So far in our board fundamentals series, we have briefly looked at ‘what good looks like’ in a Chairperson, the board and a NED. There are so many topics we can cover and any suggestions that you may have will be welcome. For us at Greenspire Evaluations, we were prompted to start this offering because we believe that organisations, be you a multi-national business or a charity, can flourish, succeed and achieve that mission that you set out to do. Yet, time and again, we see that this does not happen for a variety of reasons, a major one being that there is poor leadership at the helm. This could be in the form of a weak CEO or executive team but ultimately, it’s up to the Chairperson and the board to ensure that management is performing and performing well, and as such the board has to be highly effective.
With every organisation in every industry, it will have its own unique and particular challenges but here are some of the most common.
Some typical barriers to board effectiveness
The quality of the board
A board has to be composed of a truly diverse group of individuals who are fully qualified to be there and to offer a particular expertise or skillset to the group. And that expertise and skillset have to be relevant and practical.
This may sound obvious but time and again, what we see is that members of a board may have been qualified for a situation from awhile back but not so in today’s world. Examples such as that of a large investment bank’s risk committee, no one on that board had any experience or knowledge of particular products and strategies in over 25 years. Composition matters.
Diversity also matters. Diversity of opinion, personality, experience, skillset, perspective, as well as of gender, age, ethnicity, culture, ability and so many other aspects. This is to ensure that the organisation is not at risk of group think, blindspots and innovation. However, what can lead this philosophy to be ignored or treated as some form of ‘box-ticking exercise’ is that often, it is poorly managed which inevitably results in poor communication, a lack of trust and disruptive behaviours and therefore an inevitable return to older ways for ease, as opposed to effectiveness.
Often, it is not well understood by board members what their roles & responsibilities are, nor their specific contribution to the group. Individuals need to know how they can strengthen the board and the organisation and to do it in an effective and non-disruptive manner, yet whilst offering some healthy challenge to the status quo. A difficult balance to achieve and can often be the cause of some toxic outcomes amongst the board and with the organisation itself. To add to this mix, is that board members must always remember that they are there to enable the organisation to be successful and sustainable for the long-term, whilst helping management with shorter-term issues.
The motivations for individual board members for being there may vary but their commitment to that organisation should be a given. Sadly many board members may perceive their commitment to be a less than what is expected which will directly lead to a lesser contribution. Not helpful to the other board members and especially not to the organisation.
Boards must have a strong strategy and plan for its creation, selection and structure of its board members. And like any other strategy and plan, it has to be reviewed and updated regularly to ensure that the board remains fit, purposeful and of value to the organisation.
The quality of the information
For all the will and systems in the world, producing good quality information for and by management for the board is extremely difficult. Obvious as it sounds, the information has to apprise members of the activities and challenges facing the organisation. This information has to be correct, brief, focused, strategic and highlight key issues, challenges and options. Pertinent information should also exclude external viewpoints such as industry themes from various media and various networks such as industry or geopolitical initiatives. Information be through formal or informal channels is wholly valuable to the board.
It is always difficult to ascertain the quality of that information – how it has been derived and if the focus is appropriate and correct. Many boards encourage board members to be involved in designing the reports that come to them, as well as encouraging continues design and redesign of those reports, as the organisation, its environment and strategy change over time.
The structure of the board
A well-structured board is vital to its effectiveness. When reporting lines are appropriate and sub-committees function well, these will ensure that the governance of the organisation will be as effective as it can be. Examples such as regular reviews of composition and agile sub-committees which focus on pertinent and specific issues help increase the efficacy of board information and therefore its ability to make decisions.
How the board conducts its roles and responsibilities matters greatly too. As such, the board has to have appropriate and relevant processes in place to ensure that it functions as it should. These processes should include items for: evaluation, strategy, decision-making, audit, risk, education, succession planning, selection, regulation etc. Without these, boards will be unable to adequately balance out its various responsibilities such as immediate decision-making vs long-term strategy goals for the organisation.
The dynamics of the board
When the culture of the board is healthy and functions well, boards thrive. Sadly this is not quite as common a factor as we would like. Examples of cultures that lead to poorly performing boards include: group think, dominating members (and groups), controlling Chairs, disruptive individuals. Other non-performing boards might feature low vitality, lethargic and complacent members. Sometimes dysfunctional individuals and behaviours are encouraged which may challenge the status quo but not necessarily in a healthy way. Lazy and lackadaisical attitudes such as being unprepared or late for meetings and for significant moments for the organisation can also be a feature. Boards which communicate well and encourage healthy and productive behaviours where positive challenge and debate are welcome but unhelpful and destructive attitudes are shutdown, these are the boards that typically thrive. A board that is self-aware, self-reflective and constantly evaluates its performance as individuals and as a group, is one that has a far greater chance of helping organisations succeed.
Leading a successful, sustainable and growing organisation is not an easy task. Having an effective, aligned, agile and powerful board can make all the difference to the long-term objectives of your organisation. A board can only be valuable to the organisation if it is comprised of quality board members who contribute in as compelling and effectual way as possible, as a group and as individuals.
This article forms part of the board fundamentals series.
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