When composing the proper Board structure to suit the objectives and direction of the organisation, there are many things to consider to ensure you are on the path to success. This article breaks down the main questions to ask your Board about its composition and renewal.
Is the structure of the Board appropriate to the circumstances?
When structuring the Board, members should align with the needs and values of the organisation. It is, therefore, necessary that the structure has the appropriate number of:
- Board members
- Independent directors
These are important for promoting good governance, diversity and value generation in an organisation; however, the Board’s structure will generally be determined by the size and scale of the organisation and its specific strategy and goals.
Does your Board have the appropriate diversity?
A diverse Board brings a myriad of healthy elements to the boardroom. These include:
- Life Experience
- Cultural Background
- Educational Background; and
A diverse board can optimise decisions around specific issues, as the members represent a broader cross-section of society. While diversity is proven to enhance performance, innovation and decision-making to a certain degree, if it is not fully embraced and properly embedded, it can create conflict – particularly around members who might not fit stereotypical roles. It can then shift time and effort away from value generation and redirect the focus on building trust and confidence rather than core tasks.
While diversity is designed to generate value in an organisation, it can sometimes be perceived as creating a culture of ‘tokenism’. Board members may be reluctant to embrace differences to achieve value and might see this as a box-ticking exercise. Conversely, minorities may feel they are simply there to make up the numbers and may feel their skills and expertise are undervalued and, therefore, their contribution.
We recommend that the challenges around diversity are fully embraced and diversity is properly embedded to ensure that the boards and organisation represent a broad cross-section of society and achieves the benefits accordingly.
Does the process for recruiting new Directors work well?
A well-structured recruitment process for board members will make it much easier to recruit great board members. It also builds on finding the right people with the right skills and diversity to fill the roles when the timing is right.
Typically, the board recruitment process should involve input and buy-in from all directors. If the Board is united around its requirements, the greater the potential to influence the skills, experiences and attributes of those appointed to the Board.
Do new directors receive a comprehensive induction?
A comprehensive induction process for directors is an important tool for boards as it gives context to inductees on the board meeting process, history, and culture of the organisation and sets the tone from the beginning around what to expect.
When inducting new directors, boards should consider the following:
- Discuss with your newly appointed directors how you might be able to tailor content to suit their needs
- Ensure the induction doesn’t just involve overwhelming the new director with stacks of information. Arrange for the inductee(s) to meet with the Chair, Committee Chairs, CEO and key executives. Site tours should be scheduled in the early stages of a new directors appointment – and they can be virtual if that helps
- Invitations to attend all Board Committee meetings should be made in the early stages to help speed up the familiarisation process
- Review the induction program at the mid-way point, and seek feedback to improve the induction process.
A staged induction is also an effective way to close the loop in the process. An initial induction can often be overwhelming due to the information being provided; therefore, it is recommended that at around the 6-9 month mark, a follow-up induction is included for board members to consolidate their initial months in the role and as an opportunity for feedback.
Do Directors have the abilities, expertise, and experience to match the current and future strategic needs of the organisation?
As a director, industry experience and personal and professional development can build the tools, you need to do the job right. However, for the board, it is about ensuring that it has the right mix of abilities and experience to match the organisation’s strategic needs.
Boards should develop a fit-for-purpose Skills Matrix that identifies all the industry and other skills that are needed for the board to succeed. If the Skills Matrix identifies skill gaps, new directors should be appointed accordingly.
Whilst the right mix of skills is critical; all directors should also possess the right attributes, which are likely to include:
- Moral courage
- Commercial acumen
The importance of these type of attributes are often underrated on a board, but it is these attributes that can make the difference between a board being high performing or dysfunctional. Good boards work hard to model and uphold the organisation’s values and set clear expectations as to the behaviours that are appropriate for directors. They also provide good feedback to directors to help them improve their performance and effectiveness.
Do the members of Board Committees have the abilities, expertise, and experience that match the requirements of the relevant committee?
Board committees are essential to good corporate governance and should have a clear scope and reporting procedures.
To achieve success, committees must avoid vague objectives and focus on clear goals. They also need the right mix of abilities, expertise and experience to ensure that each Committee’s role is delivered well on behalf of the board. The mix of skills and experiences needed for a Safety Committee will be quite different to those needed for an Investment Committee.
Many boards co-opt an external expert to join one or more of their committees to provide the extra expertise required. Examples of where this might occur are investment committees for superannuation funds and audit committees for not-for-profits and government entities.
Does the Board have appropriate ongoing renewal?
Boards should always focus on maximising value for the organisation and promoting good governance. A renewal process is the best way to facilitate this. It mitigates the risk of stagnation in decision-making and helps the organisation to strive towards its vision.
While an appropriate mix of skills, diversity and experience are necessary elements in a board, the renewal process creates an opportunity to assess what is working and what isn’t. Then existing members who continue to add value can be re-appointed to the Board, and new board members can be procured as required.
When Boards are regularly renewed, it makes way for innovation and value to be put at the centre of focus for the organisation. Every organisation is bespoke and comes with a unique set of circumstances; therefore, it’s essential to focus on its specific needs and goals to create the most value.
Let Board Surveys help ensure your organisation has the right board structure and composition. Speak to us to learn more.