Friday, November 15, 2013

A High Performing Board

High Performing Boards Exemplify Leadership Effectiveness. 


Generally speaking, Boards have a couple of main functions such as strategy (input, review, etc), governance (monitoring, risk management), service (providing advice & support to execs), and resource provision (opening their networks etc.). A high performing board would be performing all those roles in a way appropriate to the best interests of the organization. More specifically, what are the key characteristics of high performing boards?


1. Strategic Focus 

 A Board should be managing for the long term. It's critical in finding time and a viable board process for discussing long-term strategy and profitably growing the company. So the Board must review strategy (including competitive analysis), resources (including succession), risks (mitigating actions) and governance to ensure the integrity of information and processes. In the real world, too many Boards get sucked into reviewing quarterly financials, and analyst opinions. Board effectiveness should be measured over the long term.

A very clear strategy must be in place and discussed and approved by all members of the board. But in some companies, a strategy exists only as a "dust collector" on some shelf. This strategy must be followed (with some flexibility of course) at every board session, to ensure that management follows and does not "forget" the strategy.

2. ‘Deep Common Sense’ 

Having "deep common sense" is very important for the high performance board. The more complicated the strategy, the worst the rates of return. Complexity does not mean better. Sometimes, simplicity is the best strategy. Lacking of "common sense." can complicate the matter, get trapped by the complexity and lose focus on critical issues.

The ‘Deep common sense” leads toward ”Effective Judgment", which has been defined as "Applies common sense, measured reasoning, knowledge, and experience to come to a conclusion.". Some call it "informed judgment," defining it to include providing wise counsel on the broad range of issues, being able to think strategically about complex issues.

3. Openness

Boards make communication with shareholders in a timely fashion. They encourage a climate of continuous learning and board meetings are not a comfortable place but continually challenging in order to step outside their comfort zone.

The high performing Board shows the ability and openness to "question itself and its decisions/ discussions". It’s not talking about "second guessing" but the ability to validate and double back on decisions past and present discussions. This is basically getting the "oversight" closer to the forefront (if not within) of every board process. Boards are flexible and adaptable on one side, and stick to core values, have the balance of conformance and performance right on the other side. 

4. Self-Evaluation 

High performing boards set goals for their own performance and regularly evaluate how they are performing as board: They frequently brainstorm issues such as: Board Composition, Structure, and Leadership - periodic risk assessment and well tuned succession plans. The assessment point includes:
-Whether they are led well, inside and outside meetings, by the chair
- Whether they spend the time, energy and effort to recruit the right directors;
- Whether they set the right culture tone, expectations with the management team, and with performance expectations of directors too;
- Whether they work as a team - no weak links or bottlenecks;
- Whether they fundamentally understand the business model, and think up and out strategically, as well as being compliance / oversight focused too;
- Whether they tend not to be homogenous but have a mix of backgrounds and perspectives; nothing is off limits and unsaid, but directors are very polished when they contribute - egos are left at the door; 
-whether the board being able to change/ be proactive as the business environment changes
- Whether they assess their own effectiveness;
- Whether they act early when it comes to performance concerns, rather than waiting
- Whether they are accountable, and meet with shareholders;

5. Effective Governance 

Board speaks with one voice - that is not to say that all members agree, but once a decision is made, it is made and publicly supported by all members of the Board. Such communication unification will enforce effective Board governance.

High-performing boards have put significant effort into governance & risk management. This includes addressing risks to reputation, and the need to be transparent and the ability to define risk appetite and risk culture for the business. 

Another important responsibility of a board is to consider crisis management. What will it do in a crisis, how will the board and management communicate with the various stakeholders and the media. Boards should not underestimate the value of role play in this area. No board will find this easy, but practice will ensure a more controlled outcome that protects reputation risk. 

Overall speaking, the high performing Boards bring  ‘deep common sense,’ balance, improved strategic thinking, focus on shareholder and stakeholder communications, and practice better governance, better oversight, better risk management with strong discipline and self-assessment.

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