Does Your Board Know Its Role?

By Steven E. Sacks, CPA, CGMA, ABC

The purpose behind an organization creating a board is not to micromanage, design a company logo,  or address human resource issues. Neither is its role to sit around and smoke Cohiba Esplendido cigars and sip Louis XIII de Remy Martin Grande cognac. This glad-handing, back-slapping culture lead to the financial breakdowns in the early 2000s and probably still is happening at this writing.

Why do boards exist anyway? They are entrusted to build and preserve an organization’s prosperity and longevity. In theory, each board member should have a thorough handle on the industry in which the company operates and to use this background and experience to serve as a guiding hand to the organization’s management.

The board members should understand trends, the competitive challenges, and the effectiveness or lack thereof regarding the organization’s structure and operations.

A lot has been written about the responsibilities of boards, such as adherence to legal standards and ethical norms; protect assets and provide financial oversight; and articulate the organization’s mission and accomplishments.

But there much more to this dynamic. Like with any board-driven organization, an effective board needs all members to understand one another: personalities, thought processes and other aspects that play a role in how decisions are made, and the three-prong relationship between the board, organization staff/management and the shareholders/members. All this results in building…you guessed it:  culture.

I don’t mean that board members share camaraderie (at least giving the perception of such) or that they participate in meeting discussions. Understanding culture means sharing information, mediating or resolving disputes and evaluating the attitudes and inclinations in managing these issues. If there is dysfunction within a board, how useful can it be to carry out its various areas of responsibilities and provide guidance to management?

If a board is operating within a rapidly changing profession or industry, it needs to pivot quickly, reprioritize and encourage innovative thinking. A board may operate with only a couple of its members that usurp floor time, thus giving the impression of more influence and knowledge. In reality, however, this leads to staleness of thinking, narrow and self-serving goals and a disconnect between management, shareholders/members and the board.  As with professional service firms or customer-centric businesses, a board needs to regularly conduct a self-assessment to ascertain if it is being constrained by protocols and philosophies that are not in step with the needs of the business or organization.

It Does Not Need to be Complicated

An effective board led by the chair should leverage the collective expertise of its members—even if the fields or perspectives they represent are diverse—to help mold the vision and mission of the organization. [See my recent post about the mission statement.]  Before they even review the minutes of the prior meeting, board members should go around the table and discuss:

  1. What is our vision?
  2. What is our mission?
  3. What are we in business for and whom do we serve?
  4. What do we want to be in the future even if it is different than today?

This is really not a hard process, but some boards cannot even tell the difference between a vision and a mission. Do they review these two elements and how often? At every meeting? Once a year? When a large portion of the board changes composition? For a membership association or for a for-profit in any profession or industry, the board needs to determine whether the vision and mission reflect the goals of the organization and if the strategies and action plans are aligned. It’s just that pesky process of articulating a vision and mission that needs to be accomplished before anything can be implemented.

One of the impediments to boards attaining consensus of a vision and mission is that there are personal agendas. I’d like to think that some motives are purely altruistic, but acknowledge that some are to improve one’s own professional standing or financial position.

Overcoming the Hurdle

Let’s assume the board has agreed on a vision and mission, it should then turn its attention on core issues that are attainable in the next 12 to 24 months that are in alignment. During the course of this process, it should become apparent what goals should be set, articulated clearly and shared with everyone in the organization.

In establishing roles and responsibilities, the board chair and vice chair, if there is one, should work in concert with management to identify the relevant goals; choose the appropriate endeavors and the individuals to implement them; and establish standards against which success is measured.

In order for the daily financial operational, administrative and management components to work effectively, trust must be established between the board and senior management.

Let’s admit it: many boards do not function in the most effective manner. A small cadre of members makes decisions for the whole board that will impact members or shareholders. So management plays the hand it is dealt and is resigned to trudging through practices and beliefs that are fossilized.

Some battles are worth fighting, some are not. It is knowing which is which that can build or impede success, and more important, knowing what side each player is on.

 

About Steve

Steven Sacks is the CEO of Solutions to Results, LLC, a consultancy that specializes in helping individuals, firms and organizations meet the challenges of communicating with clarity and purpose. Visit his website at www.solutions2results.com.