/>iIn a business environment of increasing complexity and competition, good governance isn’t optional. Enter the board of directors.
An effective board of directors increases accountability and oversight, which in turn boosts a company’s stability and growth potential. Beyond their critical legal and fiduciary duties, a board of directors can and should also serve as a valuable sounding board and provide insight from an independent perspective by challenging assumptions and pushing back on insular thinking. Boards are especially useful in areas like succession planning, M&A and divestitures, long-range strategic planning, and new markets.
This article will review some general considerations to keep in mind when forming a board and managing a successful board meeting.
Board Formation
Getting the Right People in the Room
When building a board, one size definitely doesn’t fit all. Jonathan Friedland of Much Shelist observes that the ideal board size is commonly between 5 and 7. “Too few and you lack perspective; too many and you lose focus,” Friedland cautions. However, smaller companies may have fewer.
According to Allan Grafman of All Media Ventures there are three critical questions within the categories of criteria, skills, and fit you should keep in mind when considering a prospective board member:
- Criteria – Is this person an industry specialist or broad business leader?
- Skills – Do they bring hard knowledge or soft skills like empathy and listening?
- Fit – Will they gel with the existing team?
Forming Committees That Matter
A board cannot be effective if its work is limited to the formal, quarterly board meeting. That’s why forming committees that are engaged throughout the year is essential.
Alex Sharpe of Sharpe LLC breaks committees into three types:
- Standing Committees: These committees focus on projects that recur and can be anticipated.
- Ad-hoc Committees: These committees are formed to address special projects as the need arises.
- Advisory (non-voting) Committees: These committees are constituted to provide specialized insight to the larger board.
Of course, each business will need to tailor its committee list and type based on its size, industry, and overall strategy.
Encouraging Real Engagement
If a board is only as effective as its individual members, how can you ensure each member shows up both mentally and emotionally?
Sharpe suggests the key is to set clear expectations from the very start by
- Having written job descriptions for each director,
- Making participation part of the culture,
- Making space for tough conversations, and
- Conducting periodic reviews of both individual members and the collective performance of the board.
The Effective Board Meeting
Preparation for a board meeting should start well before the boardroom door closes. Sharpe emphasizes that written reports should be sent out at least 3 to 5 days before meetings to give directors time to digest the content and arrive ready to ask meaningful questions. Resolutions and action items should also be circulated in advance.
Grafman notes that a ‘war on the floor’ often happens when directors see critical items for the first time in a live meeting. Sometimes disagreement and tension cannot be avoided, even when information is shared well in advance. In these cases, the board chair should be prepared to moderate and manage the pace of the meeting accordingly.
The Important Role of the Board Chair
David Spitulnik of Spitulnik Advisors compares the board chair to a conductor. They set the tone, manage time, keep things moving, and use votes to build consensus and assign responsibility. Beyond having a deep understanding of the organization, its culture, and its bylaws, the chair should also have a ‘human touch’ and sense of empathy for every member.
Grafman offers three pieces of wisdom for board chairs:
- Don’t let perfect be the enemy of good.
- It’s okay to experiment and iterate.
- Tap into tribal knowledge when faced with a problem — someone’s probably solved this before.
Setting an Agenda
The best agendas follow an annual rhythm. This way, meetings stay focused and directors know what to expect throughout the year. For example, a board could structure its meetings based on the cycle of its strategy and response:
- Q1: Strategic plan review
- Q2: Market dynamics
- Q3: People and compensation
- Q4: The year ahead
When forming a meeting agenda, Friedland underscores the importance of distinguishing between operational updates and strategic issues. The board should be engaged at a high level and not dragged into the minutiae.
Handling Conflicts
Conflict is an unavoidable element of a board meeting. While conflict can be unpleasant at times, it can contribute constructively to the meeting if handled properly. In order to do so, however, boards must address conflict with ‘emotional intelligence’ by:
- Recognizing emotional triggers amongst its members,
- Using empathy to de-escalate tension, and
- Rebuilding trust when it’s broken.
After the Meeting
Following the meeting, action items should be documented, assigned, and then revisited at the next meeting. But documentation and follow-up aren’t just clerical tasks. Meeting minutes matter. As Friedland quips, “If it’s not in the minutes, it didn’t happen.” In this way, what may seem like a simple clerical oversight initially could have serious consequences down the road.
Communication between meetings is critical as well. This includes:
- Interim committee work
- Updates to shareholders (as appropriate)
- Transparent communication between the board and management within agreed-upon boundaries
To learn more about this topic view Board of Directors Boot Camp: The Effective Board. The quoted remarks referenced in this article were made either during this webinar or shortly thereafter during post-webinar interviews with the panelists. Readers may also be interested to read other articles about effective directors.
This article was originally published here.
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