An effective board is one that develops and promotes its collective vision of the company’s purpose, its culture, its values, and the behaviours it wishes to promote in conducting its business. It emphasises teamwork and, as such, an effective board will not always be a comfortable place. Events over the last decade have provided evidence that boards can fail. Failure has come in various disguises: failure to manage risks, to proactively contribute to firm strategy, to identify the ‘right’ team, and in some cases, to deal with integrity issues. It is also clear that better governance is needed at all levels. The latter calls for increasing board effectiveness through four pillars. These four pillars include people, information architecture, structures and processes and group dynamics.
1. People
By their very nature, boards are usually composed of high-quality individuals, who are outstanding in their respective fields, and yet, individuals could lack the necessary knowledge to perform their tasks as members of a specific board. To overcome this problem, effective boards should establish performance and knowledge standards for individual directors, educate their board members, and conduct evaluations along those standards. The quality of the board is enhanced by diversity in terms of industry and professional background, as well as the diversity of gender, age, ethnicity, personality, and opinion.
2. Information Architecture
Information is best when it is designed to inform the board of essential activities undertaken by the company and the issues facing it. When thinking of information design, boards typically think of information coming from management, but information architecture should also include external information. It should also include formal and informal information. Therefore, boards should set up communication strategies to effectively gain information from managers as well as the broader context, essentially taking advantage of both top-down and bottom up information flows.
3. Structures and processes
Well-managed board diversity of opinion, experience, age, ethnicity gender and personality, greatly impacts effectiveness. The independence of board members is also crucial, but so is their structured access to the right individuals. In addition, the effective function and the necessary number of board committees should be considered as is the size of the board. It is, in short, fundamental for the board to regularly benchmark its current composition and structures against the ideal situation and to act on any divergence.
In terms of processes, there are many processes beyond the straight running of the board. These processes include the evaluation strategy, risk, board education, CEO and key managers succession and regulatory processes. The board’s strategic involvement occurs along three dimensions: co-creation, supervision, and support, and good processes will enrich these three dimensions. A well-designed strategy process ultimately enables boards to efficiently assess the company’s strategic risks as well as its strategic opportunities. Another decisive process is that of board evaluation. A poor evaluation process contributes to governance failure; therefore, thriving boards engage in self-assessment or external assessment, in terms of their roles, dynamics, and their members’ performance.
4. Group dynamics
Dynamics are fundamentally linked to the culture of the board. In this aspect, it is necessary to consider board pathologies. Group-think tendencies, for example, hinder effectiveness as do disruptive or dominating members of the board. In some cases, dysfunctional dynamics are openly employed to set the board up for governance failure. Late distribution of information and not making relevant information available are intentional practices that hinder governance. This is often a symptom of a deeper issue e.g. lack of trust or role overlap.
Governance is enriched by the directors’ differences in opinions and constructive dissent: having a critical view of assumptions makes for an effective strategy and, despite the importance of these elements, some firms appoint directors who are close associates of the company founder or its CEO. The appointed individuals may be prominent in their respective industries but their practices within the board are circumscribed by their relationship with a dominant figure of the company, and, as such, the board is destined for ineffectiveness as it runs the risk of sharing common views and heuristics which could threaten true dynamics.
With these four pillars in mind, it is important to note the importance that psychometric assessments can play in creating an effective board. Assessments enable organisations to gain new perspectives on the functioning and the culture of the board in executing its duties. Each individual can be profiled and an understanding of how they contribute to the board as well as their individual strengths and areas of development can be identified, which can be an additional benefit when conducting a board review. Furthermore, assessments can assist with group dynamics and help the group create the culture wanted by the stakeholders and the organisation. This allows organisations to have a standardised process that assists with pillars one and four. Board effectiveness comes about by ensuring that the pillars discussed in this article are constantly sustained; that is to say, boards thrive by building their governance culture on these pillars. Boards cannot neglect the quality, focus, and dedication of their members which can be assisted by assessments. Information architecture needs to be carefully designed in order to optimise its value toward effectiveness. Similarly, the quality of board structures and processes is essential for its effectiveness. Successful boards continuously improve their work processes as they become more sophisticated than in the past. Finally, board dynamics based on a culture that promotes quality discussion greatly contributes to the strategic coherence of the firm and in doing so reflects the effectiveness of the board. Excellence in the aforementioned pillars as well as psychometric assessments makes for sustainable success in board practices.
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Myushka Naidu
In order to pursue and explore her passion for people and transforming organisations, Myushka obtained a Master of Commerce in Organisational Psychology from the University of Johannesburg and is registered with the Health Professions Council of South Africa. She has specialised in assessments and has experience in managing and consulting within various industries and sectors in the African region. Myushka is an accredited change practitioner utilising the PROSCI methodology and enjoys continuously learning new knowledge and skills to support individuals and organisations reach a synergetic state.
