As CEO, there are things that only you can do. Board Collaboration and Effectiveness is one of them. Thirty percent (30%) of CEOs rate their Board’s overall performance as excellent or good. What exacerbates the problem is that 40% of executives say their Boards don’t understand the role of the Board versus the role of management. That’s shocking! Here are a few common scenarios that I see in the mid-market that may shed some light on why this is:
- No agreement for Board members that talks about their role, tenure, and goals for the position
- Lack of processes and procedures in place, such as member selection and evaluation
- Reporting Board vs. Strategic Board
Moreover, less than half (40%) see their Boards constructively challenging management. Moreover, only 34% think their Boards are asking tough questions. These stats from a recent PWC report are alarming.
The key is to define and document the roles and responsibilities of your Board members, along with the policies that govern their work. It’s crucial to identify key opinion leaders who can truly add value to your Board. Often, companies have Board members who are friends of the CEO or local smart individuals, but they may not understand the industry or be key opinion leaders. There’s an opportunity for CEOs to think bigger. Additionally, establishing tenure limits is vital. This builds the foundation to be able to have strategic direction discussions with your Board.
Why is this so important?
In the same PWC report, 92% of executives, including the CEO, say one or more Directors on the Board should be replaced. Many Boards are simply reporting Boards, reviewing only the financials and operations of a business. What a missed opportunity! Having a Board that the CEO and leadership team can involve in the company’s strategy is vital. Great CEOs want a Board to truly understand what the management team is doing and to be good judges of the results, making necessary changes to ultimately hold the CEO and management team accountable.
Understanding and enhancing Board performance is not just about fulfilling basic roles; it’s about leveraging the Board’s potential to drive the company’s strategy and growth. CEOs should focus on building a Board that can challenge management constructively, ask tough questions, and provide valuable insights. This approach ensures that the Board is not just a passive entity but an active partner in the company’s success.