company in the textile and clothing sector has become a bigger and more complex challenge of late. Cycles of innovation are becoming shorter and the revenue of retailers is shrinking. Meanwhile, complexity is growing due to growing consumer demands across all channels.
These market requirements are joined by internal wants and constraints. Fostering enthusiasm for change among employees is hard work and requires a great deal of positive energy. But enthusiastic employees are indispensable in creating a company climate that on the one hand keeps existing staff committed and makes for an attractive employer to new applicants.
The Ideal Supervisory Board
The right supervisory board effectively supports management in a range of ways. For one thing, supervisory management can contribute ample industry expertise in relevant subject areas such as distribution, design, operations, marketing, IT, or digitalisation.
In addition to industry expertise, a professional supervisory board also contributes oversight and controlling. This may include expertise in strategy, risk management, legal questions and compliance, HR, finance, or reporting. As risks are intensifying, so are the requirements that company representatives have to meet on a regular basis.
A good supervisory board is an independent carrier of know-how that ideally operates as a challenging sparring partner to executive management. The combination of expertise and independence enables the board to meet management on an equal footing to facilitate better business decisions.
The Role of a Supervisory Board
The responsibility of a supervisory board differs from that of a consultant. Increasingly, external claims are also brought against advisory and supervisory boards, raising the stakes from this perspective too. Learned behaviour of nominating board members from senior management’s network of family, old friends or acquaintances fails to do justice to these newer challenges. You’re unlikely to hand over your own bank account to friends and family, why should you entrust them with the wealth of your company?
Sure, the ‘chemistry’ between an entrepreneur, their management team and the supervisory board needs to be right. That makes it easier to achieve a familiar and trusting atmosphere where fun can form part of doing business. Much can be achieved with a smile, after all. But a truly professional engagement on equal footing will only take place where management as well as members of the supervisory board are qualified for their respective roles.
Before appointing supervisory management, it’s worth thinking very carefully about what areas of expertise and competences the board should ideally cover. What does the company need most to thrive? A finance mastermind, an e-commerce expert, or perhaps an experienced brand coach? The composition of the board will need to change strategically every couple of years. Great supervisory management will therefore at least partially rely on a rotating board.
Once the strategic priorities are determined, the search for the most suitable candidates begins. Given that appointments to supervisory management can affect a company longer term, these decisions cannot be rushed. Potential candidates should get the chance to meet management and get to know the company prior to their appointment.
Last but not least, supervisory management works best if executive management can ‘feel’ its guidance. A less tangible supervisory board risks reducing its own role to the occasional meeting and commentary, not unlike Statler and Waldorf from their balcony at the Muppet Theatre.
In the best possible supervisory management environment, the board actively guides and coaches executive management between board meetings too. This, in turn, is only achievable if management succeeds in appointing experts who bring experience along with the subject area expertise the company needs most to this role.
About the Author:
Alexander is an experienced brand executive who benefits from the best of both worlds, a long career in brand management (until recently as the CEO of Marc O‘Polo) and experience in supervisory management. Get in touch with him to discuss supervisory management strategy or read more of his work here.