What makes a good board?

Directors need to be aware of what makes a good board and how they can contribute and add value as an individual.

A board that truly adds value is not just a group of high performing individuals. A good board is a balanced team with complementary skill sets and a culture that allows them to work together to make the most effective decisions for an organisation. While the leadership from the chair is crucial, it is the full participation of every board member that contributes the most to the effectiveness of a board.

Board composition and mix

Within each board, it is necessary to have a mix of strengths between members. For example, a value-adding board may have one member with experience in finances, one director who is a specialist in sales and marketing, another member who has general management experience, and a member with expertise within the industry of the organisation. Every director needs to contribute something unique and of value to the overall culture and vision of the board.

An effective board has:

a mix of stable (long-term) and new members
mutual respect
diversity
strategic and operational thinkers
a balance between independent and interested directors
an appropriate size in relation to the organisation
a fair and firm chair
a balance of skills and experience

Dion Mortensen, partner in Movac, explains three magic things your business needs

Board balance

A strong board will be evenly balanced in several respects:

Size

The optimum number of directors depends on the size of the organisation. The IoD recommends that medium to large sized companies should have 6–8 directors.

Skills and experience

A diverse range of educational and vocational backgrounds will enrich the discussion of a board and help better decisions be made.

Types of directors

Executive vs non-executive roles

Balance of independent and interested directors

to ensure independent thinking, fresh perspectives and greater oversight and accountability, it is important to have a decent balance between ‘insider’ and ‘outsider’ directors.

Diversity

a mix of ethnicity, age, and gender all contribute to better representing the community at large and will help a board form insightful and representative decisions.

Board culture

Because a board is made up of a diverse range of characters, the need to develop a strong culture is vital. Members don’t need to be friends, but they do need to be respected colleagues. Unlike most teams, dissent and robust individual opinion is an important trait on boards as it helps members consider all possible options in order to arrive at the best possible decision.

The chair plays an important role in developing the culture of the board and setting the mood of meetings. Other aspects which contribute to a strong culture are:

full disclosure of information from management
confidentiality
regular evaluation of board members
induction and training.

Induction

Induction of a director into the organisation (especially if they are outsiders) is vital and should occur as soon as possible. It will provide valuable insight into how the organisation operates, who the employees are, and what the goods or services are. In a large organisation the company secretary will organise the induction, while in a smaller one, it works more on a case-by-case basis.

It’s not the rules and regulations. It’s the way people work together.

- Jeffrey A. Sonnenfeld, What Makes Great Boards Great

Great boards

Turning a good board into a great board, is no easy feat and depends on a whole host of issues to happen.

Some things which makes great boards:

a climate of trust and candour
open communication flows
well prepared and informed for board meetings
a culture of open dissent
diversity
a firm and fair chair
an agreed strategy and a decent understanding of the core functions of the business
a fluid portfolio of roles
individual accountability.