Your board isn’t working as well as it should?

Common questions, issues & challenges:

  • What should I expect from my board?
  • Am I getting good value?
  • I’m just getting generic advice
  • The board is focused on the wrong things
  • Am I paying too much?
  • How do I measure board effectiveness?
  • How do I change board members?
  • I’m thinking of shutting down my board

There are a lot of ways a board can get it wrong and not every business needs a board. Additionally, all boards are not created equal, the same can be said of the businesses they serve. And the business’ and shareholders’ needs also change over time.

Sometimes the issue is the board’s membership, sometimes it’s you.  Often it’s a mismatch between what the business owner needs and how the board has been set up.  We’ll take a look at the common issues below and what you can do about it.

Question 1: Do you know what you want from a board?

For an advisory board to succeed (or be perceived as succeeding),they need to know what is expected. Do you know what you want from the board over the next 12 months and over the next 3 years?

In our experience we have found it surprising that the majority of boards do not have annual and mid-term board goals defined.  These are essentially the targets the owner and the chairman set together which define how and where the board will add value to the business and shareholder value for the owner.  They can and should consist of financial and non-financial goals.

This really is the starting point for diagnosing all board problems.  In the SME space, a board is typically most useful in one of 3 ways:

  • Access to expertise you don’t have in the business

  • Access to connections & external resources you can’t get on your own

  • Independent oversight of the business when there are multiple shareholders at the table.

An example of annual board goals might consist of the following:

  • Grow EBIT to $1.5m by the end of the financial year

  • Identify and engage with 1 acquisition target over the next 12 months

  • Improve sales team performance by $500k per sales person

  • Reduce staff turnover by 10% in key positions

  • Improve team culture and staff satisfaction by 10pts

  • Implement a quality and safety system within the next 12 months

An example of a mid-term goal (3-5 years) might consist of:

  • Prepare the business for sale, targeting a $10m valuation

  • Prepare the business for succession by 2026

  • Develop the business and leadership team to allow the owner to step out of operational responsibilities within 24 months

  • Grow annual dividends to $1m per annum

  • Expand the business from a national to an international firm within 3 years.

You’ll note from the above examples that these are specific and you can tie them directly or indirectly to shareholder value and the robustness of the business.  After all, in our opinion, this is what the game should be about:  growing profitable, reputable and sustainable businesses.

So, if you don’t have specific and accountable board goals, this is the first step in fixing your board problems.  These should be reviewed annually and written into your board charter so that everyone has the same instructions on what they should be focusing on.

Step 2
Do you have the right people for the job?

Having identified the job to be done, you then have to ask, do you have the right board to do it?  The first seat to examine is the Chair.  Are you the Chair or is someone else?  We recommend the business owner not be the chair of the board, but there are plenty of examples where they are and this can work too.

The chair takes on a special role within the board.  It is not only about managing the board meetings and the agenda, but it also involves managing board members and managing, coaching and being the confidant of the CEO.  If they are doing these things well, then you have a good chair – they just need the right running instructions from you.  If they are not, it might be time to appoint a new chair.

Step 3
Conduct an annual board review

An annual board assessment is an important process and provides a natural opportunity to review the performance of the chair, other board members and the board’s performance overall.

Board reviews can take a number of forms.  They can be regular,  internal reviews by the board, management and shareholders; or they can be more formal and conducted by an independent, external third party.  Whether you choose an internal or external review will depend on whether you feel you have a small problem or a major one.

We have often been called in to do an external review when the board is seen to be in dire straights.  The shareholders feel it has become dysfunctional but are not sure how to make drastic changes without upsetting the company overall and losing important institutional knowledge.

Board Associates has a number of resources which can help you to conduct reviews of any type.  Contact us for more information and access to these resources.

Step 4
Refresh your membership

Board members should be those people who add unique experience and expertise to the business, and do so in a way that lifts the performance of the board and the firm overall.

Common challenges with individual board members are:

  • Being too dominant or disruptive
  • Not being prepared or engaged in the board meeting
  • Not adding relevant contributions based on their specific expertise
  • Not having expertise aligned with the future needs of the business

Board membership is always in a state of misalignment to some degree. That’s because what is in “fit” today will inevitably be out of “fit” tomorrow. It is normal to refresh and evolve your board membership and this should be expected.

Step 5
Refresh your board processes and focus

Even with the right goals, the right leadership and the right membership, boards can still focus their time on the wrong things – or the wrong things as expected by the owner.

Large, publicly listed boards are required to provide what we call “Capital G” governance.  This includes oversight of risk, monitoring of policies as well as the setting and implementation of strategy.  The needs of smaller and privately owned businesses are similar but the emphasis is less on governance and more on growth. Things like risk, safety and policy are still important but the balance of time spent on these vs growth & strategy is different.  We call this “little G Governance”.

If you’re finding your board is spending all of its time on the governing of governance, and not enough time on strategy, innovation and performance, you should bring this the attention of the chair and / or raise this in the board review process. 

One of the things we find works well to protect against this is to tie the agenda to the annual board goals and to prioritise those agenda items first.

Another quick fix is to ensure all board meeting have a meeting evaluation at the end.  This is a useful checkpoint to allow people to call out whether the focus and time allocated during the meeting was on the right things.  The questions to ask are: did we spend the right amount of time, on the right things and did we do it in the right way?

Contact us today if you’re ready to start getting better results from your board.