An interesting article this month in McKinsey Quarterly, “High-performing boards: What’s on their agenda?” The premise is that Directors report that they have a greater impact as they move beyond the basics. This rather goes without saying (no shit, Sherlock), but a bit of awareness and language around this can help everyone optimize their scarce time as board members.
In a 2013 survey of more than 770 directors from public and private companies across industries around the world and from non-profit organizations, more than one in four assessed their impact as moderate or lower, while others reported having a high impact across board functions.
What does this mean, and how might we apply it in small organizations?
They suggest that there’s a hierarchy of practices and variations in how much time is dedicated to them:
- Core governance and compliance
- Mergers and acquisitions
- Performance management
- Business risk management
- Organizational health and talent management
Directors who report having a low to moderate impact said that their boards undertake “the basics” of ensuring compliance, reviewing financial reports, and assessing portfolio diversification. More forward-looking boards, however, spend time on strategy, including practices such as:
- Reducing decision biases
- Evaluating resource allocation
- Assessing value drivers
- Debating strategic alternatives
- Assessing portfolio synergies
- Adjusting strategy, based on changing conditions
- Assessing whether strategy stays ahead of trends
- Engaging on innovation
- Assessing portfolio’s diversification
This doesn’t imply that boards are meddling in the CEO’s turf. Instead, they are building a better understanding of both their organization and the environment in which it’s operating. In fact, this allows the executive director to stress-test strategies and then feel better about the need to make decisions around the reallocation of resources.
More involved boards follow an agenda that looks something like:
- Basic review of financials
- Regular performance discussion with the CEO
- Analyzing leading indicators and non-financial metrics.
Having a recurring agenda structure that supports all of this – possibly by following the Balanced Scorecard methodology – makes it easy for everyone to cover off not just the basics but also to look forward and set the direction that’s necessary to avoid simply maintaining the status quo.
This all perhaps sounds highfalutin, but it’s not. Anyone and everyone has opinions about what’s working or not working today, and what at least one good idea is for making things better tomorrow.
Let the agenda be your friend and make sure everyone on the Board’s talking about what matters strategically. Plus, it’s more fun.