Some boards look good on paper, but if they’re not run properly, if they don’t behave as a team, and if they don’t have proper oversight over the CEO, they won’t be as effective as they could be.
It’s hard to judge from the outside. Indeed, one reason researchers can’t find a clear causal relationship between boards and performance—even though directors tell me emphatically that boards do matter—is because what happens inside closed doors is largely invisible to outsiders. But board dynamics matter greatly.
I’m interviewing several leading directors and chairs on them, while also observing boards in action, and the data is fascinating. Here are 10 statements I’ve been asking board members to weigh in on, and explanations as to why I picked them. (There are a lot more, but these tend to be favourites.)
1. Our board chair conducts an effective decision-making process (i.e., ensures that, for crucial decisions, alternatives are generated, a thorough discussion and analysis ensues, relevant perspectives are brought to bear, the best decision is made, and the decision is supported).
I’m trying to understand how effective the chair is, particularly in chairing meetings and shaping key decisions. This is a key weakness of ineffective chairs.
2. Our CEO welcomes the board’s constructive input into our organization’s strategy (i.e., by being sufficiently candid, open and responsive; and encourages the same from direct reports).
I look at the behaviour of the CEO. CEOs can easily hold back, block or try to manage a board.
3. Our non-executive chair (or a leading or senior independent director) has a constructive working relationship with the CEO (i.e., mentoring, supportive and collaborative, open yet independent, candid and professional).
I’m examining the nature of the relationship between the chair and CEO. I interview both, as well as other directors, trying to get a sense of whether the chair provides a strong counterpoint or is managed by the CEO.
4. Boardroom discussions are constructive (i.e., directors disagree without being disagreeable, assumptions are constructively challenged, views are skillfully explored, differences of opinion are appropriately acknowledged and resolved, and consent is forged).
I look at how debate and decisions get made within the boardroom, in real time.
5. Our Management (including the CEO) does not inappropriately influence meetings (e.g., by filtering or managing the flow of information to predetermine an outcome, not providing independent data, not facilitating access to independent advisors, etc).
I’m trying to spot undue influence or the attempt to shape or funnel information, agendas or outcomes. If this happens, the board will miss something.
6. Our board displays at all times a culture of diversity of views and open dissent (i.e., members sufficiently challenge one another, differences of opinion are fully aired and accepted gracefully, no topics are “off-limits” for discussion, and members feel free to speak out openly and honestly without fear of criticism, even when voicing a minority position or asking a probing question).
I look at constructive dissent and how, or whether, it happens in the boardroom. I also keep an eye out for groupthink.
7. Each regular reporting member of management has a constructive relationship (i.e., characterized by respect, responsiveness, openness, transparency, candour, professionalism and accountability) with the board and each committee of which I am a member.
Here, I look at the interface between committees and reporting management and whether there is blockage or dysfunction. Committees are where the work gets done. If something gets missed, this is often where it happens.
8. The board reacts in an appropriate fashion toward reporting management (i.e., predictably, constructively, confidentially and deliberatively) in order to build trust on management’s part to come forward with their real concerns in a candid manner.
This one is about the board’s behaviour in shaping trust and candor with management. Trust is a two-way street, and how the board behaves also matters. If the board dominates, leaks or is unpredictable, management simply closes up. Then, something can get missed or the board does not add full strategic value as management is holding back.
9. Our discussions (boardroom and at each committee of which I am a member) significantly improve the quality of Management decisions (e.g., by engaging of management in thorough and constructive sessions that stimulate, guide and enhance management’s thinking and performance, impact outcomes and add value).
I look at whether the board adds strategic value. A 360-degree assessment that incorporates management’s views can bring a reality check to a board that thinks they add value when they may not.
10. We (board and committees) are not overly reliant on (or influenced by) a particular individual (e.g., with the most relevant skills and experience or tenure, or in a particular role or reporting relationship) given the work that we undertake.
This one examines pockets of undue influence. It could be a shareholder, a director or a manager that can influence debates and outcomes, acting out of self interest.
Most boards can’t answer “yes” to all of the above. Can yours?
Whether a board is effective or not, for the most part, comes down to factors inside the boardroom. The above are uncomfortable to ask, and data is limited, but the answers to them matter. Board dynamics are known best by directors themselves. The regulations and guidelines focusing on having a majority of independent directors, a certain size, a separate chair, etc.—they’re important, but ultimately inadequate to ensure effectiveness and performance of the company. For boards to succeed, and for shareholders and other stakeholders to receive returns, more of the above should be focused on.