Managing Your Board
By Norbert Schwarz
Many family businesses have accepted the idea that an active board of directors which includes highly qualified outsiders can play a key role in establishing the business’s advantage in the market place. But having a great board requires more than choosing some good outsiders. Good boards, like any valued resource, must be managed effectively to fulfill their potential.
Managing board meetings is a skill requiring planning and a unique form of leadership. The board leadership role normally rests with its Chairperson. Perhaps the most important qualification for this role is that the chosen individual be an effective facilitator. A good board facilitator will see that the agenda is adhered to, all participants have the opportunity to contribute to the discussion in a collegial environment, that proper board decorum is maintained, and decisions are made and clearly recorded. Above all, the Chair/facilitator will assure that meetings focus on strategic rather than operational matters.
Another very important role of the Chair will be to create the appropriate meeting agenda. Many effective boards will set an annual calendar focusing on certain topics each quarter. While meetings are not dedicated exclusively to these topics, they do set the tone for each meeting. For example, the fall meeting might focus on a review of the revised strategic plan. The winter session may focus on performance management and a review of compensation and incentive policies. In spring, the board may focus on product development and marketing, and in summer, the focus might be on risk management, leverage and resource allocation. While such planning can assure that the board covers all key elements of the business process, the agenda should also be flexible enough to include all other critical strategic issues affecting the business at the time.
Board meetings need to be planned well before the meeting date. In addition to the standard financial statements, directors should receive background information on strategic issues and questions to be raised at the next meeting. Questions meant to stimulate thinking on these subjects should be offered well in advance of the meeting to allow directors time for independent research and review of the subjects. Directors, owners and managers should be encouraged to submit such strategic questions and issues. The Chair, in collaboration with the CEO, should serve as the clearinghouse for such future agenda items.
Effective governance requires that the board review its own performance regularly seeking to achieve continuous improvement of the board process. At the end of each board meeting, the Chair should poll the participants to determine how the meeting could have been made more effective. Particular attention should be given to the conduct and content of the meeting. The Chair should pose specific questions to the board to stimulate the feedback. Was the board given sufficient notice of agenda items? Were appropriate materials made available to the board to prepare the board for the discussion of issues addressed at the meeting? Answers to such questions can be very helpful to the Chair in planning and conducting future meetings.
A more comprehensive review of board performance should be made annually. Feedback should be solicited from the directors, senior management and owners. Questions should once again focus on improving the future effectiveness of the governance process. How can the board improve the building of trust within the governance structure?
How can the board strengthen its role as a resource to senior management? To the ownership? What critical issues should the board address in the coming year? Such a review also offers an opportunity for the board to check in on the prevailing perceptions of each group toward the governance structure. The board might solicit each owner’s perception of the board’s effectiveness in meeting owner expectations for the business. Also, management might be asked how it believes the board could improve its role as a resource to senior management.
Some boards will also include a process to evaluate individual contributions of board members in the annual feedback process. For example,the Chair might review each member’s commitment to the board process in terms of attendance, preparation and participation in the prior year’s meetings. As a final element of the annual review process, future needs of the company, management and owners should be analyzed to determine what, if any, changes might be made in the composition of the board to best meet those needs.
To be successful, an outside board must be established for the right reasons, receive appropriate information, be managed effectively and be accountable for its continued improvement through an effective feedback process. Such a board can offer owners and executives fresh perspectives, challenging insights and significant advantages for future success in a challenging and ever changing business environment.
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