Bshields are very complex structures and full of ambiguous force relationships. An appointment to an executive or governing board is often seen as the culmination of a distinguished executive career. Being effective in these challenging environments is a big challenge – whether you’re a chairman who leads a board of directors, a CEO who has to make sure numbers live up to expectations, or a board or NED member looking to shore up their positions. position in the business community.
Once the vision is defined, it is critical that all board members have the same understanding of that vision, speak with one voice, and agree on the goals and direction of the board.
Rising risks and scrutiny from investors and the media are putting boards under severe stress. They are faced with the task of constantly learning, developing and improving their effectiveness. Fully organized external and internal reviews form an integral part of the board’s annual calendars and help members gain insight into how they can become more effective. As the pressure on boards increases, so does the pressure on the practice of these reviews. In recent years, we have seen big shifts.
Questions arise: what ideas do chairmen, CEOs, and directors need to become more effective? How can you get these insights? What type of data is useful? In this article, we will share our research and experience with the boards of directors of leading industry organizations.
You can ask the board a lot of “interesting questions”. And this is exactly what seems to have happened and contributed to the resistance of boards of directors to participate in performance reviews. Instead of asking “interesting questions,” we focus on those variables where there is evidence that they are associated with effective advice. To do this, we studied Anglo-Saxon and German-language literature and conducted more than 100 interviews with chairmen, board members and partners of private equity firms.
The study identified seven hallmarks of effective boards that give us a solid foundation for the questions we ask in board performance reviews.
Board Strength
While fully cooperative external and internal board performance reviews are an integral part of the board’s annual calendar, they are not well liked. To be fair, most board members are afraid of reviews.
Conflicting questions from reviewers seeking to determine what is wrong with the board and where there are gaps force board members to respond politely without interfering with the process.
Recent research clearly shows that instead of trying to identify what doesn’t work, it’s much more effective to focus on identifying what works. This is exactly what we do in our reviews.
For an effective board, it is essential that members understand what their strengths are in the specific context of the board, and how members can make the best use of each other’s strengths.
The last years of the pandemic did not help. New members who joined the council might not be able to meet because personal time was not possible or limited. Currently, we see that board members are accustomed to the virtual world. Participating in board meetings via Zoom or Teams is beneficial and convenient. However, this comes at a cost. Council members know less about each other and do not understand how best to use each other’s strengths.
Composition of the Board
In recent years, talk of gender and women on the board has overshadowed discussion of board composition. The questions are more complex and require a deeper understanding to create truly effective boards.
It is necessary to look beyond “labels” and understand the presence and status of the development of areas of know-how and behavior of people in a group environment.
Recent research clearly shows that instead of trying to identify what doesn’t work, it’s much more effective to focus on identifying what works.
It is critical to understand how different areas of know-how, preferred roles in a group environment, and personality styles complement each other and fit the specific situation in the organization, i.e. the organization’s development cycle, strategy, and values. creation plan.
In our reviews, we see that currently the areas of know-how related to “newer” topics such as digital, cybersecurity, transformation, climate and ESG are not as well developed as their importance might suggest.
Clarifying Roles and Responsibilities
The transition from an executive career to a non-executive career is not easy, and it may take years for some to fully adjust to their role on the board of directors. We found that the greater the burden on an organization and operational efficiency, the more likely it is that the boundaries between executives and non-executives blur and conflicts arise. A clear division of roles and responsibilities is a vital hallmark of any effective board of directors.
Vision,Goals and Focus of the Board
The vision of an organization can be one of the hottest topics in any forum. Are all members aligned? Does everyone at the table have the same understanding of the vision? Does everyone understand words the same way?
Once the vision is defined, it is critical that all board members have the same understanding of that vision, speak with one voice, and agree on the goals and direction of the board.
Structure and Organization of the Board
The organization of the work of the board of directors depends to a large extent on the secretaries of the board and the interaction between the chairman and the general director. Effective councils understand how to organize and run their meetings.
Ability to Resolve Conflicts
Effective boards and their members understand how to resolve conflicts among themselves on the board and between the board and the next level of management. Moreover, effective councils understand who in the group is best suited to resolve conflicts and how to use those council members.
Regular Reviews and Reflections on the Work of the Board
Regular time-outs where board members can network, put day-to-day work behind them and reflect on how they work together is a hallmark where there is the most visibility. There is a strong and clear correlation between the time spent thinking about how the board works together and its effectiveness.
Since performance reviews are not liked, and the best data can only be obtained when all board members are involved in the process, questions should be asked in a neutral and non-confrontational manner.
The transition from an executive career to a non-executive career is not easy, and it may take years for some to fully adjust to their role on the board of directors. A clear division of roles and responsibilities is a vital hallmark of any effective board of directors.
The practice of conducting board performance reviews has evolved. As pressure increases on boards to learn, adapt, and become effective, so does the pressure to practice these reviews. The seven hallmarks of effective advice provide a solid foundation for analyzing effectiveness. The hallmarks are based on research and indicate areas where neutral and non-confrontational questions need to be asked to create more effective advice.