The CEO of a small angel-funded company recently asked me, “What do great boards do?”. He frustrated and unsure of what to reasonably expect from his directors.
I dug deeper, only to find that his board meetings were more like cocktail parties. Cocktail parties that one reaches in a private jet.
It was clear that his board wasn’t doing a lot for him and the company’s investors. To pull him out of this negative frame, I reflected on the moments when I have seen a board shine.
In my experience, a board makes an impact through excellence in three broad activities:
1. What great boards do: Oversight
At a bare minimum, directors ensure that management is making sound decisions, stewarding the organization’s resources well, and not doing anything illegal. When directors get sued, it’s usually because they have failed here.
Most critically, good boards fulfill this role without treading into management’s turf. They do so by asking constructive questions and avoiding operational pecking. As a reminder of this balance, I know of a board that prints “Nose in; fingers out” on the top of every meeting agenda.
2. What great boards do: Insight
From a strong, diverse board, directors can ask questions that management hadn’t considered. Collaborative discussions can help synthesize a situation and sharpen communication of strategy. Directors who have “been there, done that” can reflect on their experiences in analogous situations.
I see this playing out strongly around decisions that affect large groups of employees or customers. When working intensely on a issue, executives can under-communicate with stakeholders. Often it’s the board that summons the empathy needed to avoid an emotional firestorm.
3. What great boards do: Foresight
A good director will offer oversight and insight. A truly exceptional director looks into the future and brings management along for the ride.
I love watching a colleague reframe an issue to test how a situation will evolve in 3 or 5 years. For publicly traded companies, this foresight can surface new, surprising questions long before the CEO faces a quarterly earnings call. If a CEO lacks a strategic thought partner within her management team, the board can fill this gap and add value in a way that only those with skin in the game can.
This foresight doesn’t happen on every agenda item. When it does happen, however, a CEO will never doubt her board’s value again.
In your experience, what do great boards do? How have you seen a board deliver on its full potential?
What conditions must be in place for directors to make their best contribution to an organization?
