Modern boards of directors need to constantly adapt to changing technology, changing times, and changing expectations for organisations. In order to make the best decisions possible, the most successful boards should be able to combine effective group dynamics with strategic vision.
To help your board succeed, we have compiled a list of five effective board management strategies.
Define roles, accountabilities, and responsibilities
Corporate charters and policies should outline duties, descriptions, and responsibilities of the key roles, including CEO, chairperson, board members, and executive officers. These charters or terms of reference, should also clearly define the accountability and responsibility of each position. Audit, risk, remuneration and certain other responsibilities should be overseen by committees, governed by a charter.
When trends—positive or negative—are identified, the CEO must be accessible and willing to address board questions. Equally, boards of directors need to entrust the CEO to handle day-to-day operations while keeping an eye on the organisation’s long-term business and strategic plan. Both good and bad news should flow equally between the board and management, facilitated by the CEO.
Members of the board should carefully evaluate the reports and perspectives of management and be open to engaging in discussion to enable management to utilise the experience and knowledge of a qualified, diverse board.
Engage an independent board member
There is a tendency to appoint business executives as members of the board of directors. While those executives can provide direct insight into a company’s processes, strengths, and weaknesses, the main role of the board is to be an impartial and objective body.
By including business executives, boards run the risk of introducing conflicts of interest and biases where the executives might have direct stakes in one kind of decision or another.
Put simply, the role of an executive as part of a management team is very different to the role of oversight played by a director.
The appointment of an independent non-executive director will help restore the balance. This person should neither be an investor nor a part of your team. Independent directors can offer some much-needed impartiality into an environment that can otherwise become insulated. Adding non-executive and independent board members typically comes at a cost, but the potential advantages significantly outweigh the expense.
Make risk management the board’s top priority
Board members should be open to accepting feedback from management teams about the level of risk the company can tolerate. Taking calculated risks and thinking strategically drives progress, with risk management being the business’ safety net. Both are necessary for a company to thrive, especially in the face of modern challenges.
Cybersecurity, executive and management ethics, cultural or societal opinions, and other potential threats can affect a business’ long-term future. To ensure risk is accounted for by the board it should be defined as a major component of organisational strategy. Board and management should work together to build an internal framework that highlights potential and existing risks.
Establish a diverse board of directors with a wide range of experiences and review performance
Boards should consist of members with diverse skill sets and backgrounds. Members of the board should hold each other accountable for discharging board duties and responsibilities and devote adequate time to thoughtfully address key issues and decisions.
The board should continually strive to develop its members’ knowledge in the area of corporate governance. They should collaborate with management, using their experience to expand perspectives and assess the decision-making process. Boards should also undertake regular performance evaluations as a part of assessing their performance on both individual and board levels.
Promote good ethics and integrity
The moral and ethical tone of an organisation is set at the top. Businesses should emphasise the value of ethics and integrity across all decision-making. Directors and officers should establish a culture of compliance with relevant laws and other regulatory obligations that sets the standard for everyone else, including employees and vendors.
Boards can encourage an environment of openness and inclusion by enacting policies for conflicts of interest, whistleblowing and codes of conduct. They should also establish protocols for overseeing and managing business ethics. Additionally, the board and its committees should also practice financial transparency and accountability.
Effective corporate management is essential to the long-term success of the organisation in an ever-increasing competitive business landscape. Performance is enhanced and competitive advantage gained by implementing processes, designed to promote open and honest dialogue with shareholders, employees, suppliers, and all other stakeholders.
To ensure good corporate governance and strategy setting, an annual board performance evaluation (Board Review) that asks the right questions identifies weaknesses and tracks progress over time is necessary. Agility – a cloud-based client portal – offers online tools that will help you streamline your board operations, distribution of board papers to directors and document storage, making your board management more effective than ever. To learn more about Agility’s functionality and how it can help you manage your board management process, contact Acclime today.