Preventing Potential Dysfunction in the Boardroom

corporate culture

There is no shortage of research on the impact that boards can have on the performance and profitability of the organizations they serve. In today’s business context, boards face higher expectations, increased scrutiny by the community, press, politicians, and the street, and significant increases in the velocity of demands of their attention. These realities create a need for boards to be as effective as possible in driving profitability for the firms they serve. Board inefficiencies and lack of effectiveness are simply not something that organizations can afford. Setting up boards for success starts during the recruitment process and some recent research sheds some light on how to make this process have greater positive impact.

Selecting the right people to serve on your board.

Unfortunately, the selection of board members can often fall back to the same old approaches- identifying “friends” who seem to have the right experience and expertise to support the organization based on where they are currently.

Recent research conducted by Solange Charas and discussed in a recent article in Harvard Business Review shows a link between the quality of board member interactions and the ability of their organizations to generate economic value.

She also found that board members who did not know each other prior to the board service were more likely to engage in productive cognitive conflict.

Some of Ms. Charas’ research findings also include the following:

  1. The “cultural intelligence” of individual directors, or their predisposition to working well in teams, is critical in generating high-quality team dynamics
  2. The quality of board-level team dynamics is highly correlated with firm profitability, and
  3. Boards that are able to function effectively as a team have an 800% greater impact on firm profitability than any one well-qualified board director – in other words, the whole is greater than the sum of its parts

These are some pretty compelling findings, in my opinion, and they call into question the norms of recruiting board members who are “friendlies” as opposed to making the effort to identify board recruits who may be outside of your normal spheres but who bring a certain personal, political, or optical dynamics that help the group collaborate and move work forward in a clear and expedited manner.

What do boards need to be most successful?

While not all boards are created equal, there are some fundamental elements that have been shown to increase the ability of boards to function most effectively.

  • Clearly articulated roles, responsibilities, and relationship to CEO
  • Consistent process to select the best person as chair and to set clear term limits
  • Process to manage internal board conflicts
  • Method to ensure board meetings are effective and productive
  • A director recruitment process that results in high quality and diverse directors
  • A method to assess the performance of the board and management teams
  • The right committees and the right board members serving on those committees
  • Plans to support the long-term success and sustainability of your organization
  • Clear articulation of how the board adds value to the organization

Some practical tips for your consideration.

Going a bit beyond the best practices already discussed, the following can be practically applied to begin shaping your board to pre-empt dysfunction and to achieve greater effectiveness over time.

  • Broaden the scope of your traditional role. Being ready, willing, and able to go beyond your fiduciary duties to engage more deeply on strategy, M&A, technology, and brand. Taking a more broad approach gives board members increased insight into their organizations and the opportunities and challenges that they current face.
  • Continue to develop as a board. You’ve obviously achieved a lot in your career to even be a board member but the rapid pace of business today requires us all to take a life-long learner perspective. Making the effort to expand your base knowledge and skills in areas that may stray from your core education and expertise can provide valuable global perspective that can serve board members well.
  • Set expectations about the true expectations of board members in terms of commitment to the organization. The role of board members has evolved over the years and directors are held to a higher standard in terms of both expectations and scrutiny. Being abundantly clear about the commitments you expect of your board members will help ensure that there are no surprises when a new director onboards.
  • Clarify roles and responsibilities both collectively and as individuals. Make the space during board meetings to understand and clarify how the group integrates and can be most effective. This requires some artful facilitation to come to agreement without coming off as patronizing but it can and should be done to drive continued alignment amongst your directors.
  • Appoint an ambitious board chair who can find the right mix of expertise and perspective. Appointing the most appropriate chair is critical to the overall effectiveness of your board. Additionally, someone who possesses the fundamental leadership abilities to drive positive, sustainable change should be considered. Identifying someone who is hungry to continuously improve and who is brave enough to go beyond their traditional comfort zones to bring in directors who may present different perspectives will challenge your board to perform at a higher level.
  • Remember that the success of your meetings starts well before the meeting. A productive board and effective chair organize matters before, during, and after the meeting to ensure that the limited time you together is as productive as possible.
  • Make the effort and take the time to cultivate and sustain trusting relationships. The most effective boards are able to find a balance between collaboration and productive conflict, an idea that is supported by Charas’ current research.
  • Be clear about the type and format of information the board expects from management. Again, clarifying what is expected from management will help take the guesswork out things and will help to ensure that the board’s time together is as productive as possible. “Feeding the bears” can be tough enough without needing to guess what they want to eat that day.
  • Keep detailed minutes. People can get caught up in the natural flow of conversations and can become susceptible to unintentionally skimming over key points. Sidebar conversations, ringing cell phones, and other distractors can present opportunities for board members to miss important information. Capturing the detail will help reduce the risk of people missing things.
  • Encourage director input on board processes. Meeting agenda, data requirements, etc. Like any group process, people typically want to feel like they have some control, or say, in what is happening around them. Making time to engage the directors in providing their input and perspectives on board process will help to ensure that things meet the needs of everyone involved.

Regardless of where your board is currently, there is always room to improve and the research is clear that highly functioning boards can have a significant positive impact on the performance of their organizations. Charas’ most recent research sheds some light on the importance of extending the search for potential board members well beyond the “circle of trusted friends” in order to help create an interpersonal dynamic amongst your board that balances collaboration with productive conflict. But, as we all know, board effectiveness goes far beyond the process of recruiting of new members. The question is, will you assemble a board by default or a board by design?

Note: Charas measured Board dynamics using 30-item Team Dynamic Inventory, a team-level assessment measures four key dimensions of team interaction. This tool was developed by Tony Lingham, associate professor at Case Western Reserve University’s Weatherhead School of Management.

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