10 Strategies to Make Your Board of Directors More Effective

Boards of directors typically include business people outside your realm of endeavour who bring expertise in strategy, finance, technology or some other dimension that can expand your perspective on your specific marketplace. 

Effective Boards are highly knowledgeable about your business and its environment and as such can operate as a productive forum for developing and testing ideas as well as making strategic decisions.  Boards also become a monthly or quarterly set of business eyes to help you stay focused on the most critical performance, growth, and success factors for your enterprise. However, there is ample evidence to suggest that not all Boards operate effectively and many under-deliver on their potential value.

Listed below are ten governance strategies to adopt to maximise the return on investment in a Board by encouraging the appropriate level of challenge and support so that the firm’s “leadership is doing the right things, and management is doing things right” (Peter Drucker).

 

1. Measure organisational performance with “balanced measures”

Progressive organisations measure customer value, employee engagement, and operational efficiency equally with bottom-line financial results.  Boards that keep a close eye on each of the four categories enjoy a 360-degree view of business performance.  Employing balanced measures requires an easy-to-grasp reporting system. Information should be presented as a simple set of indicators on a monthly basis.  This report allows Board directors to quickly scan overall company performance and determine which area they want to inspect with more detail.  The report should contain no more than three to five indicators for each balanced measure.

 

2. Tie at least 75 percent of each agenda to strategic plan objectives

If Boards use a “consent agenda” they can accept numerous self-evident updates without wasting valuable time.  A consent agenda is a single agenda item that includes standard actions e.g. bank signature changes, informative correspondence, as well as general reports to the board that shouldn’t require dialogue e.g. a property and facilities renovations update, quarterly marketing /advertising plan, updates on any corporate investments’ performance.  By accepting the consent agenda, the board completes many minor transactions at once, thereby leaving more time for one of the most important functions of governance: strategic thinking and planning.  Using a consent agenda can save boards anywhere from a few minutes to a half hour.
In today’s fast-changing business environment, boards frequently struggle to assure that there is sufficient strategic focus to remain relevant and successful. Investing more of each meeting in strategy discussion simply improves a Board’s ability to provide the necessary focus and responsiveness in regards to strategic issues.

 

3. Manage risk proactively or face harsh consequences.

A director has many legal duties and obligations.  In the worst case scenario, if events go badly wrong, a director can be disqualified. It is therefore not just in the interests of the company, employees, customers, and suppliers that there is a robust process for managing risks that is actively reviewed by the Board.  Random stuff happens in life and in business.  Like boy scouts, smart people prepare.  They take the time to learn the risks and anticipate every eventuality.  The most common risks include: running out of cash, inadequate commercial contracts, damage to corporate reputation, employment law, cyber security threats, health and safety, and infringements of intellectual property.

 

4. Conduct board member development at each meeting.

Ongoing growth of Board director capabilities is a constant challenge.  Limited free time and budgets make travel and participation for continuing professional education a rare opportunity.  Ego may also be an inhibiting factor.  One solution is to seed a small amount of development at each meeting.  For example, boards can read and discuss an article on governance to learn how to be a better Board, listen to a presentation by an accountant to improve financial oversight, or invite a customer to provide their perception of your product /service to promote greater Board understanding of your value proposition.  These investments will not only provide fresh insights and perspectives but contribute to the ongoing growth of governance capabilities.

 

5. Hold a brief “product” or “service” tutorial at each meeting.

A ten-minute update on one of your organisation’s products or services enables Board directors to stay current and maintain a “feel” for the nature and character of the business.  This enhanced knowledge also offers the Board an opportunity to interact briefly with managers and programme leaders as a way to better understand the CEO’s leadership and management.

 

6. Create rules for Board interaction.

Seasoned Board directors are adept at decision-making, managing interpersonal relationships, and handling differences of opinion and conflict.  Boards that define commitment expectations and develop rules for interacting at Board meetings and with managers often function more effectively than before creating these guidelines.

 

7. Job descriptions and commitment to serve signed by each member.

Joining a Board is frequently fraught with uncertainty about the required time commitment, conflict of interest guidelines, Board development commitments, representation and other duties.  Just as a job description helps focus an employee’s work contribution, a Board director’s job description specifies the reserved powers particular to a Board director in order to focus the potential director’s commitment.  It also discourages those who might consider joining the Board for the wrong reasons.  Board directors should sign their job description and conflict of interest statement as an additional step to raise awareness of the governance commitments expected.

8. Conduct a Board self-assessment at least once a year.

Progressive Boards engage in regular self- assessment.  These can be limited or extensive. A limited evaluation might look at the quality of meetings, agenda management or perceptions of individual participation.  A comprehensive assessment would cover additional aspects of governance, such as strategy, Board composition, committee structure, and CEO feedback.

9. Provide formal CEO feedback twice a year.

Many Boards fail to evaluate their CEO on a timely basis.  Boards should provide direct, formal feedback on their CEO’s performance, twice a year.  This discussion keeps expectations and performance calibrated and results in better organisational and Board performance.

10. Plan an annual retreat to revisit organisational values and strategic plans.

Progressive Boards find time to “retreat” at least once a year, if only for a day, away from the pressures of a typical agenda.  Discussion at these retreats allows relaxed exploration of changing business conditions, shifting customer expectations, chronic challenges, expansion and a renewal of focus on strategy for the governance body.  Retreats can range from one to three days.