Ive sat on Boards of Directors (BOD) for the last couple of decades and all to often I’ve seen battles between board members who really would prefer to run the company.
Running the company is the role for Operational Executive staff, not for the Board. So if running the company isn’t was a BOD should do, what is?
Whether you’re a BOD member of a new start up, or a SME, of a multinational, knowing exactly what you are really responsible for is critical to ensuring a successful business. Even for existing Boards its useful for them to be clear exactly what they believe they should be doing.
Here’s what I believe BODs are responsible for:
1. Generate alignment around a challenging strategic plan. Keeping up-to-date with the business environment, and ensuring the company response to it will generate a positive outcome (sales, profit, market share, positive customer experiences etc) is the foundation of the BODs oversight. Being conversant with the strategy, overseeing the process and timing to agree on a strategy, and when necessary to seek change, is a critical custodial responsibilities of the Board. Along with
2. Provide (great) sustainable strategic advice, without meddling. This is not easy… most people got onto BODs because they were good at doing things, but once you are on a BOD your role is to let other people do things, the transition sometimes is not too easy. Don’t provide too much advice, again your role is to assess performance, you can’t become too involved in the process as you threaten your independence in assessing performance, Neither can you second guess outcomes. Finally, don’t worry if your advice isn’t taken, you get to assess the outcomes later when you…
3. Select the new CEO of the company, and then assess their performance. This means the board must be willing to fire the CEO if the business isn’t go badly, and the plan is the appropriate response to the environment, customers and competitors. Ensure the hire is the right fit for the company that will best succeed in the future environment. The most critical part of BODs role having selected the best person to run the company, is to hold the CEO accountable for deadlines, plans, and delivering on strategy in a timely way.
4. Be creatively dissatisfied with your own and the operational teams performance. Board meetings aren’t meant to be love-fests, neither are they supposed to be hyper-critical second guessing of managements performance. The BOD is there to get the best out of everyone in working for the company and that often comes from being creatively and encouragingly dissatisfied with what’s happening. The positive and creative tone in encouraging the operational team to work faster, or harder towards the strategic plan is what should spur the executive team to better performance. This means also having time as a board without the executive operational team to assess the BODs performance, and from their seek ways to improve.
5. Block or push for major events in the company’s life; change of strategy- pivoting, fund raising, acquisitions, maybe even sale of the company to another company. This is part of the strategic management of the business for which the Board, with the CEO, is also responsible.
6. Help with recruiting senior executives or key hires. Independent non-executive board members should know enough about the company to make informed decisions, without being too tied up in the internal mix to become too personal about decisions. Be a great sounding board to help the CEO make good hiring decisions.
7. Assist the CEO lead a growing business, as it increases in scale. Depending on the life cycle stage of the company and the sophistication of the operational team, board members may help the CEO and operational executives understand the process of a company growing. For example a start-ups first real financial or strategic plan (especially if you are pitching to financial institutions), coach operational staff on how to manage larger and larger multi-functional teams, or other nuts and bolts of building businesses from a small start-up to a great business. Conversely in hard times managing the difficult process of down sizing can be greatly assisted by BODs who have been there done that.
8. Reviewing performance. Not just operational performance, but also the company’s performance in terms of governance (how the business is run), risk (what could cause the company to fail) and compliance (with the external rules that are imposed upon an organisation) often overseen by way of internal or external audit. Without this becoming either a “cover you ass” or Witch-hunt exercise.
For more established companies, BODs could become involved with business risk and governance in separate more in-depth meetings. There may also be work in more specialized subcommittees such as being part of compensation committees, strategy reviews, financial and audit committees. So the board of a company may evolve quite a bit from an early stage company to a public one.
So, in a quick way this is what Boards of Directors should do. Anything i have missed out?