In reflecting on many years of experience on boards, as a Chair and board member of companies and non-profit organizations and as a CEO, I believe that the roles of a company board can be boiled down to five:
- Resolve questions of identity and direction
- Secure and support leadership
- Monitor performance
- Manage risk
- Ensure compliance
What Directors Should Focus On
Identity and Direction | Even subtle shifts in a company’s competitive position have a way of changing everything: what leadership is called for; what constitutes success; what risks are to be managed; and what regulatory requirements must be met. This doesn’t mean that a Board should hold frequent, formal strategy sessions. It does mean that boards must be alert to defining moments that represent opportunities for it to add value or, conversely, lose the trust of the CEO and other stakeholders.
These defining moments don’t usually involve a simple choice between clear alternatives. They require the board to formulate new options or look at old options in new ways, uncovering their implications. To be effective on the occasions when the company has come to a turning point, directors must have taken the time and made the effort to build collective understanding among themselves. Well-informed participants and prudent board regulations are necessary but not sufficient. The board and CEO must fundamentally see themselves as a team, who share a set of tools for collaborating and a common approach to leadership.
Teamwork | There are real challenges to getting a board to act as a team. Members represent diverse backgrounds, agendas, skills, and stakeholders. Even with years of tenure, they may know one another only superficially, spending time in each other’s company for a few hours a year in relatively formal settings. Many directors tend to be uncomfortable differentiating themselves from their peers. Their discomfort rises in direct proportion to the stakes they perceive. Peter Drucker long ago counseled that teamwork begins not with focusing on relationships or structure. It starts with goals, then crafting the mechanics to achieve them.
Boards have a mandate to exercise their powers collectively, even though members are required to make their judgments as individuals. Boards that work as a team build a bridge between members’ personal viewpoints and collective decision making. Good governance occurs when a team rises to the occasion in the company’s defining moments. And with the exception of the Board’s reserve powers, such as its power to select, reward and remove the CEO, the CEO is an integral member of the team.
While Board committees have an important role to play, the emergence of factions on the Board diminishes the capacity of the whole. The concept of a "weakest link" is a myth. Weakness is never in any one link, but in the working relationship between or among some combination of members.
Tools | There is a self-perpetuating cycle that sets in when the board and CEO are out of alignment. The CEO thinks: “They get so lost in the weeds…how will I ever get them to see the big picture?” The board thinks: “There’s something he’s not telling us…we need to drill down.”
To be truly effective, the board as a whole needs a shared sense of the conversations they should be having and tools to guide how the conversations are conducted. Bear in mind that people talk at roughly 1,200 words a minute but think at around 450. It’s one thing for directors to speak their mind. It’s quite another for everyone to be really prepared to change their mind. Most boards need to improve their capacity for dialogue: synthesizing, sharing airtime, listening rather than rehearsing, inviting other perspectives, exploring assumptions, and setting aside efforts to convince and convert in order to really listen and reflect.
While directors want to add value and participate meaningfully in the success of the business, CEOs are often driven by an instinct to demonstrate that they have already thought of everything. Those on both sides of the table need to go to the edge of their understanding, opening themselves to unanswered questions that everyone owns. That’s where good governance occurs.
Leadership | The board chair must pay attention to the appropriateness of the agenda, the robustness of the pre-work, and the legitimacy of the conversation. At points of chaos or closure, a capable chair will find ways to strengthen the voices that tend to be outgunned and draw in those who have unspoken perspectives.
Proponents of Lean argue that 80% of any improvement is in the process. Board Chairs and members can improve their process by directing their efforts, in defining moments for the company, on reframing issues, forging a real partnership between board and CEO, and leading a more authentic dialogue that will help the company seize opportunity.
A major focus for every board is the profitability of their company. In one of our most recent ebooks, "3 Step Strategy to Improve your Profitibility" you will learn a lot to take a strategic, focused approach to improve the revenue of your company.
About the Author
As a CEO, Director and Advisor to CEOs on strategy and governance, Mike has compiled a track record of navigating complexity, refining business models and cultivating leadership. Learn more or contact Mike directly here.
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