Company Directors Course – 5. Board effectiveness

CDC - board effectiveness

The final day of the company directors course focussed on board effectiveness –  what is it? how can it be managed? what’s best practice? what are some of the traps? The first half involved long time board recruiter Mike Horabin sharing his vast knowledge and decades of hard won experience. The second half involved us being put into a live case study, where we each in turn acted out as a presenter to the board, an observer of the board, and being a director on the board on a separate agenda item. It was the high point of the week, and a strong conclusion to the proceedings. 

There are so many takeaways from this course, so here are just a few more to add to those already posted about the board’s responsibilities and decision-making, duties and the law, risk and strategy and accounts, solvency and finances

  1. Boards are charged with coming to sound conclusions, concentrating on the proper items in front of them, with concise, well prepared information. They need a good mix of people and skills, have leadership from within (Chair) and provide leadership to the company. Overall, they are there to add value.
  2. Good boards provide calm decisions in times of crisis, are not rushed or panicked.
  3. They are a pool of wisdom, and are there to guide, mentor and assist management.
  4. Individual characteristics of good board members include: integrity and honesty, relevant experience, strategic thinking, good communication skills, wise and battle scarred, inclusive, good team player, adaptable, willing to change their views, courageous enough to ask difficult questions, are independent, decisive and have good instincts.
  5. High performance boards can have tough conversations but still reach decisions and be productive; they respect each other, trust and share in an open environment.
  6. The ‘magnificent 7‘ things a board needs to do are: lead with the right culture, develop the best strategy & pick the best CEO (then these others become easier ->), manage risk, monitor performance, ensure compliance & maintain good shareholder relations.
  7. The chair’s role is crucial – they are elected by the board, their relationship with CEO is pivotal, and they can only continue if they have the backing of the board.
  8. The Board should manage their own secession; most of the time they should try to get a new member on board before the other departs, and then have their position ratified at an AGM; they can come on as casual for a few months beforehand.
  9. Board committees must have clear terms of reference, time frame, its own Chair (good training ground for future chairs) and make recommendations to the main board.
  10. If you don’t agree with the way decisions are going in the main board meeting, by all means meet other board members, but make your points and do a paper to the next meeting if needs be. Talk to the chair; don’t thump tables, and if the decision goes against you, abide by it. Don’t form factions.
  11. Develop a “Matters reserve list” which shows which matters require sign off from Board, with the implication that all else can be handled by the CEO and management. Review this regularly.
  12. A board calendar should outline what needs to be dealt with throughout the year – monthly, quarterly, six-monthly and annually. Board meetings should last 2-3 hours, but can be half days, and in some indigenous organisations might last 2 days.
  13. Culture is crucial and central; it’s not fluffy, it’s hard nosed, but a good corporate culture can lead to so many good outcomes. “Culture is how people in the organisation behave when no one’s watching.”
  14. If Chairs disagree on the direction of the discussion, or how consensus is forming, ask a question. Monitor how bad news gets to the board – is it disguised? embellished? hidden? slow? Ultimately, boards need the bad news quickly.
  15. Papers to the boards are legal documents, as are your notes on them if they are kept and a legal case starts. After that you cannot destroy them, they are evidence. Minutes should be published within 48 hours of each meeting.
  16. Finally, take time to reflect as a board and as individuals, with each other – what can we do better? how did the meetings go? how good were the papers? were our decisions correct/best? have we added enough value? what can be improved?

Overall, the company directors course was a high value 5 days, and brought home the complexity and skill in group decision-making around the board table, how to search for answers, the importance of asking the right/tough questions. It’s made me reflect on how challenging it can be, but how vital it is to do well. It’s made me realise that this is something I want to do, in time, and something where I think I can contribute.

Over the next 3-5 years and beyond organisations are going to be challenged like never before with the rapid changes in technology, cyber security, digital disruption, the sharing economy, robotics, driverless cars, connected devices, the Internet of Things and much more besides. Who knows what jobs will exist for our children in 10 or 20 years time? Probably they have not even been thought of yet. Whole industries will disappear, and new ones will be created. Businesses that cannot stay relevant will fade away. Others will start up.

I would like to be the ‘digital guy’ who sits on various Boards, thinks strategically, and assists organisations make the transition from old way of doing things to the new. It’s exciting, and challenging, and something where I can probably add value. What can you add value on? Are boards something you might be interested in? If so, I highly recommend the AICD company directors course.

… and now I have to do my exams and pass this thing!

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