Time is right for building a better board
Your organization has been challenged in ways that would have been previously unimaginable. The economy has been reset; you now deal with a new reality. You know that you will need to govern, lead and manage your organization differently in the future. A review at the very top of your organization, at the board that provides governance, is in order. Let’s start the exploration with these questions:
- What is governance?
- What are the benefits of effective governance?
- Who should be involved in governance?
- How should your organization’s governance change in the future?
First, a definition. The word governance comes from Greek roots and means “to steer.” You steer the ship and important) things.” Let’s call this principle “The Three Rs: Right people, Right time, and Right things.”
If your organization is effectively governed, benefits will be realized in clarity of mission and vision. You can’t steer the ship if you don’t know where you are going. Effective governance will bring discipline and accountability to your organization. It will also enable your organization to flourish by maximizing profits, creating jobs, providing growth opportunities for your people, building better communities and stronger relationships with customers and suppliers.
Let’s take a look at the three Rs of effective governance:
Right people
A best practice for the family business is to have an active and engaged board of directors, with a healthy number of outsiders sitting on the board. These outsiders can serve in either a formal, voting capacity or an informal, advisory capacity. Either way, outsiders on your board can provide experience and expertise that your organization may be lacking.
You’ll want to avoid having your current circle of bankers, attorneys and accountants as board members. Instead, actively seek out and recruit entrepreneurial risk takers. These people can provide creative thinking and innovative decision making, as well as ask probing questions that spark healthy debate.
Another best practice is to use debate as a self-discovery process. Set time aside at each meeting for an open forum on a specific topic. Strong organizations seek diversity in their board members. If you want to make the best decisions and have the best strategy, you will want to ensure that all voices are heard. Diversity brings these different voices to the table.
Invest in these talented directors by paying them a market rate for their service and providing them with opportunities for continuing education. Keep in mind that these high-performing directors want to be held accountable, so many organizations establish some form of board evaluation.
This evaluation could be as simple as asking two questions at the end of each meeting: “What went well? What could be improved?” Other boards have a formal, written evaluation process for the board as a whole, while others take the evaluation process one step further by evaluating individual committees and board members.
Right time
If you’ve made it through the article to this point, you’re probably thinking, “Oh great! Just what we need more meetings!” If you are committed to effective governance and have recruited talented leaders to serve on the board, you’ll want to make the highest and best use of their time.
Before you hold another meeting in your organization, let me strongly suggest you read Patrick Lencioni’s business fable “Death by Meeting.” After you’ve read this fable, you’ll come to understand the context and purpose for different types of meetings. Some are tactical (held weekly), some are strategic (held monthly), and others involve high-level reviews (held quarterly). The context and purpose will dictate the frequency, agenda and length of your meetings. Lencioni’s book also stresses the need to create drama in meetings as a means to make them more engaging and less boring.
David Maister advises professional services firms and suggests that two questions be asked before any meeting is held: What do we want to change as a result of this meeting? How will we measure if we are successful? Although his advice is targeted at professional services firms, it applies to businesses of all kinds.
Having a disciplined approach to your meetings helps ensure that they are held at the right frequency and last for the right amount of time.
Right things
The National Association of Corporate Directors (NACD) has introduced the concept of NIFO. For board members it means: Noses In Fingers Out! It is easy for boards to fall into the trap of discussing administrative and managerial details. Instead, NACD recommends boards should have their noses in the business enough to identify opportunities and threats but leave their fingers out of the details.
Other recommendations from NACD include the following:
- Boards should provide vision from a high level, including developing and approving the strategic plan.
- Board members should monitor strategy, policy and business performance.
- The board is responsible for oversight of the company’s risk management process.
- Continuous evaluation of the topics debated at board meetings is important.
Most importantly, good boards serve as a sounding board and provide advice and counsel to the company’s leaders.
It’s not too late to make a resolution for 2011. Consider the opportunities and challenges that you as a business owner and your company will encounter. The competition isn’t going to get any easier. Why not differentiate your organization? Why not engage the hearts and minds of leaders from outside your organization? Why not radically change the way you govern? The results may surprise you.
