McKinsey states most boards do not focus enough time shaping an agenda for the future.
Debate over the role of company boards invariably
intensifies when things go wrong on a grand scale, as has happened in
recent years. Many of the companies whose corpses litter the industrial
and financial landscape were undermined by negligent, overoptimistic, or
ill-informed boards prior to the financial crisis and the ensuing deep
recession.
Not surprisingly, there’s been a renewed focus on improved
corporate governance: better structures, more rigorous vetting of executive hires, and greater independence by non-executives, for example.
Governance arguably suffers most, though, when boards spend too much
time looking in the rear-view mirror and not enough scanning the road
ahead.
Today’s board agendas,
are surprisingly similar to those of a century ago, when the
second Industrial Revolution was at its peak. Directors still spend the
bulk of their time on quarterly reports, audit reviews, budgets, and
compliance—70 percent is not atypical—instead of focusing on matters crucial to
the future prosperity and direction of the business.
The alternative is to develop a dynamic board agenda that explicitly
highlights these forward-looking activities and ensures that they get
sufficient time over a 12-month period. The Nielson Group specializes in supporting the talent management portion of the board's key accountabilities.
The Nielson Group offers several areas to support board initiatives:
Board role clarity - formation of key accountabilities
Key talent due diligence for mergers and acquisitions
Key to any board function or dysfunction is based on how well the board’s role has been defined.
The familiar roles of a well-functioning board—such as setting strategy,
monitoring risks, planning the succession, and weighing in on the
talent pipeline—are easy to list.
But in practice, things are never
simple. CEOs and their top teams, for example, are often touchy about
what they see as board interference. Manage teams and board members must have a high trust level to leverage the relationship.
Weighty boards with years
of experience and members used to getting their own way are frequently
frustrated because they can’t intervene more actively or they feel their advice is
ignored.
It’s critical to defuse these tensions at the outset by clearly defining
the board’s role and establishing well-understood boundaries. Unless
roles are clear, the relationship between the CEO and management, on the
one hand, and the board, on the other, risks devolving into
misunderstandings, loss of trust, and ineffectiveness.
An annual
discussion between the board and management, including development of a set of key accountabilities for each member of the management team and the board provides incredible role clarity that benefits all stakeholders. The Nielson Group ensures this is always a
productive exercise.
For instance, a large Nordic investment company
creates work and role descriptions, for the board and management, that
are reviewed and approved every year. This process always generates
valuable discussions and makes roles more clear.
Unleashing the full power of key organizational talent is a key accountability of forward-looking boards. Boards are powerfully positioned to focus on long-term
talent-development efforts because they understand the strategy and can
override some of the personal ties that cloud decision making over
appointments.
Business unit managers, might be tempted to hang on to
high performers even if it is in the company’s best interest strategically to reallocate
their skills and experience to a business or role with more potential. For
example, a large media company, prompted by its board, recently
reassigned its strategic-planning director to lead digital development
projects on the US West Coast. The move was remarkably successful:
working in close cooperation with some of the most accomplished digital
giants in the United States, the business quickly got up to speed on the
newest technological trends.
Key Talent Reviews Many forward-looking boards hold annual reviews of the top 30 to 50
talents, always with an eye on those who might eventually be suitable
for key executive roles. Here’s how The Nielson Group process works. Each executive director selects, for presentation
to the board, three to five promising managers. The board receives a
photograph, educational and work background, performance
reviews over the last three years, 360 Feedback Survey results and talent assessment results. The Nielson Group organizes the
information into a executive packet and applies key information onto an evaluation grid showing categories such as goal achievement, leadership, teamwork, and personal development. The
directors then spend 10 to 30 minutes on each person, discussing key
questions and assigning the person the appropriate location on a 9-box grid.
Supporting Key Talent Development The board has an incredibly powerful role when it comes to retaining and developing top talent. How can the company coach and develop talented people? What
personal and professional development opportunities, such as an
international posting, might help broaden an individual’s experience?
What are the potential next career steps? In addition, during corporate
projects, client gatherings, and trade shows, directors should take any
opportunity to meet—and assess—upcoming executives and fast trackers
informally.
Key talent can be developed faster and retained when organizations offer coaching. Having a board member assigned as a sponsor for the coaching gives the coaching much greater importance and exposure. Hiring The Nielson Group to deliver the coaching ensures alignment between the individual, senior executive management and the board.
The key is that the board must agree with management on a sensible
approach to reviewing and developing executive talent. Appointing a board member with a
successful people-leadership track record to lead the effort is one way
of boosting its impact. Engaging The Nielson Group to partner with the assigned board member to provide the objective 3rd party work necessary ensures the impact is high-quality and effective.
