Managing a board of directors is a challenging task that involves collaborating with various personalities at different ages and from all sorts of backgrounds. For example, the average board size in France is 14, followed by 11 in Italy, Spain and Sweden, with the average age of directors being 59, 58, 60 and 60 respectively.
This means you typically have a large group of experts, confident in their opinions and convictions, that you have to encourage to work as a team and to consider each others’ views.
Given these statistics, and the fact that the board only convenes a few times a year, the company must deploy best practices for board management in order to form something that is greater than the sum of its parts, challenges its own assumptions and makes the best possible group decisions for the good of the company.
This article collates actionable advice that you can use to help create a cohesive and effective board.
The evolving role of the board
Whereas, previously, the board was mainly concerned with strategy and risk management, these roles have been supplemented by monitoring and oversight of financial performance. In addition, boards are also tasked with leading the way on environmental, social and governance (ESG) topics, delivering sustainability and improved non-financial metrics too.
Recent events have increased the pressure on businesses to ensure they are working in the best interests of society as well as for the business. These include the Me Too movement against sexual abuse and harassment, the death of the black man George Floyd at the hands of a white police officer in Minneapolis in the US and the subsequent Black Lives Matter protests, as well as the COVID-19 pandemic. Boards are tasked with leading this social shift that is in such stark focus.
Compliance is another increasingly prominent aspect of the board’s risk management remit. Legislators around the world are continually increasing the regulatory burden on companies in response to the digitisation of business (for example, GDPR), financial crises (the Market Abuse Regulation and the Markets in Financial Instruments Directive II, among many others) and other disruptive influences on the market.
Best practices for board management
Establish a clear board structure
One way to ensure the board works in harmony is to set a concrete structure that assigns tasks and responsibilities to all members. This allows them to ‘own’ their specialist area and the role that they play individually and as part of the collective.
Each member should understand what is expected of them, including in their preparation for meetings, their contribution to those meetings and the actions they take afterwards to carry out the work of the board.
You should also define how committees operate and feed into the main board, as well as the role of the chair. When all parties understand the structure, it leads to more efficient running of the board.
Align the board and the CEO
Once you have defined the roles of the board and its members, the structure of authority becomes more clear. The CEO requires delegation from the board in order to be able to put into action the strategic aims. If the CEO and board are not aligned, this means they have to continually refer back to the board, slowing the process down. When establishing roles and responsibilities, ensure you allow the necessary delegation.
This is made easier by ensuring that the CEO and board are aligned on strategy. It must be an ongoing conversation to ensure the two parties (and the executive team) do not stray too far from the organisation’s vision.
Foster diversity and inclusion
Although it sounds counterintuitive, one of the ways to manage a board as one team is to introduce an element of challenge to the boardroom. By fostering diversity and inclusion when building a board and undertaking succession planning, you bring more varied experience and a wider knowledge base.
When boards are composed of people of the same gender, ethnicity, age and background, you only gain a narrow insight into the place of your business in society and its optimal future direction. In such a situation, disagreements can be simply based on personality clashes rather than on feasible evidence backing up differences over strategy.
By bringing together a more diverse set of directors, each member can learn from the other’s experience, to which they might not otherwise have been exposed. This enables the board to look at issues from a different perspective and come to innovative decisions.
Open the lines of communication
Collaboration and communication are important for boards who want to reach the best-informed decisions in the most effective manner. Rather than board members acting in a vacuum between meetings, being able to discuss and debate topics with board colleagues remotely helps to work through problems and brings momentum into the meeting room.
An online workflow streamlines the processes for creating and approving agendas and meeting minutes, as well as nurturing the bond between board members.
Using a board portal is one way of connecting board members in this manner, working in the cloud by annotating documents and communicating with each other.
Better communication also helps to streamline meetings, as much of the functional conversation can take place outside of the boardroom. Any queries about language or intent, for example, can be dealt with in the board portal, allowing directors to get straight into the meat of the topics at the next board meeting.
The better directors know each other, the more you can tailor the meetings to ensure they are conducted in an efficient, but still effective, manner. The chair will know who they have to encourage to speak and who they might need to rein in, understanding the method of voting and the meeting structure that works best for their board.
Italian private equity firm Itago, for example, adjusted its workflows to move away from preparation involving confusing email chains that often left board members underprepared. They opted for a board portal that set out the topics at hand clearly long before the meeting took place.
Sharpen directors’ skills
As the corporate world does not stand still, neither should your board. But, to achieve continuous improvement, you must have in place a regular schedule of training and education for your board members.
