The critical responsibilities of a board have evolved significantly in recent years, moving well beyond mere compliance and oversight. Today’s most effective boards serve as catalysts for transformation, helping organizations navigate complex challenges and seize opportunities. This transformation requires a culture of curiosity, accountability and forward-thinking leadership and hinges on the ability to ask the right questions, challenge assumptions and guide management toward meaningful, measurable progress.
In addition to business, situational and industry-specific topics and issues, here are five key foundational questions that always need to be asked and answered to achieve your optimal impact as a high-performance board providing advice to management, performance oversight for real results and long-term sustainability as well as value creation for owners.
All shareholders and stakeholders matter: Do we know what they want? You can’t achieve shareholder or stakeholder satisfaction unless you know what they want. While it is generally very clear in financially sponsored companies where fast, profitable growth and strong cash flows matter in driving value and returns to the investors (i.e. private equity or investor-owned), it can be less true in multigenerational family businesses with a wider range of shareholder backgrounds, circumstances and interests. Do you clearly understand what shareholders want? Not just more performance and returns, but in what form and when? Are you a growth company, a dividend company or both? Have you asked shareholders about their preferences? While consensus does not require unanimity, a collective appreciation of the group and shareholder alignment will help provide foundational stability for moving forward in building the business.
History, hope and wishful thinking: Do you have a plan to invest in? Many non-investor private companies do not operate with clear enough goals and have grown accustomed to relying on their traditional efforts to sustain performance and a lifestyle for their owners. While there may be some level of acceptable performance and comfort in this, it may not fully address the risks to the company nor the company’s fullest opportunity. Have you truly worked with management in its planning? Do you have a competitive, market-relevant strategy that can be resourced and executed with the time, money and people you have? Remember, an annual budget based on history is neither a strategy nor a plan. Prepare an annual plan aligned with a multiyear strategic direction and use it consistently, adjusting as circumstances demand.
Horses for courses: Do you really have the right team for the future? Many non-investor-backed private companies stick with a CEO and leadership team for a long time, sometimes out of family relationships or loyalty. This is generally less so in investor-backed companies since they know time, money and people focused on executing a clear plan drive success. Sometimes, the CEO has had a history of success and performance but is currently mired down in a stagnant situation. With changing market conditions and circumstances for the future of the business, do you have the right CEO and management team for the execution of a clear plan? What gaps and additional capabilities do you need to complement the current team? Put together the best team you possibly can.
Put your money where your mouth is: Do you have investor conviction? It’s pretty easy to spend someone else’s money, but using the criteria of investing your own hard-earned money is a high bar for whether your board has done the right job and whether you, as an individual director, have true belief and commitment in the plan and leadership team. In some cases, boards or directors do invest real money, but even if you didn’t have to, would you? Lead and evaluate with the discipline of your wallet commitment, not just your role as a director. You will find the issues related to strategy, people and execution gain clarity and your willingness to address them will strengthen.
Timeshare vs. mindshare: Are you spending your time on impact areas? Boards need to focus on what matters. But they can be inadvertently misdirected in how they spend their time, especially on executing all the best practice board processes, but without adding value to the enterprise. The critical business matters that occupy your mind in terms of risk, opportunity and management execution should not be shortchanged due to discussion agendas that focus excessively on process and insufficiently on review, debate and solutions on key matters. Have you aligned your board mindshare needs with your board timeshare reality? You have to get this right!
Taking the time to continually ask and answer these five key foundational questions in your governance processes will enable your directors to be the best they can be as a high-performance board.