By Stuart R. Levine
What is an optimized board and are you serving on one? I have found that the key factors contributing to an optimized board are boards that have a strong culture, focus on ensuring company strategy and succession planning and have engaged directors who are prepared for all meetings. Unfortunately these four factors aren’t easily achieved and require strong leadership from the CEO and dedication from all the directors.
This month, Passageways featured Peter Gleason, President & CEO of the National Association of Corporate Directors (NACD) on their webinar Board Meeting Optimization: Driving Excellence. During this webinar, participants who are also directors, were asked interesting questions regarding how their board functions.
When participants were asked how they would describe their board’s culture, 54% said fairly collaborative, 6% said ineffective and 2% said toxic. That’s 62% of board members surveyed who did not believe that their boards were highly collaborative. According to Peter Gleason, a recognized expert on board leadership and board governance, “When you think about board culture, ensuring a highly collaborative environment requires a constant awareness of communication — asking what are the values expressed on the board and company and how is this being projected and tracked out to the marketplace.”
Senior leadership takes their signals from the board. The engagement of the board, including how seriously they are digesting materials, and how board members and senior leaders come together becomes part of the culture of the entire organization. Culture and tone starts at the top.
Boards can become very operational and tend to look backwards instead of focusing on strategy and the underlying assumptions of the strategic plan. It’s easy to fall into the trap of the dog and pony show, with powerpoints and presentations that lack executive summaries which can be digested quickly. When asked whether their board agendas properly address strategic priorities, 35% of participants in the Board Meeting Optimization webinar said yes, 50% said yes, but not often enough and surprisingly 14% said no. More than half of the 345 webinar registrants were not pleased with the amount of board agenda time allocated to strategic issues.
A big opportunity exists to increase the level of discussions and get ahead of strategic issues like cybersecurity, AI and geopolitics that will impact the strategies of your organization. Board member optimization includes drawing on board member experiences to identify flaws in the strategic assumptions, potential risks and where they can support the company. These deep dive issues are often discussed over dinner the night before the board meeting providing directors the change to engage and provide invaluable insights. This requires good facilitation. Some directors can take a lot of oxygen out of the room, and it may required someone meeting with that director privately to discuss tone and culture to ensure everyone has time for participation. We often call these people the kings and queens of chaos. There’s only so much oxygen in the room.
When asked the question, Are your directors adequately prepared for board meetings, only 22% said yes. About 40% said 75% of directors were prepared and 35% said half were prepared. 4% said that their directors were not prepared. These numbers certainly provide insights into room for director improvement and increased board optimization. It’s impossible to run a company and a strategic board if only 22% are fully prepared. Board meeting preparation should have a discipline around before, during and after. Board optimization best practices include a pre-call discipline where board members are plugged into the CEO in order to anticipate any questions that are on the minds of directors. Directors need to understand what’s on the CEO’s dashboard. Conducting executive sessions with adequate follow up to the CEO, ensures that there is continuity of conversations after the board meeting.
With the advent of board portals, the old adage of ensuring that board materials are no thicker than one inch deep no longer applies when all the information is online. It’s important not to drown directors in data, where additional information keeps being added into the portal. Summary sheets and executive summaries become critical to board optimization to ensure materials can be digested in a timely fashion and with the greatest amount of ease. Most directors who come prepared, will review the materials more than once, and have a conversation with their CEO beforehand to understand what they are trying to drive and what’s on their mind.
The lastest NACD 2016 report shows that director’s spend approximately 245 hours or 30 days per year on board activities . If a board member serves on four boards, do the math. If an activist knocks on your door, these numbers can double. For board members serving on newly formed companies, the time commitment is often greater, with less management bench strength available. It becomes important to think about the time commitment you have for the boards in which you serve. Managing and prioritizing multiple board issues can be challenging and it’s important once you make a commitment to be an effective board member, to understand how to manage the time required.
Board members need to be participating and invested in the success of the company. They are there for a purpose. It’s the dialogue they bring to the table that’s critical. Board seats are the most expensive real estate for your company. If you are not participating at the highest level, you are taking up the most expensive real estate. Engaging and participating at the highest levels will ensure that you are not an underperforming asset and are leaning in with currency. This will go a long way towards optimizing your board.