Today’s competitive environment and business performance challenges are top of mind for leadership teams and the boards of every enterprise — big or small, private or public. Much has been written about the importance of board refreshment as one key to being a more effective board, with the idea that new directors can add fresh perspectives and more relevant experience to the needs of the business. These practices to change the composition of the board revolve around approaches to transitioning out directors and to selecting fresh directors with more clarity and focus. The list of practices is long — with pros and cons that are well documented. They include:
- Age or term limits
- Staggered terms
- Performance reviews
- Skill matrices
- Recruiting and nomination practices
Most boards have considered or adopted some aspects of these practices in the goal of improving board performance and contribution to business success. But how about refreshing your board through approaches to being a better board in those situations where a change of directors is not imminent? How about being a better, refreshed board while you consider director changes? In fact, what is refreshment and how do you think about it? Does it mean invigoration, rejuvenation and renewal? Is it only in the composition of the board or are there opportunities in how the board works and fulfills its responsibilities? Here are some approaches that I have seen improve how a board refreshes itself, its thinking and its perspectives that you might consider.
- Change board and committee chairs. To be a value-added board, you have to strive to be the best, discussing and debating the right topics and dedicating the limited time directors have to the right time-share and mind-share matters. Changing or rotating board leadership roles can help create the right “spotlight” effect to look at why we do something and then how we do something. It also provides an opportunity to stop doing certain things and to start doing the more impactful things. In one situation, the board chair simply revamped the traditional board meeting agenda to enhance the competitive and business performance review deliberations. This has greatly improved board business understanding and discussion.
- Sharpen your effort to understand the marketplace and listen to the voice of the customer. The simple theme here is that the business must win in the marketplace. As accomplished as your board may be, directors are often not close enough to the market and the customer and don’t invest enough effort to get closer. Some refreshment practices have included making it clear that directors are expected to invest in understanding the marketplace, and companies have committed resources to support efforts like trade show and conference attendance, customer visits, and other efforts to bring the customer into the boardroom discussion.
- Get an outsider’s view of our business. Does your board only look at the enterprise’s internal progress as a benchmark for performance improvement and results? Or does it also look clearly at the market’s performance and how competitors have fared? Does your board also expect benchmarking against external sources and results to stimulate thinking? Even with external benchmarking, in the right situation, your board may consider the use of outside advisers for an objective diagnostic review of the business’s strategy and performance.
- Think like a “friendly activist” to unlock value creation. Too often, the activist perspective is characterized as antagonistic and conflict-ridden, and in many cases it can be. However, if a board wants to explore how to unleash the potential of the business and unlock its fullest value, it needs to explore possibilities for change and investment in every aspect of the business. Is your board asking enough questions, is it asking the right questions and is it acting like a friendly activist when engaging with management? It may seem uncomfortable, but it can be very useful to think like an activist in the boardroom.
- Adopt a business building mindset in all board work. One useful approach to refreshing committee work is to ask each chair and committee to think very specifically about how its work helps to build the business. Does the audit committee only think about controls, reporting and compliance, or does it extend into how its charter helps build the business? The same is true for every other committee, from compensation and how management is incentivized and rewarded, to governance in terms of how the board runs, oversees performance and drives shareholder value.
- Get the CEO to help improve board engagement. This is often overlooked in the “separation of duties” and the idea of “noses in, fingers out,” but does your CEO help drive better, refreshed board thinking? Does your CEO have board engagement as an aspect of performance review and feedback? This might focus more thought and attention on how a strong CEO should leverage a refreshed board as a value-added resource. Of course, this requires an environment of genuine trust and mutual respect, especially between the CEO and board chair.
- Board bottom line 360. The art of board reviews as a whole or directors individually has evolved positively, but it can still be a somewhat sensitive area for a lot of boards. One practice that has served to stimulate individual director contribution and self-refreshment is the peer emphasis (not pressure) of the anonymous 360 review by your fellow board members. While this practice is not new, when coupled with a summary question on whether each director is a contributing, effective board member (independent of differences in ideas or opinions), it can help get to the bottom line about individual refreshment. In one particular example, if a director does not get a majority affirmative review in this bottom-line evaluation question, he or she will have a specific improvement discussion with the board chair or be considered for transition in the next formal director refreshment cycle.
Think about these approaches to board refreshment and effectiveness that may complement the focus on replacing directors as a way to refresh your board and its performance.