Sunday, February 20, 2011

Who’s Assessing the Board’s Performance?

It’s interesting that with the constant changes taking place in the global market place and organisations having to constantly evolve to stay ahead, that most corporate boards seem pretty static.

So who’s assessing Board performance and ensuring that they have the right mix and calibre of executive and non-executive directors to lead the organisation forward? As it is this group that define the future vision and direction of the organisation, through their strategic leadership.

Static boards that have been formed by a buddy-buddy network or through any other method are unlikely to be able to adapt quickly enough to changes in the market place. They are unlikely to have the right selection of non-executives to ensure the organisation optimises its future, which may lead to sub-optimal solutions that will mean a drop in performance and may lead to a fight for organisational survival. In these scenarios the blame is often placed firmly at the executive or management level, without sufficient investigation into the reasons for poor performance and the role and influence of the Board, including the non-executives, in the specific failings of the organisation.

Board’s that are simply there to ratify decisions are also going to be the downfall of their organisation, sooner or later, as organisations need both skilled and flexible board members, especially at the non-executive level, who can contribute to the organisations future through strategic insights and challenging the executive team.

Financial and business analysts are just as guilty as they often see Board changes as problems rather than solutions; often looking for something to report, before actually assessing the benefit of the proposed Board changes.

Creating a Board with the correct knowledge and skill set will have an impact on the organisations sustainable growth. There has been considerable research into the key knowledge areas that should be understood and practically applied by Board members, and these include; corporate strategy formulation; competition; global markets; leadership; strategy implementation; change management; group effectiveness; organisational design; corporate governance; investor and community relationships; functional knowledge and ethics.

The amount of time directors have to dedicate to their roles and accountabilities has also changed and it’s worth noting that many Corporate Boards have not transformed to the legislative, operational and leadership requirements of the 21st century, and are still caught in the ‘old ways’ of operating. Unfortunately there isn’t an option, Board structures need to change to ensure effective governance and compliance, as Board members are now under greater pressure to govern their organisations adequately. Board members are now being held responsible for financial performance, for monitoring compliance with legal requirements and with appropriate standards of conduct. This has had a major impact on the amount of time directors have had to devote to their role and their respective organisation – but like other jobs, if you can’t dedicate the time, you shouldn’t be in the position.

It’s one thing to identify leadership potential and to develop the strategic leadership team through training and development initiatives, but we need to go further and actually make sure that the Board has the best set of members at the executive and non-executive level to ensure the maximum input and representation in respect of corporate strategy and business enhancement. This will give the organisation a real competitive advantage and, in the not so distant future, will be one of the key factors in differentiating between those organisations leading the way and setting the examples for others to follow; and the rest.

So who is assessing that the current Board structure has the required skills for today’s complex competitive environment and who is prepared to reconfigure the Board to ensure the best structure for the future of the organisation? This is the key question facing organisations – and it will be strong, confident leaders who will make sure that they have a Board that represents the needs of the organisation; a Board that will challenge their ideas and thinking; and have the special talents and business networks for the good of the organisations future. In fact the true leaders of tomorrow will crave a Board that is diverse and challenging rather than one that is passive.

Finally, if organisational restructuring and change management are seen as accepted and basic business principles in today’s business world, then the Board should not be excluded from the same rigorous process.

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