High-performing boards: who sits at the table?

An effective, balanced board with shared goals creates value in a company

Building diversity – including gender diversity – into the demographics of the board makes good business sense. Photograph: iStock

Building diversity – including gender diversity – into the demographics of the board makes good business sense. Photograph: iStock

 

Effective boards create value. This applies across sectors, for organisations large and small. As the top decision-making body, the board’s role is far-reaching and onerous, from setting the purpose and strategy of the company, to guiding culture, overseeing risk, monitoring performance and engaging with stakeholders. Ultimately, the board is accountable for the long-term sustainable success of the organisation.

The best chairpersons also have a degree of humility that is often undervalued

The board’s ability to deliver on this mandate is shaped by a number of factors, one of which is the composition of the board itself. High-performing boards are often relatively small, and every seat is filled carefully. A look around the table provides insights as to who makes the cut, and why.

A skilled chair

First, an adept chairperson is essential. Leading the board is a complex job, and the chairperson must guide its culture, composition, operation, evaluation and development. He or she also plays a key role in stakeholder engagement, and as an ambassador for the organisation. A good chairperson has excellent communication skills and high emotional intelligence, alongside proven business acumen and a deep well of relevant experience.

The best chairpersons also have a degree of humility that is often undervalued. Clear leadership is needed in the boardroom, but once the chairperson has declared a view, directors are reluctant to present opposing opinions. A skilled chairperson doesn’t dominate, but, like the conductor of an orchestra, guides proceedings to draw out individual expertise and deliver a strong combined performance.

An open CEO

Alongside the chairperson, a CEO who values the board is crucial. Many experienced directors suggest that, in practice, the CEO’s attitude to the board is the single biggest determinant of board effectiveness. A CEO who is open with information, and welcomes input and constructive challenge, sets the tone for his or her team to do the same. This supports productive working relationships, and allows the collective skills of the board to be fully leveraged.

Directors with clear roles

Also at the table are directors who have a clear understanding of their individual roles and the collective role of the board. While directors share the same legal responsibilities and fiduciary duties, their roles differ in practice, determined in part by whether they are executive or non-executive.

Executive directors, in their management capacity, run the business and answer to the board for organisational performance. As directors, they work with non-executive colleagues to fulfil the broader board role discussed above. Good executive directors are agile in balancing these demands, donning a “board hat” to act in the wider, long-term interests of the organisation.

Non-executive directors are part-time, charged with monitoring performance and providing constructive challenge. Successful non-executive directors do this in a supportive way, and also look to actively contribute value to the business.

Contributions differ, and board colleagues rely on specific directors for input in particular areas. Productive boards have a shared understanding of these different roles, formal and informal. Without this clarity, members might assume that someone else has “got this” when in fact they haven’t, and material issues can fall through the cracks.

Overall balance

An overarching feature of a good board is balance, on a number of fronts. First, directors must collectively have the knowledge, skills, and experience to deliver on the board mandate. With some common elements, overall requirements differ from board to board, driven by factors such as business size, life-cycle stage, sector, strategic objectives and operating environment. The best boards actively plan succession to ensure continued balance as the business and its environment evolve.

But knowledge and skills are insufficient without the character to actually deliver on the demands of the role. The boardroom is a nuanced environment, often tricky to navigate. Even experienced directors can find it difficult to speak out if the dynamic is not conducive. Integrity and courage are essential, alongside preparation, good judgment and independent thinking, and the emotional intelligence to work productively with others.

Second, a balance of perspectives is needed for good decision-making. Building diversity – including gender diversity – into the demographics of the board makes good business sense. Men and women approach decision-making differently, and a combination of views supports better long-term outcomes. Progressive boards embrace diversity, and employees, investors and other stakeholders increasingly demand it.

A skilled chairperson, an open CEO and directors who are clear about their roles, are all key

Also fundamental to balance is the distribution of power, driven largely by the relationship between the chairperson and CEO. While a close working relationship is needed, an imbalance in this dynamic can result in one or other dominating, with damaging results.

Appointing an independent chairperson, with no previous ties to the organisation, provides a helpful balancing of power in the boardroom. Equally, independent non-executive directors bring an objectivity that supports effective oversight and decision-making.

Overall . . .

Investing in a good board can create substantial value, and getting the right people around the table is an essential step that requires active succession planning. A skilled chairperson, an open CEO and directors who are clear about their roles, are all key. High-performing boards fill each seat carefully, ensuring a balance of power and perspectives on a board team that has the collective competence and personal characteristics to deliver on its mandate.

Dr Mary Halton is an adjunct lecturer with the Kemmy Business School, University of Limerick, and a board adviser with Align Consulting Ltd.

mhalton@alignconsulting.ie

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