An effective board of directors is a board that has diversity within its members and diversity with its talents.
In addition to having a broad demographic, an effective board regularly evaluates each individual member’s performance, as well as the board’s performance as a whole. Board members have term limits, so a key component to maintaining a productive board is to actively recruit new members who will bring new expertise to the board. Board planning should include at least one annual session where board members focus on strategic planning according to the organisation’s mission and vision.
In today’s business world, boards are facing ever-increasingly complex and difficult matters. A diverse board brings an expansive array of perspectives. The synergy of a diverse board creates a powerful dynamic that is ready to meet the challenges that come before its members. Women are increasingly filling the list of board candidates as boards begin to recognise and welcome their expertise. Boards will also benefit by seeking diversity regarding gender and age. Nominating, governance, or resources committees should also seek board member recruits who have geographic diversity. Boards should consider demographics of other groups of people that may represent the organisation’s mission in an important way, such as people with disabilities, differing religions, or differing political views. Recruits should not be sought solely on the bases of a certain demographic, rather their demographic combined with their talents and abilities.
An entrepreneurship & business management expert, Dr. Timi Olubiyi, stated that “an effective board of directors should be comprised of people with a high dose of emotional intelligence and experience that will enhance compliance, enforcement of ethical standards, transparency and probity of the board. Management performance is often measured by the amount of wealth management is able to create for shareholders.”
Also, an effective board management requires that the chairman of the board of directors should have the requisite knowledge, intelligence, experience, integrity, among other competencies necessary to offer effective board leadership.
Steps To Build An Effective Board
A properly functioning board can be a powerful force for the company’s success. A board in disarray, on the other hand, can be a distraction, causing missed opportunities and creating liabilities for your company. Here is how to build one that helps grow a company.
Find the expertise you are missing: Outside directors can bring in experience that your team lacks. For example, if your company is about to embark on an aggressive acquisition’s strategy, you might want to select someone with significant merger-and- acquisition experience. If you are thinking about expanding internationally, you may want to consider a person with overseas experience. CEOs of companies that are similar to but not directly competitive with your company can offer insight into broader industry trends, especially if these executives are a bit further along in their growth trajectory.
Look for board experience: People who have served on boards can hit the ground running, because they already understand the critical issues of audit, compliance, finance, and strategy, as well as other dynamics that can affect board performance. For this reason, current or former CEOs make ideal board candidates. Since they have prior board experience, the learning curve is relatively short and easy.
Do not overlook non-CEO candidates. CFOs, COOs, directors of development, and directors of sales, especially if they work at significantly larger companies can bring valuable experience to your board. Because these types of executives frequently want board experience, they may be willing to serve on much smaller company boards than a CEO would consider.
Keep your board size manageable; Small, focused boards are generally preferable to larger ones, especially for midsize companies. Regardless of the number, make sure that you have an odd number of board members to avoid deadlocks, as well as several directors who are clearly independent.
Choose people who can participate fully: The people on your board must be able to dedicate significant time to your company not just for scheduled meetings, but also on an ad-hoc basis when time-sensitive challenges arise.
Divide your board into focused committees: Boards work on a broad range of issues, including compensation, audit, transactions, capital expenditures, financings, overall business strategy, key personnel decisions, lawsuits, and other problems that arise.
A diverse, experienced board can play a crucial role in the success of the business, offering outside experience and perspective that can help you avoid problems and take advantage of opportunities. Choose your board wisely, and it can help guide your company to substantial growth.
