In Board Performance, Governance

HIghly effective board meeting around table

The previous article in this series reviewed a number of studies and characteristics of highly effective boards’ behaviour.

This blog will describe specific actions that a board can do in order to become more effective.

  1. The highly effective board attracts the right skills for the output required

This means your board needs a deliberate plan for its own succession.

There is value in reviewing your plan periodically to make sure it is current with the competencies you need as your industry or sector evolves. These competencies will be more than the managerial experience, professional expertise or sector specific accomplishments. For example, an insurance board needs some folks who understand the insurance business of course, but not only that skill set. The Not-For-Profit that is dedicated to a reducing the impacts a disease has in a community will need more skills sets than those who understand that sector. The organization will require someone who understands the finances, the legal risks, and the ability to serve its membership, for example. Look for people who can describe governance as a skill set, as it is different from management. Find a blend of people who can bring new context, questions and ideas to the board room.

Make sure the Governance Committee (or equivalent) is keeping close rack of the intentions of directors a year before they term out. Make sure they DO term out!

  1. The highly effective board uses a governance model

In my experience, when I ask the question about the model they use, the answer is often a description of the meeting process. This is not the same thing as using an actual model.

Many boards seem to have an unwritten understanding about what their governance model is but are not able to describe it. There are many academics working in this field such as Chait, Ryan and Taylor who developed a triangular model to represent three modes of thinking for boards of directors.

These modes are strategic, fiduciary and generative thinking. While this is instructive it does not develop an actual process to follow for a meeting. Even the McKinsey survey questions around the 37 tasks, will imply a governance model without actually naming it.

Bradshaw of York University describes 4 board of director models:

  1. Policy Governance Board (also known as the Carver model)
  2. Constituent / Representative Board
  3. Entrepreneurial Board
  4. The Emergent cellular model

Each model has its own attributes and behaviours of course. The one I find effective is Carver’s Policy Governance model. This is mostly because for over 25 years, it has developed actual processes to enable a board to become outcome focused and future oriented. Given that the McKinsey survey referenced above also identifies that most directors want to be able to spend even more time on strategy, so it follows that the board needs a model that enables this activity.

  1. The highly effective board knows what its job is

This may seem obvious but many directors will show up, go through the activities required (such as passing motions, approving regular items on the agenda etc.) and not much else.

Another reason I favour the Carver model is the notion that the board operates on behalf of ‘owners’ who may or may not be obvious. A community organization may have a large and diffuse set of constituents such as ‘the community interested in improving cycling in our city’.

Or the board may have a very clear set of owners in the case of a publicly traded organization, for example. Each may have a different version of what the actual job of a board is. But by positioning the board as an agent for the owner, the Carver model brings clarity to the meeting agenda. Is there room on the agenda to consider the owner’s interests? Does the board even know who the key stakeholders are and how to balance off what may be competing interests? What are the actual outputs an owner might expect of a board representing it?

In my experience, I see three major outputs: oversight, foresight and insight.  It is common for directors to consider oversight as the primary responsibility (that is, the place where their own personal risk is highest!). Such oversight of course is necessarily looking backing in time to what happened (via the CEO report for example). I would argue that the ability of a board to make room on the agenda for more than oversight – to consider foresight (what is likely to happen externally) and insight (what impacts might some external future factors have on the organization) are the kinds of valuable outputs any organization needs of its directors.

  1. The highly effective board has the right leader

The role of the Chair as leader and facilitator, is a critical one.

According to Jeffrey A. Sonnenfeld of the Yale School of Management writing in the Harvard Business Review, the best bets for making a ‘great board’ revolve around the social systems as led by the Chair. That is, he identifies that the Chair needs to create a climate of trust and candor, a culture of open dissent, use a portfolio of roles, evaluate their own performance and ensure individual accountability.  I consider these essential qualities of a highly effective board but not the only qualities. A culture of open dissent works best inside an established and well maintained governance model. A portfolio of roles works best assuming you have the right blend of skills and experience on the board in the first place. Trust and candour really depends on one’s own version of individual accountability. If there are things that are only said after the meeting, then that is a sure sign of dysfunction. It goes without saying that a poor leader will not be a positive factor in the board overall performance.

  1. The highly effective board evaluates its own performance

This notion has cropped up a number of times in this blog, and I believe it to be a vital attribute. One of the challenges herein is to pick a method for evaluation that is meaningful. It is very easy to walk through some evaluations that will not cause any disruption. They may not illuminate areas for improvement either. This is where a skilled leader becomes important; given the performance is so directly linked to individual contribution a meaningful evaluation will certainly identify weaker individuals. And the leader will need to make sure that is fair and fairly resolved for the organizations sake.

Finally, as a board director you are already asking yourself if your board is working effectively. Is the work you are doing (and you are undoubtedly working!) improving the environment you are operating in? When your AGM is over will the situation be better, neutral or worse?

The above top 5 attributes will not be easy to install. But they are worth doing in order to make the time you dedicate to have as positive an impact as possible.