What makes a great board and how does a great board add differential value to the organization it governs?
1. Great boards clarify and continually update their expected value contribution.
2. The best boards gather and deliver feedback about how they are delivering their expected value.
3. The best boards continue to educate themselves through formal and informal means.
4. Great boards retire and replace underperforming directors.
A constant and open dialogue is key to board effectiveness. Great boards make an effort to remain aligned with their company’s strategy as it evolves. Yearly evaluation of where the company is headed in the short and longer term allows boards to define the skill sets they need to get there.
Great boards also ensure that when gaps occur, they are filled promptly to support company growth. Even with age and term limits in place, directors need to ensure that objective, independent, and rigorous evaluations, at both a board and individual level, are conducted annually to identify weaknesses and build on strengths.
Moreover, directors need to remember that their role is in providing the oversight needed to ensure the company is constantly adding value for shareholders. To do so, boards need a well-defined and regularly updated value proposition in which the expected contribution of the board and each member is clearly laid out. It is only with an explicit description of their role that boards and their directors will be in a position to gauge their work, make continuous improvements, and deliver optimal performance.