Is your board of directors operating at its maximum effectiveness? Today’s boards make critical decisions that have profound organizational impacts, all while upholding their fiduciary duty of acting in the best interest of shareholders.
Besides, boards must perform under today’s strenuous economic conditions and nail-biting market competition. For boards to maximize their impact, make the greatest contributions, and perform to the best of their abilities, they must operate at their highest potential.
Greater board effectiveness can be achieved in several ways. A board might be able to conduct an internal assessment and find ways to improve, but this can prove challenging: boards might not always spot their own strengths and weaknesses.
One common way to achieve greater effectiveness is through an external board advisory partner. They can offer a wide range of solutions, including board assessment and conducting a board director search. With that, they’ll recruit new board members who fill skill gaps, bring much-needed diverse perspectives to the table, and help the board and the organization ultimately arrive at their desired future state.
Let’s dive into what you need to know.
What Is Board Effectiveness?
When we’re talking about maximizing board effectiveness, what exactly does that mean? Board effectiveness refers to how well a board can do its job and how well it’s able to function. Effective ones can make valuable and well-educated decisions, weigh in on critical issues, operate ethically, cultivate and execute long-term strategies, and encourage healthy board succession and turnover.
Board members can be effective on their own, and often, they are fine individually. But board effectiveness refers to the overall strength of the board as a unit. During a board of directors search, boards often look for ways to strengthen their effectiveness with the help of a highly skilled board advisory partner.
How Do You Measure Board Effectiveness?
How exactly can you measure board effectiveness? You need to look at the board’s accomplishments, goals, and skills as a whole and on an individual level and contrast them against one another for a 360 view of your board’s competencies and deficits.
Boards should be able to get through agenda items, communicate with senior management, set and accomplish broad goals, and know how to pull the right levers to be more impactful. They should also have diverse, representative directors who bring a valuable perspective.
Board effectiveness can be measured internally through a self-audit system, but this can be challenging without bias. Instead, they often turn to a board advisory partner to assess their current state and, if needed, to conduct a best-in-class board of directors search.
What Are the Characteristics of an Effective Board?
What are some of the hallmark characteristics of an effective board? Effective boards are, first and foremost, composed of technically proficient and highly skilled board directors with professional and educational credentials who are culturally additive to the board. These board members have in-depth sector knowledge, public policy knowledge, and other key competencies, such as complex financial literacy and compliance understanding.
Second, effective boards are also diverse. Having diverse perspectives should never be for the sake of checking that category off a list.
Instead, boards should have members who are diverse and representative because these members bring valuable insight and opinions to the table. Data shows that diverse executive teams are 25% more likely to have above-average profitability than their competitors.
Next, effective boards should have excellent leadership. The board chair should be able to guide the council to success and sets the tone for the board’s behavior. Lastly, they should have excellent practices and solid culture, contributing to sound decision-making and transparent conversations.
How Do You Build an Effective Board?
Building an effective board starts with the basics. Below are certain pillars to focus on.
Diversity
Boards need diversity, and many today lack it. By bringing on more diverse directors, boards gain different viewpoints, leading to better decision-making.
Digitally Savvy
Boards should not be using technology equivalent to the types found in 1999. If a board’s technological systems and protocols are outdated, it will hinder its effectiveness. Use advanced digital tools when needed, and bring board members up to speed with how to use them.
Future-Proof
How a board is performing today is not enough. Instead, boards must be future-proof or designed to achieve their goals, regardless of future conditions. They have to act with the future in mind.
Board Evaluation
In order to maximize board effectiveness, boards can seek out evaluations to gauge how they are performing and where they can improve. Board evaluations, often conducted by a board advisory partner, use outside expertise to diagnose the state of the current board, including the expertise, skills, and insights of current members. These evaluations can also lead to a board of directors search or board recruitment, which ultimately identifies new directors with diverse backgrounds.
Essential Board Governance Elements
Board evaluations involve digging deep into the state of the current board, including analyzing its current composition and structure. This sort of analysis looks at the skills, experiences, and perspectives each board director possesses and identifies where boards have strengths and where they might have weaknesses. Board evaluations also analyze operations (how the board functions), board dynamics (how the board communicates), and its decisions.
Questions for the Board to Consider
When boards are looking to conduct an evaluation to maximize board effectiveness, they can consider these questions:
- Are we equipped to self-audit and conduct a rigorous self-evaluation?
- Will we benefit more by partnering with an external board advisory partner?
- Do we need to work with a board search firm to identify excellent new board directors or a board chair?
- Are we prepared to address board composition issues, such as diversity, and make changes to maximize effectiveness?
- Are we prepared to address board governance issues that might come to light during a board evaluation, such as the need to identify new board directors?
How N2Growth Can Help
We know what it takes for boards to maximize their effectiveness because we have a proven track record of partnering with boards on their most complex and sensitive issues. We offer robust board advisory solutions, including board assessments and evaluation, director selection, succession and assimilation, and team and individual 1:1 coaching for CEOs and Boards.
As a Board Advisory Partner
As your board advisory partner, we can help you maximize your board’s impact, effectiveness, and efficiency. Our expert team of consultants has deep expertise in amplifying boards by helping them identify their needs, align their resources, lead in the present, govern, and plan for the future.
Partner With Us Today
Boards cannot perform at anything less than their peak effectiveness. If you’re ready to find out why N2Growth is one of the top executive search firms for boards and how we can provide robust and highly-specialized advisory services (including board-level search), let’s talk. See how partnering with a third-party such as N2Growth can help you achieve board effectiveness.
