How Effective Is Your Board?

10 May 2019

boardroom

Good governance is vital.  It is for any organization, large or small.  Public, private or third sector. It is needed to help organisations achieve their objectives, improve, as well as behave in an ethical and legal manner – for its employees, other stakeholders, regulators, customers and the wider community.

For many, conducting an evaluation is perceived as nothing more than a tiresome box-ticking exercise.  Something to be endured and to be ‘passed’ as if it were a rite of examination passage – tested at regular intervals.


‘Of course we’re effective!’

As an organizational psychologist and executive coach, my objective is to help people to get from A to B.  In the case of board evaluations, it’s about raising awareness. To start, an obvious question to ask is, ‘how effective is your board?’  Very rarely do leaders, board of directors ask themselves this very question with a genuine desire for a real answer. Instead the typical reactive and tutomatic response would be, ‘Of course we are.  We have done X, delivered Y, have data on Z and therefore we are effective’.


But do you REALLY know?

In a piece of research conducted by Stanford University for NYSE listed companies, they uncovered some fascinating findings which will form the basis for this article.

  • 89% believed their board had the skills and experience necessary to oversee the company
  • only 36% believe their company does a good job accurately assessing the performance of individual directors
  • 64% believe that their board is open to new points of view 
  • approx. 50% believe the board leverages the skills of all board members
  • 46% believe their board tolerates dissent
  • 46% believe that a subset of directors wielded an outsized influence on board decisions

The first fact would suggest that in theory all 89% of boards should be very effective and yet the reality is vastly different.  Board evaluations as mentioned above start off reviewing structures and processes. However, the other side to the ‘how effective’ coin is in the value-add portion where the contribution of individuals, the interpersonal and group dynamics are analysed.  This section is often overlooked and yet this is exactly where inefficiencies and failings can really derail an organization, or if done well, can really be the part which allows an organization to flourish and succeed for the long term. The figures above suggest that much work still needs to be done.

The report continues to talk about three specific elements:


How you lead – the reality check

‘It examines how the leader was chosen, the Board Evaluations and Boardroom Dynamics, skills and experiences that this individual brings to bear, and his

or her leadership style’.  

  • 72% think their leader is effective in inviting others to participate
  • 60% believe their leader ‘asks the right questions’
  • 26% believe their leaders are effective in giving direct, personal and constructive feedback to fellow directors

Amongst many questions, my first is, what about the 40% who thinks their leader is not asking the right questions?  What are they doing? And the 74% who are not giving good feedback – what happens to those directors?


How you manage – the reality check

The way in which board meetings are run – are they organised for optimal productivity, honest discussions and exchange of ideas and invite the participation of all directors.

  • 68% say there is a high level of trust amongst directors
  • 63% say the board effectively challenges management
  • 53% say the do not express their honest opinions in the presence of management

Only half of board members feel they can express their honest opinions??  The 37% who don’t effectively challenge management? And with the 63% how self-aware are they that they can truly say they’re effective?


How you contribute – the reality check

How do board members interact, which directors participate and how are decisions made?

  • ¾ believe their fellow directors allow personal and past experiences to influence their viewpoint
  • 44% say fellow directors do not understand the boundary between oversight and managing the company
  • 39% say fellow directors often derail conversations with off-topic subjects

Nearly 40% of directors just go off-topic – as a form of contribution?  The other figures would also suggest that many directors are just ‘winging it’ – are stakeholders really comfortable with that?

Yes, this research is based on large corporates in the USA but the results do raise some interesting questions and I don’t think from anecdotal observation that they are incorrect.  In fact, in certain sectors, I might suggest the numbers are not reflective enough. And these numbers are staggering.

So, to that effect, how effective are you and your board – REALLY?