Board of Directors Mistakes
Quite simply, board of directors mistakes come in two flavors: Acting when they shouldn’t and not acting when they should. In our experience, these two mistakes are rooted in one of two causes, namely:
1) Lack of clarity/consensus on the roles and responsibilities of the board of directors, and/or
2) Lack of effective tools for boards of directors for when to take action and what action to take.
The skill, knowledge, longevity and organizational understanding of
directors, and the understanding/level of trust reached with the chief
executive will dictate the appropriate role and responsibilities of the
board. Some boards play on a fiduciary or protection of assets role while
others are actively engaged as partners in co-managing. An expanded role
offers greater opportunity to add value, but only if the requisite skills,
knowledge and level of responsibility are present.
The keys to avoiding board of directors mistakes here are:
1) Assure that you are not taking on or demanding a role you don’t have the skills and knowledge to fulfill, and
2) Reach honest and open agreement with the CEO on board role.
These actions will assure that the board is not taking action in an
area where it lacks expertise, plus assure that it does fulfill its intended
role.
Avoid board of directors mistakes with knowledge and tools.
Inform yourself on the optional roles and responsibilities of board of directors through readings on BoardGrowth.com. What role is appropriate for your board at this time?`
Effective tools for boards of directors will improve your batting average on taking action when you should. Tools answer the key questions such as:
- Are our strategies working?
- Are our customers/clients satisfied?
- Are we efficient?
- Are we adhering to plan?
- Is there a trend that requires a change in policy?
- Do we need new policy to strengthen what is working well for us?
- Are our committees being effective?
- Is our trust in the CEO still warranted?
- Are our assets performing well?
Effective tools provide trend data that enable boards to determine whether a problem or win is an isolated event or a change in condition that warrants a change in plan/policy. Thus, boards act only when they should and make the right decision.
The rules for non-profit board of directors are largely the same. Profit is replaced with or distributed as expanded service offering or territory. Customer is replaced with client. Shareholder dividends are replaced with client or stakeholder benefits. But, the management and governance principles equally apply, the board of directors mistakes are similar and the tools equally valuable.
BoardGrowth.com offers the knowledge and tools to define and fulfill the roles and responsibilities of board of directors and to avoid the common board of directors mistakes.
Read more about how improved corporate governance eliminates board of directors mistakes.
