Optimize the board’s time to create shareholder value.
The more effective the board meeting, the more effective the board.
To make board meetings as productive as possible, it’s important to start with an annual calendar not only for when the board will meet but also for what the board will discuss at each meeting. This approach will create working agendas and help focus board members on the most critical and time-sensitive topics during each group session. It will also allow board members to better prepare for meetings as they will know what to expect from meeting to meeting.
It’s standard practice to conduct an annual financial review and audit the company’s prior-year performance at the first board meeting of the fiscal year. This is also when the board would generally review and approve the budget for the year. At the last board meeting of the fiscal year, board members might assess the CEO’s performance and review any broader leadership succession plans that exist as a precautionary measure should anything ever happen to the CEO or other key leaders. It is also helpful to map out the company’s strategic intentions for the year ahead and begin considering a capital plan for any significant investments.
In between these year-end and year-beginning sessions, it’s important to review the company’s performance mid-year in line with the stated objectives for the year. Is the company on track to achieve its targets for the year? Or does the company need to adjust for the second half of the year because of any market changes or shifting customer demands? Given recent trends around “The Great Resignation” and significant ongoing challenges with labor, perhaps the company’s goals are proving to be too aggressive. Board members can’t wait until year-end to determine that management is off track and should pivot their strategy. This is exactly where the board can help, assuming board members are having the right conversations.
Agenda items
In addition to these standard agenda items tied to an annual calendar, effective boards preserve time in their meetings to review any strategic priorities for the year. What major projects or undertakings did the board approve for the year? For example, if the company is going to expand into a new geographic market or perhaps build a new facility this year, the board needs an update on the status of these initiatives on a regular basis. If these strategic projects are on track, these updates can be brief, with board members reviewing any supporting information outside of the live meeting. If these projects are not on track, then the board should set aside more time to review what’s happening and understand how senior leadership is addressing the challenges they may be experiencing. Include key leaders at board meetings whenever they must speak to the specifics, address any implications of what’s happening and present alternative plans.
For private company boards that have committees in place to handle discrete board initiatives, effective board meetings also include regular updates from these committees along with any management updates. For example, the finance committee will usually have a relevant update to share and the performance management (or possibly compensation) committee will have updates toward the end of the year as they complete their annual CEO performance review. The nomination and governance committee, on the other hand, may not have anything to report if the board has a full slate of members and is not recruiting new directors.
Each of these agenda items can be relatively short, taking no more than 30 minutes to an hour of meeting time if sufficient information is provided to board members in advance. This prepares them to engage in meaningful dialogue rather than requiring leadership to read their reports during meetings.
While you will want to avoid marathon board meetings, it’s even worse to not have open and productive conversations at all. To be most effective, someone — not necessarily the board chair — must actively facilitate and manage everyone’s participation. This individual must be empowered to keep conversations focused and address any unproductive behavior or emotional outbursts (which may occur, especially during family business board meetings). Typically, this person will also manage the timing of the meeting and record any group decisions or future action items. Board members should leave meetings with one shared voice, aligned on any next steps, so it is effective to include a review of these as a closing item on the agenda at the conclusion of every meeting.
Some board chairs feel they must control the conversation, tending to speak first on any matter. In actuality, the board chair’s job is quite the opposite. It isn’t about demonstrating one’s individual talents and expertise in the boardroom. It’s about creating the context for collaboration among all board members as well as any invited speakers. This is one of the reasons it can be best to identify a designated facilitator separate from the chair.
Executive sessions
Another effective strategy for raising the level of the board’s discussions is to set aside time for executive sessions, which allow board members to speak freely, away from company managers or other individuals who attend open board meetings. For example, board members may not want to discuss the CEO’s performance or compensation in an open forum. This common but sensitive topic is better suited for an executive session. Executive sessions can be standing agenda items at every meeting in case they are needed.
Fruitful board meetings aren’t just about having the right agenda. Effective meeting management principles, such as sharing the agenda and necessary reference materials at least a week before the meeting, are critical to ensuring board members can prepare in advance. The goal is to give everyone a voice in contributing to the company’s most strategic objectives and create the space for informed group dialogue during the meeting. It isn’t to read updates and reports to each other.
The most important element of a successful board meeting is maintaining the distinction between governing and managing. The board’s job is to set the company’s strategic direction. Management’s job is to execute. Be careful that your board doesn’t blur the line and impede the CEO or other senior leaders from doing their jobs. It is important for the board to monitor management’s performance in achieving those annual objectives. It isn’t the board’s job to drill down into the operational details of how the job gets done. If board members maintain the right altitude with their conversations, then board meetings will be far more productive.
The value of bringing board members together extends beyond boardroom discussions to the interpersonal connections they establish with each other and the company’s senior leaders. Facilitate these rich relationships by taking advantage of having everyone together in a shared space. Introduce social connection into the meeting agenda between more serious topics and host informal gatherings the night before or immediately after each board meeting. Whether it’s an extended cocktail reception, an opening dinner or a closing group lunch, give board members time to interact with one another outside of the boardroom. These connections will create a strong foundation for making complex and potentially contentious decisions and taking swift action in the future should the need arise.