A board is a crucial component of any organization, and its performance can significantly impact the company's success. A high-performing board can provide strategic guidance, effective oversight, and critical support to the management team (Unlock the Power of a High Performing Board: Why Your Business Can't Afford to Miss Out). Unfortunately, many boards fail to deliver on these expectations. Some clients come to us with a board they would rate a B- or a C+. Some categorize their board as just a "review board." In some rarer cases, board members are not even speaking with one another anymore! Poorly performing boards can lead to strategic missteps, missed opportunities, and even legal and reputational risks.
So, how do you prevent these issues from forming and improve your board's performance?
Define the Roles and Responsibilities:
One of the most critical factors in setting up your board for success is defining the roles and responsibilities of board members. Each board member should have a clear understanding of their roles, responsibilities, and expectations, including the purpose of the board, its governance structure, the organization's mission, vision, and values, and the board's specific duties and obligations. It's also important to identify "swim lanes" that each director will play in.
To achieve this, establish a board charter that outlines the board's composition, responsibilities, compensation, meeting cadence, and other operating procedures.
Recruit the Right Board Members:
It's true that the success of a board depends heavily on the quality and diversity of its members. Therefore, it is essential to have a recruitment process that identifies and attracts the best candidates (Get the Best of the Best: Strategies for Attracting Top Board Members). Consider the candidates' skills, expertise, and perhaps most importantly, their alignment with the organization's mission, values, and strategic direction.
It is also important to ensure that the board is diverse and inclusive. Diversity brings a range of perspectives and ideas that can help the board make better decisions. This includes diversity in terms of gender, ethnicity, age, professional background, and other factors. Our research suggests that diverse boards have a more positive impact on company performance.
Develop a Strong Board Culture:
Developing a strong board culture is essential for improving your board's performance. A strong board culture fosters open communication, trust, respect, and accountability among the board members. Encourage board members to express their views openly and honestly, respect each other's opinions, and hold each other accountable for their actions. As a third party, we can help curtail all interpersonal challenges and prevent a "shadow board" from forming after the meeting. It's important to drive a strong board culture to prevent boardroom politics from standing in the way of board performance.
Provide Ongoing Board Training and Development:
To improve your board's performance, it's essential to provide ongoing training and development opportunities for the board members. Board members need to keep up-to-date with emerging trends, best practices, and legal and regulatory requirements. Provide regular training sessions on topics such as governance, strategy, finance, risk management, and leadership. Offer opportunities for board members to attend conferences, seminars, and workshops that focus on their specific areas of expertise.
Conduct (Annual) Board Evaluations:
360 board evaluations are a powerful tool for improving board performance. In a 360 evaluation, board members, executives, and stakeholders provide feedback on each board member's performance, including their own. This multi-perspective approach provides a comprehensive and balanced view of the board's effectiveness. 360 evaluations can be conducted internally or by an external consultant to ensure objectivity and confidentiality. The most important step is to use the feedback received to identify areas for improvement, establish action plans, and monitor progress over time. By conducting regular 360 evaluations, boards can gain valuable insights, enhance their performance, and build trust and credibility.
Set an Optimal Agenda:
Setting an optimal agenda is critical for a high-performing board as it ensures that the board is focused on the most important issues and uses its time effectively. However, this is often one of the largest challenges we see with our client's board. They can focus too much on prior quarter financials and KPIs, rather than addressing the critical issues that will help drive the strategic objectives of the business. Oftentimes, 80-90% of the meeting is dedicated to management presentations, financial analysis, and risk reviews. Instead the meeting should dedicate the majority of time to strategic discussions that focus on what really matters. This can be achieved by sending the board books out in advance and holding a pre-call that addresses any financial or risk questions a board member may have, freeing up meeting time for more strategic discussions.
In conclusion, a high-performing board can be a strategic weapon for any organization. To improve your board's performance, it is essential to define the roles and responsibilities of board members, recruit the right members, develop a strong board culture, provide ongoing training and development opportunities, conduct regular 360 evaluations, and set an optimal agenda. By doing so, your board can be well-prepared, fully engaged, and make informed decisions that support the organization's success.