James Langabeer Ph.D. is a decision scientist and the founder of Yellowstone Consulting, LLC , a strategy consulting firm.
All publicly owned companies and most nonprofits and small businesses have a board of directors . Even privately held firms often have a small group of advisors they trust to serve as fiduciaries. This group oversees the executive management of a company and plays a central role in oversight, audits and strategic decision making. Still, boards are a resource that’s often overlooked and under-utilized.
As a former chief executive officer myself, I know how easy it is to get the board mired in details like sales funnels and product pipelines. This leads to board members who either aren’t engaged or lack the information to actively contribute. Boards have a ton of potential to provide creative, strategic input, and if aligned properly, they can play a much more significant role.
The Importance Of Trust Between Executives And Their Board Of Directors
Truly effective boards are used as a strategic advantage. The key is knowing how to tap into the members’ expertise effectively.
The first step is establishing trust. A good board-CEO relationship is cultivated over time with continuous communication. Too often, CEOs and executive teams aren’t sure of what information—and how much of it—to share with their boards. Information is often guarded, or held closely, which limits the board’s effectiveness. I’ve seen many company leadership teams treat the board as more of a customer or investor than a true strategic partner.
To easily gauge whether your relationship with your board is effective, ask each member, “Do you feel you are contributing all of your talents in this role?” If not, step up and make some changes in your board’s overall roles. Use strategies like questionnaires or audits to determine how board members perceive their access to critical information and the level of trust with the team. If you decide to perform a full audit, consider hiring a third party, such as a strategy consultant, so the board feels comfortable providing direct, candid feedback. Then, use the results to guide changes in board governance and company management.
The Six C’s For Effective Boards
There are six dimensions that can help guide the board of directors’ performance. I refer to these as the “Six C’s.”
This is probably the most talked-about aspect of boards. Understanding the ideal structure of your boar d—such as its composition, rules and procedures—helps you figure out who would be a good fit for your board. Think through how diverse your board is from a skills, gender, racial and experience perspective. Consider the size as well. Smaller boards are often more engaged, while larger boards tend to be more diverse but less effective. If you anticipate having a large board, consider splitting it up into multiple committees.
Consider what you expect out of your board of directors. What charge, or mission, does it officially hold beyond the fiduciary basics and hiring and firing of the CEO? Establish a charge focused on strategic performance and direction, as well as control. While the board chair typically determines the agenda, their working relationship with the chief executive helps outline what the executive teams’ priorities are in terms of strategies, performance or direction.
What is the level of information symmetry between the executive team and the board? Is the board getting all the necessary strategic information to properly govern? Do members feel they could use more in any given area? Proactively providing directors with all the information needed in advance will help ensure better use of their time. Routinely ask the board if what they are given is trusted, valuable and sufficient.
Consistency of the information and governance process builds better results. Boards that meet routinely and are provided in advance with the right level of information are much more likely to help provide strategic input and value than those which lack consistency.
Boards should feel like they’re actively contributing and adding value. Most directors of company boards will be upfront if they want to contribute more, so work to help them become better engaged and forward-looking. Ensure that they have the freedom to bring a problem or opportunity they’ve noticed to the chair and executive team.
Boards hold the ultimate fiduciary responsibility because their power lies in the capacity to control key decisions around CEO hiring and firing, oversight of financials and other controls. Make sure your board has processes and infrastructure to properly control the business.
Cultivating a more engaged and effective board of directors is vital. By focusing on the 6 C’s, you and your board can positively influence your company’s future.