Tuesday, January 15, 2008

Role of the Board of Directors - Part I

Q. What's one of the biggest complaints CEO's have about their Boards?
A. "The Board is a waste of time - it doesn't add any value."

Q. What's one of the biggest complaints Board members have about their Boards?
A. "This Board feels like a waste of time - it doesn't feel like we're adding any value."

Q. What's going on here?
A. Who said the role of the Board is to add value?!

It's not - at least not in the context of masterminding the next I-Pod or the next outsourcing strategy. That's up to the management team.

The role of the Board is to govern - some Boards are even called Boards of 'Governors'. There are 5 key elements of governing effectively:

  1. ensuring that the organization has the right CEO
  2. ensuring that the organization has a strategic planning process
  3. learning the business and the industry well enough to have a well-formed perspective on benefits and risk of the organization's strategic direction
  4. monitoring to ensure that strategies are being executed as planned
  5. monitoring to ensure that the Board is governing effectively

The Board role is a mix of three things:

  • out-front leadership (CEO and planning process)
  • knowledge and insight (business of the organization)
  • monitoring and compliance (measurement and policies).
Managing this mix is the responsibility of the Board chair. There isn't a more important role in the organization.

See part II Role of the Board of Directors here.

See part III here.

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