Resources & Policy

Building an Effective Board

With businesses focused on daily operations from sales, finances, marketing and so on, there can often be little time for management to devote to the bigger picture or to step back and assess the long-term strategy of the business. This is where a board of directors is invaluable to bring strategic focus, direction and objectivity.

When putting a board of directors in place, be it with a combination of executive and non-executive directors, or for smaller businesses, separating management and board meetings with the addition of one or maybe two non-executive directors, there are a number of aspects to consider to create a board that is effective and fit for purpose.

The right composition

Getting the right composition on a board is critical. A range of skills and expertise is essential to board effectiveness and to avoiding a group-think mentality. Diversity in terms of business experience, industry expertise, gender or professional qualifications, can broaden a board’s perspective and lead to more valuable discussion and interaction.

It is also important that the composition of the board reflects, and is sympathetic to, the needs of the company’s stakeholders including its customers and suppliers.

Culture and dynamics

The culture of the board should inform the culture of the business. A business striving to accelerate growth, enter new markets or diversify, needs a board that can keep pace with business plans and provide the strategic direction needed, bringing specialist skills and an independent eye.

Dynamics around the boardroom table must also be considered. Does the board encourage open discussion and debate where all views are heard rather than being dominated by some individuals? The culture of the board can have a significant bearing on its performance, positive and negative, which in turn can impact the company.

Challenging assumptions

Appointing the right board, with the right people in place, can have a very positive influence, often providing management with the impetus to become more strategic in focus as well as questioning some of the core assumptions of the business. The board should bring independent oversight and is expected to provide constructive challenge and robust debate.  Hence businesses should aim to find the most capable, dynamic, engaged and committed board members who are willing to ask the difficult questions. Sourcing a non-executive director should be approached as seriously as recruitment for key executive positions.

More than rubber stamping

A board does not exist merely to rubber stamp management decisions or to tick the governance box. An effective board is a highly important component of a company’s armour and management should tap into the wisdom and knowledge that a board can offer and fully leverage its expertise. For any business, the board should be an overseer of strategic activity, while acting as an advisor and a sounding board, offering insight, expertise and challenge, with the long-term interests of the business in mind.