Is your Board of Directors effective?

Maybe you can’t afford a board room like this, but you can do many things to improve the performance of Directors.

 

Board of Directors should be more than a rubber stamp.

Today businesses and non-profits must be able to contribute measurably to the bottom line while delivering high-quality customer value. Owning and operating an enterprise in today’s environment are no longer simple. While technology helps with some of the complexities, it doesn’t support all that is necessary to bridge the performance gaps and stay out of trouble.

Good corporate governance is the duty of a Board of Directors who should be knowledgeable, creative and act with utmost integrity. It’s not necessarily about simply sticking to rules and regulations.

 

“The Board of Directors controls and directs the way in which a business runs, so make sure you have good ones”. Peter Sergeant

Many directors of some organisations are there in name only. Keep your board to a minimum and get rid of anyone who appears to be there for their ego, or only poisoning the atmosphere.
Everyone knows when the problems exist in an organisation, but few have the courage to do something about it. It is the board’s responsibility to deal with them quickly. Other benefits of a good board can include:

  • Better business performance. Independent directors can bring additional skills that your business may be lacking. They can also contribute their experience, especially if they have been through the growth stage of another organisation.
  • Independent advice. Directors offer you an invaluable source of expert advice and act as a ‘sounding board’ outside of your family, friends and colleague’s networks. They also introduce their networks that you and your organisation can draw on.
  • Improved access to capital. Outside expertise can improve your organisation’s positioning and credibility in the market. Establishing an independent board demonstrates that you are committed to good governance and compliance. If you are trying to raise funds, investors will have a greater degree of comfort if they can see real independence demonstrated in your board and at least one experienced director with financial expertise.
  • Management accountability. By distinguishing between management and oversight you take the next step in forming a business with intrinsic value. This enables greater attention to be paid to both governing and managing respectively. Managers become accountable to the owners, who are represented by the board.

If you are a family business it can pay to appoint an external independent chairperson to ensure the business activities are carried out in a professional manner and to offer appropriate advice as required.

 

 

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Personal Experience:

While I believe in collaboration and consensus, there often needs to be more than a group decision. There are many times I have seen the need for the Managing Director, or Chairperson, to step up to the plate with of vision of what the project must become to achieve the desired outcome.

There always needs to be one creative and experienced person who provides meaningful and substantive direction. It is the key ingredient often missing in the typical inactive Board, where unimaginative ideas are in short supply, or where egos and self-interest are out of control.

I know many leave it too late, but as your business or non-profit grows, it will have an increasing need for directors with good governance and strategic direction experience.

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