In parts of Indonesia Komodo Dragons make unwelcome and unannounced visits to villages that border their habitat. Even though the giant lizards and humans lived in harmony for generations, contention exists now because environmentalists have imposed new policies in a region where people previously perceived a sacred duty in caring for the Komodo Dragons. The relationship between lizard and human has not been the same since.
Executives and boards of directors have experienced a similar loss of symbiosis. Federal regulations and increased corporate oversight have caused CEOs and directors to examine the way they do business. Now, more than ever, directors are taking their responsibilities seriously, speaking up, and striving for results; but in many cases, the evolving relationship between the company’s executives and the board has not found the right symmetry. Finding it will depend on several factors: recruiting better directors, investing in their professional development, and requiring them to do their parts in creating a stellar board.
Effective board performance starts with the caliber of the directors—their individual skills, knowledge, experience, and abilities. Not every director will bring the same talents to the table, but that won’t compromise effectiveness as long as someone else on the board can offer a balance. I have identified ten important assets for directors, but depending on the company and its mission, some will be more important than others. For example, not every company aspires to grow through acquisitions. Similarly, not every company wants to grow significantly. However, the following are essential for each director, regardless of the industry: financial acumen, communication skills, critical thinking abilities, and a willingness to prepare for and participate in meetings. Therefore, the first step to effectiveness is an evaluation of the current talent on the board. Using the following assessment, rate directors on a scale 1-10, with 1 indicating low expertise or experience.
|Knowledge of compliance|
|Ability to assess risk|
|Knowledge of operations|
|Critical thinking skills *|
|Participation in meetings|
*Gets to the core of issues. Thinks dispassionately. Sees patterns and contradictions. Prioritizes effectively.
This tool offers an easy way to assess the capability of each director and the overall competence of the board. It creates a sort of SWOT analysis that allows decision makers to identify both opportunites and threats. Additionally, it pinpoints the requisite expertise and experience needed when recruiting new directors.
Finding the right directors is the first step, positioning them to succeed the second. To achieve this, I recommend defining objectives for each of the dynamics of a stellar board: leadership, governance, succession planning, strategy, and rapport with the CEO.
Not all five aspects of the Stellar Board will barter for first-place position among the company’s priorities. Only by setting objectives and prioritizing them will directors be able to understand where to focus their attention. They will then want to assess each of the five areas.
Using the following form and a scale from one to five, board directors and C-Suite executives can then rate the existing and optimal levels of board involvement for each Stellar Board activity. One represents areas where the board is not engaged and five represents areas where members are highly engaged.
The higher the gap between the two numbers, the more likely effectiveness is being compromised. To maximize success, executives and directors should negotiate the appropriate level of involvement and the specific requite changes related to improving each of the five major areas of Stellar Board performance. The group’s average scores will identify gaps between where the board needs to be focused—the desired level of performance—and where it actually spends its time and resources.
We have come to demand more of our executives and directors. No longer can either group languish in a role and expect to keep it for life. A volatile economy has warned us not to rest on our laurels too long or we won’t have any glory to rest on, and we’ll suffer further damage to our organizational environments, putting us in the unenviable position of the Indonesians and their lizards.