Is your board effective?

Is your board effective? Is it providing the leadership and direction that the business needs? Is it building the organisation’s capability for the future? Is it prepared to make the big strategic bets that organisations need to make to survive and thrive in today’s turbulent markets? Is it the best available team to lead your organisation into an uncertain future?

There are far more pressures within a top team than with any other in the organisation. The top team is made up of leaders from other teams and functions and those leaders bring with them ambitions and egos which are far greater than those further down the organisation. Some of the top team will be rivals for the top job or have been passed over for the top job in the past and so may not be too favourably disposed to each other or even have a shared commitment to each other’s success.

The top team is also grappling with big problems which don’t have an obvious solution. They are looking, or at least should be looking, several years ahead and yet they are measured in the main by the share price, dividend and the latest profit figures. Equating the effectiveness of the board with the current success of the business is like measuring a marathon runner by their speed over the first quarter of a mile.

There are all sorts of ways that a board can go wrong:

Too homogenous – too many people with the same views and the same experience and so no access to different viewpoints and too much consensus. I once heard of a board of a large insurance business who were all Scottish actuaries in their mid-fifties – consensus was easy to achieve but where was the contention between different ideas?

Too unwieldy – some boards invite so many people to act as nonexecutives that they have too big a group to effectively cohere as a team. In government, cabinets are usually large to incorporate different political groupings but the real decisions are made by a small group of senior ministers. Boards that include too many people for political purposes usually split into factions very quickly and the real work of the board gets done by the Chairman, CEO and Finance director without oversight from the other directors.

Too remote – boards that are too cosy amongst themselves often achieve this at the expense ofremoteness from the business they are running. Boards that are too inwardly focused usually lose touch with their major stakeholders or focus on one group of stakeholders at the expense of their others.

Too divided – diverse boards run the risk of spending too much time in personal contention. Conflict around ideas and strategies is good; conflict on power plays and personal ambition is extremely unhelpful and needs to be crushed quickly. One fault-line which is dangerous is the split between the Executive Directors, who run the business, and the Non-Executives who oversee the business. If these two groups form two different factions, then the business is doomed as investors sense the lack of confidence in the direction of the business and start to put their money elsewhere.

Too unfocused – boards need careful directing, they need to have some clear priorities where they are genuinely adding value to the business rather than interfering in an unhelpful way. They have to have their own performance measured and evaluated in the same way as other humble people further down the business.

A fully functioning board is a key factor in the growth of the organisation as a whole. Where the board is ineffective or dysfunctional, then the organisation is too. Being aware of the potential scenarios detailed above it is possible to begin to shape a board that can provide the leadership and direction that a business needs.