Managing Boards for Peak Performance

This is the last in a series of five articles about Boards of Directors-  about building a board, identifying what a Board should doselecting  board members and how to spot and stop dysfunction.

A recent piece of research I read had an interesting recommendation- cut down on Board members.

The research suggested that, the number of directors has a strong correlation to company performance. The fewer the board members, the better off you are. “Small boards at major corporations foster deeper debates and more nimble decision-making,” writes the Journal’s Joann S. Lublin. For the study, GMI analyzed the shareholder returns of nearly 400 large companies in 10 different industries between 2011 and 2014.

WSJ Small boards

Though this particular study focused on large public companies, its advice–smaller is better– is relevant to any entrepreneur  or businessman who has a Board of Directors or is involved in Board management. I know of several entrepreneurs who keep adding people to their Board, celebrities, other CEOs to try to bolster the star power of their business. I have also been associated with large Boards- over ten members – and found anecdotal, that their criticism of large Boards is fair.

The lesson I hope to convey in this series is, building a board is not easy and requires sustained care and attention. You have to consider not only the outright quantity of directors, but their mix of talents–not to mention all of the outside relationships they potentially bring to the table.

Here’s a list of seven areas to consider in assembling and managing your board.

1. How many is too many?

How many members are on an effective board as opposed to an ineffective larger one? For the research I quoted, the smallest boards averaged 9.5 members; the largest averaged 14. What does it all mean? I’d recommend no more than 7-8 members on your Board of Directors. Netflix has seven directors and Apple have eight. I would think that their attributes of cohesion and swift decision-making to their relatively low head count.

2. How much similarity or difference?

Similarity isn’t always just guys, or just board members over 50 years old, consider avoiding too many Board members with skills in the same areas, or similar experiences, and outside relationships.Don’t fall into the trap of having all engineers or too many lawyers.

3. Looks versus Skills?

Quite a few companies try to recruit celebrity directors or ex-politicians or civil servants to boost their company profile.  The ideal board member should possess not only brand value- a name or reputation that by association enhances the brand of your company- but also askills.  The ability to provide wisdom and experience and the openness to share this to your businesses benefit. While that’s common sense, it’s a reminder not to sucked into celebrity endorsements if that’s all a Board member can offer.

4. How long is too long?

I have been part of the two day board meeting where there was a robust discussion over the minutes of the previous meeting followed by a list of the times the company seal was used, followed by a review of outstanding loans. There is an art in designing efficient, engaging meetings that are long enough to do the work effectively, but no longer. The Board should spend the majority of time actually discussing business challenges and working through and complex issues. To minimize meeting time, provide sufficient context for those issues before the meeting starts.

Directors should arrive briefed and ready to discuss the complex issues, so you don’t need to waste any meeting time providing long-winded backgrounds. Board meetings that serve as update meetings are simply a waste of valuable time… unless there is something critical to performance in the update. The Board isn’t a gathering of company managers- the Board has delegated that, and should overview performance, not review and second guess management decisions.

If there’s nothing but an update to provide- then postpone the meeting, or have it via teleconference, to avoid wasted time.

5. How much should they know about your top team?

You and your team know your board members well, you probably selected them and your team has observed their manager of work as they observe the Board meetings progress. But how well do your board members know you–or the rest of your top team? A recent study at Stanford University suggests that directors do not have an especially firm grasp on the strengths and weaknesses of the executive teams they’re supposed to be assisting.

The less a Board knows the less they can contribute to HR issues like succession, assessment, remuneration, skill and experience diversity within your team. In addition, the more your board knows about your top team’s strengths and weaknesses, the more your board can help the current leadership team develop–by providing mentor-ship and ongoing evaluation.

6. How much honesty in the discussions?

So, do you expose performance, warts and all, or do you try to spin things to give yourself time to rouse performance? Or do you pile on all the positives and leave the negative bits for last when you may run out of time?

The bottom line here is simple: Don’t waste precious meeting time thinking you need to impress the directors by leading with the positives. A good team of directors will see right through your plan. And they’ll think less of you for it. Have the honesty and integrity to empower your Directors with your innermost thoughts, rather than your polished presentation of those thoughts.

Only exception, if you are managing a Board where the shareholders are partners looking for ammunition to break up. This is a real challenge to negotiate and will be the subject of an upcoming post about dancing with fire.

7. How much communication between meetings?

Avoid just having  your communications with directors just around meetings, or providing the context for those meetings .

Call your directors any time you need to pick their brains or use their personal networks. Don’t limit your interactions with them to quarterly installments. Use the specific skills of each Board member to assist and mentor you, and provide an update at the next Board meeting. And don’t pick favourites, if you have a great Board you should be using the skills of all Board members- if you avoid some either you need to change your attitude, or you need to change that board member

 

In summary, my suggestion is simple and straightforward: Leverage your directors as a resource, not only in their quarterly incarnation as your board, but in their everyday lives as accomplished executives. remember they are on your side and your businesses side.