Supercharge Your Board

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HiResEarlier this year we proffered the view that the debate over Director independence is secondary to composition. If you want to create a high-performing, forward-looking Board it is far more important to spend time and effort ensuring that your combined group of Directors offer a diverse set of skills, capabilities and experience and apply those capabilities rigorously rather than debating whether an independent Director is more “valuable” than a non-independent one.

In our view, after ensuring Board composition is right, the next question Directors need to ask is “what are the (few) changes we could make that would be most helpful in supercharging our performance?”

Reflecting on our own experience of assisting Boards to improve their governance and drawing on the large volume of published material available on Board performance our top suggestions are:

  • Begin with Charan et al’s “Boards that Lead” advice.

    Drawing on their research and experience over many years in a variety of industries and countries (though biased towards Fortune 500 companies), they assert that Boards should determine when to take charge, when to partner and when to stay out of the way. For example, the business of the board might look like the table below. Adopting this framework helps high-performing boards to regularly reflect on what the Board agenda is addressing so that they can ensure that the Board is focusing on the areas where it adds most value.

  Supercharge 2

  • Modify the Board calendar to ensure strategic, future-oriented activities are locked in.

    Casal and Caspar of McKinsey recommend constructing a Board calendar that comprises traditional Board agenda items and actively pursues additional, forward-looking activities. Traditional items might include performance reports, AGM, Auditor’s review and the like, while forward-looking items might include considering market and competition analysis. While many Boards will assert that they both look out of the windscreen as well as considering the view through the rear-window, our experience is that matters such as talent reviews, risk management, refreshing and reinventing the Board, and considering strategic alternatives can easily “slip”.

  • Work on improving Board dynamics.

    Boardrooms are unusual environments where default behaviour can easily be exclusively collegial and non-critical. Yet, Boards that are willing to set aside “no conflicts” to engage in rigorous debate will enjoy much more constructive discussions. The real issue underlying diversity is that Boards need Directors who are willing to voice dissenting opinions and alternative perspectives irrespective of personal feelings and loyalties. Equally, Boards need Chairmen who can draw out the differences in points of view and navigate to an agreed conclusion.

  • Double the Board’s time commitment.

    The additional time should be spent on customer and market visits, learning about changes impacting their industry, staying ahead, understanding company operations, production and R&D. Several international surveys identify that the highest performing Boards spend significantly more time (up to double) on Board work than less effective ones. This extra time equips the Board to deal with compliance and regulatory issues more quickly and then to progress to the strategic and forward thinking aspects of their role. Extra time does not imply that Boards interfere with management. Rather, they spend additional time learning more about their industry and what is happening in their market so that they can contribute more knowledgeably across a variety of Board leadership matters.

  • Invite expert speakers to address Board meetings.

    Provide information to the Board about technological trends, shifting consumer behavior, industry changes, government policy moves, new marketing approaches, relevant IPO activity etc. Use the information to provoke debate and discussion around the organisation’s planned strategies and to gain insight into shifting customer, competitor and stakeholder priorities and behavior.

  • Rotate where Board meetings are held.

    National Boards should visit the different locations where the organisation is active, ensuring there is time in the agenda to see company operations, to witness new technologies, to observe market developments, to connect with staff and customers, and to build relationships with external stakeholders.

  • Broaden perspectives.

    William George observed that governance depends on where you sit (McKinsey Quarterly, Feb 2013) – whether as an independent Director, a Chairman, a CEO, or a combined Chairman and CEO. George outlines suggestions that Boards might consider in making the best use of these diverse perspectives. For example, he urges Directors to listen carefully to ensure they see situations from others’ points of view, and counsels Boards to encourage CEOs to seek at least one external Board appointment to see for themselves the challenges faced by independent directors.

So how does a Board determine whether it is improving its performance? Annual reviews help, though why make it only an annual event? This leads to our last suggestion.

At a predetermined place in a Board meeting, take the opportunity to explicitly ask Board members for feedback. Perhaps you might nominate an individual Director to lead the discussion and rotate the responsibility, or it might be led by the Chairman. Whoever does so, the approach is the same – pose the question “How effectively are we as a Board [insert appropriate topic eg considering our strategic alternatives, or addressing our succession planning challenges or challenging management on risk matters etc]?” and “What can we do better?” From the ensuing discussion agree some specific actions that the Board can take to improve, documenting those actions with timeframes and whoever is accountable.

The state of your Board will determine which of these suggestions are most appropriate for you. Nevertheless, all of them are ones that the Board can revisit many times in the quest for continuous improvement.

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