Sept. 16, 2021
By Amanda Harper
There is a question that is always on the lips of Chairs: Just how effective is our Board?
Against a backdrop of unprecedented change, many organisations find themselves on the back foot and vulnerable. The impact of a weak, ineffective Board can mean poor decisions, a lack of vision and challenge, and a diminishing business opportunity – all of which can be fatal in times of upheaval.
Recent years have shown that Boards can fail – fail to manage risks; fail to understand the future competitive landscape; fail to identify the right team; fail to drive strategy, instead getting ‘stuck’ in BAU ‘weeds’; fail to view the business through employees, customers and shareholders eyes’ and fail to take action. Often the question asked is whether the Board is forward-looking enough and whether there is sufficient challenge and ideas to be both forward thinking and innovative.
The easy part is that all Boards are made up of people. Having the right team is critical – although it is also a given that good process, governance, documentation and understanding are also vital to success.
However, let’s start with the people. The first assessment is as to whether the board has the right blend of skills and experience for the journey. When we work with an organisation to hire a NED or Chair, we first want to understand the makeup of the board – both right now, and what is required for the next 3-5 years. If the business has plans internationally, do they have experience on board of overseas development? If the aim is to morph into a digital business, is there sufficient expertise on the Board to advise, guide and challenge the journey? I am reminded of recent events, when an ethical bank -going through the process of acquiring another Bank – fielded a Board with both limited Banking experience, and almost no experience of acquisition, integration and a business of the size of the new (combined) entity. It was not a successful project. Whilst these are difficult questions for organisations to ask themselves, Norman Broadbent are increasingly replacing Chairs, NEDs for the simple reason that they do not have the skill/ experience to tackle the strategic direction of future business.
The second assessment is as to whether the Board has the ability to harness their collective expertise to become the forward-looking adviser and support for the CEO. Many boards fail because they lack the ability to challenge one another, and question decisions made. A board which is “too nice” is often indecisive, makes poor decisions and is not effective. A board which challenges its own assumptions, and which welcomes diverse perspectives is far more likely to drive success.
Which brings us on to the question of diversity. Many boards think this starts with an action – the simple act of instructing the search partner to hire a “diverse” candidate. This shows a lack of thought and preparation on behalf of the Board – and more often than not, our Board Practice has found that the boards in question are not really prepared for what this actually means. True diversity embraces the protected characteristics – race, gender, sexuality and religion. However the true goal for any board is to achieve diversity of thought. This may mean bringing in people from different backgrounds, or who have worked in different sectors. Those are the individuals who will be challenging the Board to question its assumptions, and push boundaries.
There are a number of questions that need to be asked around the Effectiveness of Boards, and they can be loosely grouped into four categories:
- Board Leadership and Purpose: Does the Board spends the right proportion of time on financial performance versus other matters of strategic performance and has an appropriate balance between the focus on immediate issues and long-term success?
- Board Governance and Performance: Is there a governance process which works well, and, in the absence of informal face-to-face conversations, do the board meetings continue to provide sufficient, rounded debate and understanding. Are Board papers (and supporting information) accurate, clear, comprehensive and of the right standard and, in relation to these, lead to good quality decisions with good discussions?
- Culture and People: Does the diversity of personal attributes and perspectives in the boardroom have a positive effect on the quality of decision-making by reducing the risk of groupthink?
- Defining the purpose of the Board: Is the Board forward-focused, reflecting the Purpose and Vision of the organisation? How is the Board prepared for change?
- Board Composition: Does the Board have the best mix of skills, experience, knowledge, and diversity, in the context of developing and delivering the strategy, the challenges and opportunities and the principal risks facing the organisation?
Board Effectiveness reviews can be unwieldy, over-focusing on the structures and governance, and ignoring the ‘human’ angle. Increasingly, Norman Broadbent’s Board Practice are being asked to look at this from a people perspective. We understand that an organisation’s objective for such an external Board Effectiveness Review is to go beyond compliance with regulation checks and to look at how the Board can strengthen the organisation through an aligned purpose and behavioural norms, leading governance practices and, above all, ensuring diverse and inclusive decision-making.
Our Leadership Consulting Practice in conjunction with our Board Practice can:
- Provide an independent view and progress check against purpose and strategic objectives.
- Provide a better understanding of best practice.
- Provide accountability to members and stakeholders.
- Highlight the Board’s achievements and alignment versus perceptions.
- Identify areas for improvement in the context of future Board requirements.
- Provide benchmarks for measuring Board performance.
- Enable member representation and more discursive meetings.
- Enable a better understanding between Members and Employees.
- Enable effective dynamics within the Boardroom.
- Build a consensus to move forward as defined.
- Support the Board to evolve and deliver on its purpose.
- Provide further insight and challenge on the Board’s dynamic and culture.
- Support diverse hiring and future NED planning.
For more information on this topic or to discuss the challenges of running a people-centric organisation, please contact Angela Hickmore (angela.hickmore@normanbroadbent.com)