Ask yourself the right questions.
By Don Yee
Among today’s hot governance topics is the idea of a more engaged board. This idea often centers on the practices and tactics to gain more director involvement with the goal of being a more value-added or high-impact board. In many cases a board might adopt such best practices and end up with a more “active” and busier board, but not necessarily a more “engaged” board. Sometimes there can also be a comfort element for the board, since those practices have also been adopted by other boards. In a private company setting, with less time spent on compliance and more time spent on strategic growth, value creation and disruptive risks to the business, a truly engaged board is not only possible but also essential.
Let’s start by looking at what board engagement really means. Any definition of engagement must include the trademarks of active participation, commitment, immersive thinking about the business and strategic debate —ultimately, having a positive impact on the performance of the company. A truly engaged board is a high-performance board, and to be a high-performance board there should be high results.
As an independent board director, I have observed, participated in and contributed to the performance of numerous private company boards and the companies they support. The business outcomes and performance have ranged from superior, industry-leading outcomes to “average” results — thankfully mostly the former rather than the latter. While there are many contributing factors to this range of results, such as CEO/executive team performance, industry fundamentals and specific situational factors, I have often thought about the impact of true board engagement. Here are hard questions to ask yourself about your board’s level of engagement, along with some perspective on high-impact, engaged boards:
- Are our CEO and board aligned in wanting an engaged board? It starts at the top with a strong CEO and board chair relationship, along with a vision and belief that an engaged board is a strategic asset rather than a necessary evil. There must be a strong belief that an engaged board is a resource for the CEO and that open, inquisitive dialogue and exploration on critical matters adds to better decision making. Having an engaged board on those matters does not indicate micromanagement or a less-than-capable CEO. Without this dialogue, the relationship between the board and CEO could be one of conflict, unconstructive tension and appeasement. Too often, best practice advice focuses only on what boards can do to improve their engagement, but what about what a CEO can do? In reality, a CEO is charged with effectively utilizing all available assets, and a board should be one of them. I would bet that most boards do not include board engagement as part of their CEO evaluation. Does your board?
- Are our board members capable of and prepared for constructive engagement? Every seat at the board table matters, so don’t have any occupied by individuals who won’t do the work, don’t care enough to contribute or are not capable of bringing up difficult but necessary topics for insightful discussion. Engagement requires great preparation, courage, thoughtful reflection and excellent communication. The best engaged boards also understand that the performance and contribution standard applies to all directors, although their experiences and backgrounds may be vastly different. Would you accept less than high performance in any other critical role?
- Do we emphasize form over substance or substance over form? Today, most boards use organized agendas, have committees and discuss key best-practice topics like strategy and talent management. This “perfect process” setup can fall into the hazard of form over substance, with board governance refined and standardized, presentations overshadowing discussion and debate, and a desire to get through the agenda on time, instead of adjusting time for more critical matters. The worst boards are buried with data in the spirit of transparency, avoid conflict and cut off discussion of important matters to stay on schedule for inconsequential topics. Do you have form over substance? Think about it.
- Are we working on the topics that really matter to the health and performance of the business? Many board meeting agendas include the CEO report, review of financial results, capital expenditure approvals, executive session, etc., etc. Sound familiar? Have you had results that you’ve already reviewed “read back to you” in summary form so you fulfill your oversight responsibility? Was it a well-rehearsed “show and tell” update, and did it really matter? When was the last time your board had robust discussions and debate on high-impact topics like strategy, customer demand, competitor initiatives or disruptive forces affecting your business? The best engaged boards bring forth the most valuable topics that the CEO wants perspective on, that the chair believes is vital and that board directors may push for debate on. Ask the question, “What should we be working on and investing board time in, but are not?” That’s using your seat at the table to promote real board engagement.
- Do we know how to review, discuss and engage in critical topics, some of which may be subject to healthy debate? Does your board culture include trust and the power of positive intent? Do your board discussion ground rules enable good discussion? Even if your board agenda has the right balance of oversight, governance and critical strategic topics, the discussions still must be well managed. Often, sensitive discussions are cut off and the board moves on before there is adequate time to address key matters, so that we are on track in board time management and completing our agenda, but off track on impact. If you have to table a critical topic, be clear on the next steps to bring it forward in a different setting: Is it a question of fact, interpretation or judgment? Constructive debate based on good facts, clear thinking, insightful review, compelling rationale and clear articulation are hallmarks of a superior effort to talk about the right topics with positive intent. Constructive debate leading to common commitment is invaluable. Are you good at it?
- Do we leverage the special talents and experiences of individual board members outside the boardroom? Some of the best engaged boards are leveraged by the CEO who appreciates the contribution of board members on special topics or issues such as acquisitions, leadership talent development or simple sounding board discussions. This is not board intrusion or crossing the gray zone of management, but is leveraging the board as a resource. Does your CEO take advantage of this possibility?
- Is our board too comfortable? The engaged board is not necessarily a comfortable board, where things are working so smoothly that everyone is lulled into a false sense of security. A smoothly running board should be so efficient that you can spend more time on what really matters. The engaged board recognizes and rewards high performance but is also always on watch. It courageously, constructively and inquisitively asks the right questions, which always leads to the right answers. Does your board embrace some level of discomfort so your business can thrive?
Board engagement is a powerful theme that helps unleash your board and what it can do for your business. Ask and answer these core questions and you’ll be on your way to a truly engaged board.
Don Yee has been CEO or an independent board member of numerous companies, from startups to multibillion-dollar businesses. He currently serves on the boards of Blue Diamond (a 2018 Private Company Board of the Year), Aerometals, Jake’s Finer Foods, Fat Family Restaurant Group, and NACD-Northern California, where he is the founding chair of NACD-Capital Valley and an NACD Board Leadership Fellow. He is also a member of the Private Company Director editorial advisory board.