Top Management Story

Writen by Jim Crocker

Q. What's the biggest complaint CEO's have about their Boards?
A. "The Board is a waste of time - it doesn't add any value."

Q. What's the biggest complaint Board members have about their Boards?
A. "This Board feels like a waste of time - it doesn't feel like we're adding any value."

Q. What's going on here?
A. Who said the role of the Board is to add value?

It's not - at least not in the context of masterminding the next I-Pod or the next strategy for outsourcing production to India. That's up to the management team.

The role of the Board is to govern - some Boards are even called Boards of 'Governors'. There are 5 key elements of governing effectively:

1. ensuring that the organization has the right CEO
2. ensuring that the organization has a strategic planning process
3. learning the business and the industry well enough to have a well-formed perspective on benefits and risk of the organization's strategic direction
4. monitoring to ensure that strategies are being executed as planned
5. monitoring to ensure that the Board is governing effectively

The Board role is a mix of three things:

• out-front leadership (CEO and planning process)
• knowledge and insight (business of the organization)
• monitoring and compliance (measurement and policies).

Managing this mix is the responsibility of the Board chair. There isn't a more important role in the organization. Staffing the Chair role requires careful planning and insight.

There are 6 key qualities of a good Board chair:

1. time to do the job - there are more time demands on the Chair than on anyone but the CEO
2. solid team builder - getting the Board on the same wavelength and creating a good working relationship with management
3. good delegator - there's a lot to do; the only way to get it all done is through other people
4. comfortable with process - the mechanics from running meetings to information disbursement are almost as important as what the Board talks about
5. strategic - able to lead and keep the Board focused on the high leverage issues, not minutiae
6. firm - knowing how to take and keep control when members, stakeholders disrupt effective workings of the Board

Overall responsibility for the Board falls to the Chair. However, strong committees are also vital to a Board's success. These committees enable the Board to stay focused and up to speed on issues like audit, compliance and human resources. A recent study shows that the average large corporate board in the US and Canada has between 4 and 5 committees.

So how should organizations deal with the quiet disconnect between management and the Board over the Board's role? Does it even matter?

I have a few thoughts.

First, if there is an underlying tension between the Board and management it is natural and healthy. While overall goals of the Board and management are aligned - success of the organization - at the end of the day management's role and the Board's role are different: management operates and the Board judges management's performance.

Second, Boards and Board Chairs need to be more explicit about their roles - with themselves and with management. By being more explicit - "our role is to govern and to assess management's performance" - Board's set expectations for their role that don't set directors or management up for disappointment.

Third - and Boards seem to be doing this - Board's need to get better at their governance roles. Governance in particular is not simple. While some issues are black and white, many require in-depth knowledge of law, business, policy, and decision making process. Only by stocking Boards with diverse, independent and experienced directors can consistent, timely and correct governance decisions be made.

Typically, larger business organizations are more advanced in performing their governance roles. Smaller organizations, and too many not-for-profit organizations appear to struggle with governance and seem destined to continue doing so.

Board composition is a key factor. Small company boards are frequently over-stocked with self-interested parties: investors, service providers, friends and family. Not-for-profits, even the ones that attract strong, experienced board members, frequently also attract, or are mandated to include, representatives from stakeholder groups who may have little or no Board experience.

In summary, I believe it DOES matter that Board's explicitly identify that their primary role is governance, and what that means. By explicitly defining their role, Board members and management teams get more satisfaction from their Board involvement. Everyone quickly comes to see that by providing strong governance, the Board IS making a significant contribution to the organization.

In 1983 Jim started his consulting career with CMA Consulting. However, what goes around comes around, and as a consultant, Jim has found himself leading several companies on a consulting basis. Currently that includes a small, fast growing software company that is harnessing the web to create a significant revolution in processing of P&C insurance claims.

Through Boardroom Metrics Jim offers CEO Coaching and Management Consulting to both public and private companies. He provides significant insight on management, governance and technology issues faced by executive management.