Question: The advent of the New Year make this a natural time for evaluating the board’s effectiveness and planning for the future. How do you see boards integrating this kind of reflection into their process? What are common initiatives and changes that you see boards considering for the future?
Answer: One of the responsibilities of the board is to ensure there is a credible plan in place to guide the future of the business. Reviewing the planning process and plan content while holding management accountable to set goals and timelines all fall within the purview of the board.
The benefits of the planning process – clear goals, defined accountabilities, alignment of resources, prioritization of efforts and ensuring focus on critical issues – apply to the board as well as management.
So, why not make 2016 the year the board practices what is preaches? High-functioning boards go through a planning process for themselves by identifying long-term issues, creating annual goals, assigning responsibilities, developing timelines and tracking progress. Typically this process follows the cadence of the fiscal year. Ideally the governance committee (or board chair is there is no governance or nominating committee) conducts an evaluation in the last quarter of the year, reports results at the year-end meeting and proposes goals for the coming year. Goals may be assigned to committees, the board as a whole or management, depending upon the nature of the goal. Goal owners should present their specific plans for achieving the objective at the next meeting of the board, ideally at the end of the 1st quarter.
Board evaluations drive the planning process because they are the mechanism for identifying opportunities for improvement. However, filling out the same paper evaluation each year can only get you so far. If you find your evaluation process is a bit stale, consider different approaches:
- Do a 360-degree evaluation of the board from senior management’s and owners’ perspectives. Find out where they could use more support from the board.
- Benchmark your board against high-functioning boards. (A good resource is the McKinsey Quarterly article: High-performing boards: What’s on their agenda?)
- Go back to the basics. Review the high-level functions of the board (succession planning, compensation and performance review, strategy oversight and risk management) and think about where you can improve the value you add.
- Conduct a visioning session to identify how your board will need to adapt 10 years from now based on how the ownership structure, business and industry strategy may change. Identify goals that will allow the board to transition to the board of the future.
Finally, consider improving the board process and composition as well as board meeting content. Examine specific areas where the board could be more effective in its processes such as meeting planning and execution, communication, decision making or conflict resolution. Succession planning is one of the most important of these processes. Envision how the board composition in combination with the business will evolve over the next few years and make sure you are taking steps to ensure you will have the board you need down the road.