Successful boards all share the same three key qualities that help them to stay productive and effective, adding tremendous value to companies they serve.
As an officer with the World Bank Group’s IFC, I served as the corporate governance advisor to more than 20 company boards from a wide variety of industries. I worked with strong boards and weak boards. Here are three specific traits that create successful boards.
Commitment
It all starts with commitment. Several years ago, I consulted with the largest energy company board in the region to find out that one of their most experienced and regarded board members turned out to be the board’s weakest link. The star-director, in addition to his board membership with the client-company ran his own business, sat in two additional boards and was a co-founder of a social start-up. Despite of his domain knowledge, contacts and popular brand he simply had no time to be a proactive director. (That requires a director to show up at every meeting prepared to contribute to board discussions and make good decisions.) Following our recommendation, the company replaced the director with a less stellar but more committed member that brought in a fresh perspective, but most importantly, was committed to getting things done.
Board members should be willing to dedicate enough time to serve on boards. On average, board membership may require dedicating 20 hours a month. Directors are also expected to be present at the board meetings fully prepared, which often requires reading and digesting many pages of financials and presentations.
Teamwork
According to Investopedia “ A board of directors (B of D) is an elected group of individuals that represent shareholders. ”. The key word in this definition is “group”. A board is a collegial body that represents nothing less but a team of professionals jointly serving to achieve their company’s goals. To make a team functional, companies should strive to elect not only brilliant experts and people in power but real team players. Having a board full of directors with perfect credentials but unable to collaborate is a big impediment to the board’s success. That often happens when companies recruit “mega-star” directors that want to stand out instead of combining their efforts with the rest of the team for the progress of the company. We all know those types that push for their opinion and rarely willing to listen and compromise.
Successful boards do their homework and assess board candidates’ teamwork and other social skills to avoid personality conflict and to set up a collaborative environment.
Diversity
I often received calls from companies that were looking for a director and seeking board composition advice. Nine times out of ten, they would ask for a candidate with exactly the same set of skills and knowledge that represents their field of business. A construction company looked for civil engineers, a healthcare firm wanted only MDs, financial institutions always sought bankers, and so on. The conversation usually followed by me providing best practice examples of companies recognizing that any enterprise regardless of its industry is a multifaceted process.
A business is more than just the production of a core product but also comprises of corporate strategy, finance, marketing, distribution, technology, strategic partnerships and many other components. Companies with successful boards strive to represent board diversity assuring enough knowledge and expertise to make right strategic decisions at every level of business. While the majority of successful boards represent industry domain, they also include experienced directors with broad enterprise expertise and professionals from different industries.
Establishing and sustaining an efficient board is no small task. Successful boards must assess every board candidate against set-up criteria with commitment, teamwork and diversity being at the core.