For organisations that play home to a Board of Directors, you will know that your board’s purpose is to jointly oversee the activities of your organisation. That means that while they are focussed on keeping things under prudent control, it is also their remit to, collectively, drive the business forward, with a strong focus on your organisation’s commercial needs, an understanding of market fluctuations and establishing a vision and mission for your long-term strategy. But they’re also your principle agent of risk taking.
Suffice to say, they do (and should) play a critical part in the overall success (or failure) of your business.
“Boards of directors have always, in all cultures, represented the shareholders in publicly traded companies—validating financial results, protecting their assets, and counselling the CEO on strategy and on finding, then nurturing, the next generation of leaders. It’s a tough and demanding responsibility, requiring individual directors to learn as much as they can about a company and its operations so that their insights and advice can stand up alongside those of executives. That, at least, is the ideal.” – McKinsey 2014
We look at 3 core things that you should expect from your Board of Directors
Your board should be: Offering Genuine Strategic Advice
Great directors bring a broad spectrum of expertise and knowledge that can be very helpful to the CEO and the rest of the leadership team. Where CEOs often stand at risk of getting too involved in the day-to-day running of the business, the role of a good Board is to support the CEO to keep their vision fixed on the overall strategy of the business; especially when it comes to growth, managing market fluctuations, keeping agile to changing customer buying behaviours and recognising (and planning for) potential risk areas.
But it’s so much more than that. The path of a CEO is, quite-often, a lonely one. A good Board takes just a little bit of that loneliness away through providing the right support and counsel, especially when difficult decisions have to be made.
A good Board is a blend of entrepreneurship and executives whose expertise fills a gap within the existing management team. As a unit, they are strong, and, although they may not always agree, they are (or, at least, should be) united in the vision for the business in the long run. Diversity within your Board means that you are set up to be able to view any challenge or opportunity from almost any angle and sets you, and your business, up for a solid market position. As the organisation grows, both you and your leadership team, as well as your Board, will start to identify key strengths and weaknesses and market dynamics within the leadership structure. What makes a great Board is the collective wisdom they have built up through their own experience and insight, and now funnel it back into the leadership team, and the rest of the organisation.
If you’re not getting this from your Board, then change needs to happen. And fast.
Your board should be: Bringing Customers, and influencers, to you
This is where we challenge the role of the Board. In this blog, we challenged the role of your Board, and leadership team, head on. Are they just there to sit pretty, or do they actually perform a function? Think about this for a second. I have 2 questions for you. They look identical. But they’re not.
Does your Leadership team work?
Does your Leadership team work?
In the first question, we’re challenging the notion of emotional symbiosis – a collective value brought to your organisation through your Leadership team. In the second, we’re challenging the notion of Action and whether they are actively contributing to your bigger picture. Spot the difference?
A good Board is not there to merely pitch up at Board meetings, provide commentary on few topics, have a cup of tea, and then leave. They are there for much more than that. And, surprisingly still, they’re there to work.
Just through their own personal career experience, your Board provides a rich network of connections that should be useful in connecting to potential customers, partners, analysts, journalists, service providers, and more. And they should be offering that to you directly. Apart from growing your customer network, if it’s funding you’re after, that’s where Directors should be able to step in too, with a black book of contacts that can not only link you directly to investors, but provide extremely valuable guidance on all aspects around raising additional rounds of capital.
Your board should be: Managing Your Business Risk
Although this is the part that many CEOs tend to dislike, good Boards will understand, and insist on, the importance of stage-appropriate financial controls and that regular, accurate communication between the board and the financial team (and suppliers, if working with 3rd parties) does not fall by the wayside. This means that you will be expected to regularly circulate the right financial information to directors and investors and remained disciplined at keeping them up to speed. “Risk oversight should not be viewed as a process unto itself.
Rather, it’s the foundation for everything the board and management do to properly govern the organisation and make sound decisions. Many boards frame their activities for the oversight of risk into two areas: oversight of enterprise risk programs (risk management) and oversight of critical risks and risk decisions (risk governance). The latter includes setting risk appetite and risk tolerances, as well as monitoring strategic risks and related trends.” – Nicole Sandford, partner, Deloitte & Touche LLP
“Think of a long list of disgraceful performances at the beginning of this century—from Enron to WorldCom to HealthSouth to Adelphia Communications—and the recent collapse of the financial sector, which destroyed an aggregate of $1.2 trillion in shareholder value across the entire Organisation for Economic Co-operation and Development, and even of the more recent collapse of the mining sector, which has obliterated over $600 billion in shareholder value. You have to ask, “Where were the directors?”” – David Beatty
If you’re not getting what you expect, then it’s certainly time to have a few honest conversations. Seeing the relationship you have with your board as a partnership, as opposed to direct governance only, sets you up for a mutually-beneficial strategy that builds growth, strengthens prospect and empowers your organisation to face market challenges.
If you need help to get your organisation re:focussed, get in touch with us today.