A board will operate effectively when it:
- considers the right matters
- considers them clearly and thoroughly
- comes to clear conclusions and makes decisions
- ensures that it’s decisions are implemented properly
Some of the foundational tools available to boards to help achieve this include:
- annual schedule of meeting dates and times
- annual board objectives / mandate
- annual CEO objectives / mandate
- meeting minutes, including an action item register
- board papers that analyse and frame problems and opportunities, articulate distinct options and make clear recommendations
- constitution of the organisation
In addition, there are a range of other tools that can be progressively added over time to augment the board’s system of governance:
- board charter
- board protocol
- list of delegations
- list of matters reserved for the board
- Director position descriptions
- Director induction program
- board performance review process
For the moment, let’s focus on the challenge of developing a meaningful set of annual board objectives and understand why it is an essential tool for creating a high performing board.
On average, let’s assume that a board meets eleven times per year for a three-hour board meeting and once for a seven-hour board retreat.
Forty hours, or one week, is not a lot of time to achieve a great deal of things. As a result, boards delegate a range of things to management. However, each board also needs to delineate a set of things it will achieve, independent of management.
A board needs to simultaneously focus on both (1) controlling the organisation and (2) developing the organisation.
Different board members have different ideas about what is important. This leads to diverging personal agendas vs a single, common vision / picture / agreement about “the territory” that is shared by the directors as a singular board.
The result, most boards struggle to do justice to their first role of controlling the organisation and become a compliance focused board, largely ignoring strategy formulation and execution. They tend to collectively under-commit, attempting to restrict the time and energy they demand from each other in their role as directors, relative to their remuneration, if any.
Strategy is essentially about making choices – trade-offs about what to do and what not to do, as there will rarely be enough resources (time, money, energy, etc) relative to the ideas, options, opportunities and threats facing an enterprise.
Boards need to formulate, document and commit to delivering a set of board objectives each year. This recognises the constraints they face.
One way for a chairperson to help their board determine a set of board objectives for the year ahead is by asking the board a question:
“What do we as a board need to achieve over the coming year for us to feel pleased with our performance and progress as a board?”
Responses might include things like:
- Ensure the budget is prepared, approved and monitored
- Recruit two new directors
- Introduce a succession planning process
- Introduce an annual board performance review process
- Change auditors
- Update the constitution
- Introduce a board charter
- Replace the CEO
- Raise additional capital
- Acquire a business
The key here is that you need to identify the work that the board will be doing vs delegating to management. Each of the above represent projects.
The next step is to prepare a document that organises the proposed board objectives (a portfolio of projects) for further consideration by the board:
- Include a 2-4 line brief per board objective explaining the scope of what work will need to be completed, specific measurable results, estimated budget, etc.
- Include a proposed start and end dates or just an anticipated completion date for each board objective. This will allow you to sequence the list in chronological order.
- Include a suggested board member or leave a space for the inclusion of someone who will become the project manager / leader / sponsor responsible for ensuring each of the board objectives is achieved.
I’ve generally found that a board can handle 6-12 board objectives per annum. Feel free to start with a smaller number of board objectives in year 1 and work your way up to more over time, as your board gets more comfortable with the positive impact of governing based on a shared set of board objectives vs diverging interests that can waste the limited amount of time the board can spend together.
A second approach to arriving at a proposal of what the board objectives for the year ahead should be is for the chairperson, as the leader of the board, to synthesise his / her understanding of the current priorities for developing the board into the kind of document outlined above and then distribute that to the board as a board paper in advance of a board meeting for further discussion.
Yet another approach is to bring in an independent facilitator to chair the component of a board meeting / retreat dedicated to working on developing the annual board objectives. This allows the Chairperson to step back, reflect, think and contribute more at a peer level with his or her fellow directors, free from having to chair that component of the discussion.
The Role Of The Chairperson In The Boardroom
A chairperson will operate effectively when they ensure their board:
- considers the right matters (identifies and articulates board objectives)
- considers them clearly and thoroughly (documents board objectives)
- comes to clear conclusions and makes decisions (commits to board objectives)
- ensures that it’s decisions are implemented properly (achieves board objectives)
A well-articulated and documented set of annual board objectives becomes an invaluable communication tool for setting direction, aligning interests and improving boardroom culture.
Secondarily, annual board objectives help the CEO and his or her management team appreciate things that the board may require from them to assist in delivering those board objectives. The board’s objectives provide clarity and context for the management team on the board’s current focus.
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