Every publicly-owned company, nonprofit, and small enterprise has a board of directors. Privately held companies often have a few advisers they trust to serve as fiduciaries. This group supervises the management of the executive of a firm and plays an integral function in audits, oversight, and strategic decision-making. Yet boards are a source of information that is often neglected and not utilized.
As an executive who was formerly chief executive officer, I know how it’s simple to lose the board in the details of sales and product sales pipelines. This can lead to board members not having the time or necessary information to contribute. Boards have plenty of potentials to offer innovative as well as strategic suggestions. When aligned correctly, they can be a significant function.
The importance of trust between Executives And Their Board of Directors
Effective boards can be used to gain strategic advantages. The trick is to know how to leverage the expertise of members effectively.
It starts by building trust. A strong relationship between CEOs and boards develops over time through constant communication. Often, executive and chief executives aren’t sure of the information they need to share and how much their companies’ boards are. The data is usually kept in a closed environment or tightly guarded, that limit the effectiveness of the board. I’ve seen many corporate leaders somewhat treat the board as an investor or customer instead of a strategic partner.
To determine if your relationships with your board are effective, ask every member, “Do you feel you are contributing all of your talents in this role?” If not, you need to step up and make some adjustments to the roles of your board. Utilize strategies such as audits or questionnaires to assess the board members’ perception of their access to crucial information and their trust in the group. If you conduct an entire audit, you should consider employing a third party like a strategy consultant to ensure that the board is at ease providing honest, direct feedback. Then, you can use the findings to help guide changes to the governance of the board and management of the company.
The Six C’s of Effective Boards
Six dimensions can guide the director’s performance. I refer to them as”the “Six C’s.”
It is the most talked about feature of boards. Knowing the best structure for your board — such as its structure, rules, and procedures – helps you determine who will best fit your board. Take a look at the diversity of your board in terms of skills, gender, or racial perspective, as well as from an experience and knowledge viewpoint. Think about the size too. Smaller boards tend to be more involved, while larger boards are more diverse but are not as efficient. If you’re planning to have large panels, you should consider splitting them into several committees.
Take note of what you would like to see from Your board. What responsibility or mission does it have beyond fiduciary duties and the hiring and dismissal of CEOs? Create a commitment focused on strategic performance, direction, and control. While the board chair usually decides on the plan of action, the connection with chief executives assists in determining what the executive teams will focus on in terms of performance, strategies, or direction.
What is the degree of information symmetry that exists between the management team as well as the board? Does the board have all the strategic information it needs to govern effectively? Do board members think they could benefit from more information in any specific area? Proactively providing directors with all the necessary information before the meeting will ensure more efficient utilization of their time. Always ask the board if the information they receive is reliable, valuable, and complete.
A consistent governance and information process leads to more effective outcomes. Boards that regularly meet and are supplied in advance with the correct amount of information are more likely to offer strategic direction and provide value over those that lack consistency.
Board members should feel active in contributing to the company and making a difference. Most directors on company boards are honest in their desire to make a difference, so you should work to help them become more involved in the future. Ensure they can communicate an issue or opportunity they’ve observed to the executive and chair team.
The board is the fiduciary with the most obligation due to their power to oversee crucial decisions regarding the CEO’s hiring and firing and oversight of financials and other control mechanisms. Ensure your board is equipped with the right processes and structures to effectively manage the business.
A more active and efficient board is crucial. By focusing on the six C’s on the board, you can influence the business’s future.