I have been involved in quite a bit of ‘board development’ work. I started working with boards when I was at the Business Link University in the 1990s, and cut my teeth working in a range of ‘for profit’ businesses as well as social enterprises.
More recently I have worked on board development in NHS Hospital Trusts and a number of ‘system boards’. More on these later.
Why Have a Board at All?
It is dangerous to have too much power concentrated in a single individual at the ‘top’ of an organisation. This can work for a start up or a micro enterprise, but as the organisation grows it becomes difficult.
‘Boards’ developed as a way of bringing more diversity to the leadership of the organisation. To bring in different perspectives, knowledge and experience. This is critical in the volatile, uncertain complex and ambiguous world that most organisations have to operate in today.
Boards also provide control over the power of individual leaders and their executive teams. They ensure that the organisation operates on behalf of its owners, the environment and the communities in which it operates.
In theory at least…
Sometimes Boards lack sufficient diversity and become too focussed on their own self-interest rather than that of the organisation that they direct.
Remembering that the board provides a place where many voices can be heard and woven together to provide the organisation with practical direction and momentum can significantly help with board development. It is always worth thinking about whose voices are not being heard, or are being marginalised as one aspect of board development.
Functions of the Board
The main job of the board is to provide an organisation with a sense of direction and momentum. But it also has to maintain control. The tensions of movement and control need careful balancing.
If everything seems under control – you are just not going fast enoughMario Andretti
In order to manage this tension the board acts as a pivot point.
The Board as Pivot Point
On one side of the pivot it has to look ‘down and in’ to understand enough about the workings of the organisation to provide assurance that it is effective, efficient and compliant with policies and legal requirements. And those working in the organisation have to feel completely safe to be open and honest at the board. Trust is critical.
On the other side of the pivot it has to look ‘up, out and to the future’ scanning the environment for opportunities and threats and ensuring that the organisation is ‘future fit’. It brings in experience and insight from outside of its own system.
The board has both operational and strategic functions which are carefully balanced in a well developed board.
Every board member is, or should be, a director of the organisation. This is a specific role recognised in company law and attracting some quite onerous risks and responsibilities. If directors are found to be incompetent or negligent the penalties can be punitive.
In practice, though not in law, we recognise two different types of ‘director’. The first is employed to work in the organisation, usually full-time, and usually, though not always, at executive level. Hence the name Executive Director. Usually they will work between 3 and 5 days a month as a director of the organisation – working as a part of the Board to provide ‘momentum and direction’. The rest of the time they work as a ‘servant’ of the board ensuring that the organisation is efficiently and effectively run and that the ‘direction’ offered by the board is followed. Executive directors provide the board with one channel of information about the performance of the organisation. It is important that it is not the only channel!
The Chief Executive is usually just that. They are a board member who is responsible for the running of the organisation as a whole and usually line manages the other executives.
Non-Executive Directors – NEDs
Non-executive directors are usually employed to work as board member for 3-5 days a month, but are not employed to work in the organisation. Usually they are chosen because they bring skills and experience that build on those of the executives and bring an independent perspective that is vital.
The chair of the board is usually a non-executive director who is responsible for the running of the board. As such the Chief Executive is accountable to the Chair.
In law there are only directors. No distinction is made between non-executive and executive directors who share the same responsibilities and legal duties.
Why Do Boards Need Development?
This formula, developed by Reg Revans, states that the rate of learning has to be greater than the rate of the change in the operating environment. Unless the board is learning more quickly than its environment is changing, it will fall behind. The board as a whole needs to be a ‘learning board’ and every director has to be learning as well, working at their ‘development edge’.
In theory the Chair is responsible for appraising each director at least annually and ensuring that they have adequate development plans for their role as a member of the board. This is a significant responsibility and one that is sometimes overlooked.
I also believe that Boards should be highly skilled at collective reflection, with regular use of tools such as After Action Reviews used to improve effectiveness and efficiency. Ideally there would be some sort of meaningful reflection at the end of every board meeting – but often this gets squeezed out entirely or rushed through as busy directors start packing away their papers and tablets.
Reg Revans offered a useful maxim through which the development of the board might be considered…
No action without learning. No learning without action.Reg Revans
Directors learn to ‘keep quiet’…
Boards are complex, organic, rational and emotional crucibles for debate and discussion where the future direction of an organisation is decided. Usually they have a number of big brains, big hearts and big egos all of which have something to offer. Ensuring that all voices are heard can be a challenge especially in a long board meeting with a packed agenda.
This can result in directors keeping quiet until ‘their issues’ are being discussed as a way of helping to manage time. However it is a waste of potential and a dereliction of duty as every decision made by the board is a decision of the whole board.
The Executives Can Capture the Board
Sometimes executive directors have a language of their own. A kind of techno-babble derived from their own technical specialism and sector. Sometimes policy and regulation brings in a new lexicon and it takes a brave non-executive in a busy board meeting to put their hand up and say “I have no idea what you are saying”. Instead they nod wisely and hope that everything will work itself out.
The Non-Executives Can Capture the Organisation
Sometimes the non-executives in their enthusiasm to fulfil their obligations to ensure that the organisation is being well run can start diving down into the operational aspects of the organisation, which are rightly the domain of the of the executives. They start to demand more and more data as a way of finding ‘assurance’ and ask for more and more meetings to discuss the data. Before we know it the entire board is involved in the operational aspects of the business and momentum and direction are lost while we assure ourselves that all is well enough.
The Whitehall Effect can Capture Everything
The Whitehall Effect is a book by John Seddon that describes how centralised command and control systems working in parallel with regulators can subvert the purpose of the organisation from creating value to creating the appearance of compliance with regulator and performance regimes. Boards can provide effect buffers against the Whitehall Effect, but not many of them do.
A Preference for Maintenance over Direction
Sometimes the executives can collude in this ‘operational takeover’ as talking about the operational aspects of the business is something of a ‘home fixture’ for them and less challenging than the creative, imaginative and somewhat risky work of setting direction for the organisation.
Also the urgent work of sorting out performance today, results for this quarter, turning the rag ratings green before the next board meeting can displace the urgent decisions about what should we be investing in for the future? What should we stop investing in? Operational urgency starves important strategy.
The Silo Mentality
As non-executives, if we grill the finance director over the finances, the chief operating officer over the operations, the marketing director over sales and our job is done.
As an executive as long as I make sure my part of the business is doing OK and well resourced my work is done.
As Henry Mintzberg suggest this approach to looking after our part of the cow usually ends up killing the cow! A board of directors has to direct the whole cow! It has to think about the organisation as system – not as a series of parts.
The Board becomes Detached from the Organisation
Sometimes boards become so strategic and visionary that the direction they offer bears no reality to the lived experience of the organisation. I worked for a telecoms company a good few years back now where the board decided to invest massively in fibre optic cables. However the every day work of engineers still involved copper cablers and pleas to train the workforce on fibre optic cabling skills fell on deaf ears because it just wasn’t part of the every day experience. The board had run ahead of the organisation.
And many, many more…
These some of the ways that boards can get out of whack if they are not kept subject to regular review and development. There are many more…
If you think that your board could do with development and would like a conversation about it please do get in touch, in confidence, here…