Evaluate your board meetings and your board performance to understand where your directors may need upskilling. This will ensure they can carry out their tasks to the best of their abilities.
Keep directors informed of developments within your industry, trends, governance practices and regulatory changes that will affect your business.
Encourage active engagement
In the meeting, one of the roles of the board chair is to ensure all voices are heard and views are shared. In some meetings, one or two voices can take over the floor, but the chair must prevent this to gain the benefit of the range of opinions within the boardroom.
The chair should encourage all members of the board to take part and contribute to the discussion for the good of the decision-making process.
However, active engagement should not be solely a priority for the meeting. It should exist for this whole ecosystem of the meeting process, from agenda to action items. When board members participate across the process, they are more involved with the work of the board and that can only make the board more effective.
Board accountability is essential to engaging members and ensuring their focus, attention and hard work. They must be held responsible for their actions and decisions by other members of the board, employees, investors and other stakeholders.
Being transparent in their actions, accepting where they have made misjudgements and reporting on performance to interested parties are all important elements of board accountability.
As part of this accountability culture, you should conduct regular assessments of the board, its committees and its individual members to hold them to the high standards expected of their office.
Simplify succession planning
Great boards always have an eye on what happens next. Even with a powerful, diverse and effective team, the nomination committee should always be nurturing those who will come next to take over with as smooth a transition as possible. This allows for continuity and minimises any downtime whilst a new CEO or board member gets up to speed.
Board members will eventually step down, retire or come to the end of their tenure, and a simple but effective plan to identify, train and acclimatise new talent means there is less of a shock to the board when the changeover occurs.
The impact of board management on corporate performance
In a recent study, McKinsey tried to answer the question of whether a well-managed board affected corporate performance. It found that “boards with better dynamics and processes, as well as those that execute core activities more effectively, report stronger financial performance at the companies they serve.”
Although it is challenging for a board to successfully manage all of its increasing duties, in those companies where board management was seen as a priority and where the dynamics and processes were actively nurtured, the company benefited from this efficient and effective leadership.
What are the steps to conduct a board meeting?
- Preparation: Identify and set the meeting's objective. Prepare a detailed agenda outlining the topics to be discussed and send it out to all board members in advance.
- Schedule: Select a date, time and venue (physical, virtual or hybrid) that is convenient for all board members. Ensure all necessary technology and materials are in place for the meeting.
- Call to order: Start the meeting with a welcome note and review of the agenda. Review minutes from the previous meeting and discuss any follow-up actions.
- Discussion: Follow the agenda closely, encouraging participation and facilitating discussion on each item. Ensure all members have the chance to voice their opinions and suggestions.
- Decision making: For major decisions, take a vote amongst members.. Document decisions accurately for future reference.
- Closing: Summarise key decisions and actions agreed upon. Decide the time and place for the next meeting.
- Follow-up: After the meeting, distribute minutes promptly, including action items and responsibilities. Monitor the progress of these tasks until completion.
How can the effectiveness of a board be measured?
Board effectiveness can be measured through:
|Self-assessment||This can include surveys or questionnaires that evaluate the board's performance in areas like strategy, oversight, governance, and stakeholder relations.|
|360-degree feedback||Involve colleagues, management and other stakeholders in providing feedback on the board’s performance.|
|Performance metrics||Use defined KPIs and metrics to measure board effectiveness, such as meeting attendance, policy adherence, financial management and strategic goal attainment.|
|External evaluation||An external consultant can provide an unbiased perspective on the board's performance and suggest improvements.|
How can a board handle conflict among members?
- Promote open communication: Encourage members to openly express their concerns and disagreements in a respectful manner.
- Conflict resolution policy: Implement a policy outlining the steps to handle conflict, including mediation or intervention when needed.
- Neutral facilitator: In cases of severe conflict, consider involving a neutral third-party facilitator to guide discussions.
- Focus on common goals: Remind board members of their shared mission and the organisation's best interest.
- Training: Provide training sessions on conflict resolution to equip board members with the necessary skills to handle disputes.
We hope these best practices for board management will help you create a board with a broad range of skills and experiences, who are engaged in the process and work well both as individuals and as a unit for decision-making within the organisation.
Utilising iBabs’ board portal helps to facilitate director collaboration between meetings and holds directors accountable by logging their actions, votes and other indicators. It allows you to track engagement by seeing who opens documents and streamlines the follow-up on action items with an in-built task management system. Request a demo of iBabs today to find out how it can help you make decisions more effectively.