The Savvy Director Blog

If you’re a regular reader of The Savvy Director blog, then you know how much emphasis DirectorPrep places on the value of questions. Questions are directly related to a board’s ability to learn and understand, to think things through and make good decisions. In many ways, a board’s value lies in how well the directors question management, advisors, and each other.

As a director, asking questions helps you fulfill your fiduciary duty by satisfying yourself about what’s in your organization’s ...

It’s important for an organization to have clear goals. Goals are where the organization wants to end up, but it needs a strategy to get there. If the goal is the destination, then its strategy is the travel plan.

When faced with a fork in the road, a travel plan answers the question Which road should we take? And it answers many other questions too, such as Which routes will we avoid? What vehicle will we use? How fast will we travel? Who will navigate? Who will be along for the ride? And ho...

The question posed above by my finance professor in business school may be one of the most impactful lessons of my university education. Not sure why, except maybe to suggest that his question really hit home.

The question was pretty much a side comment to the discussion that was underway at the time and I’m not sure it resonated with others in my MBA class. But it did resonate for me. I was not even into boards yet, so, it wasn’t about that. Nonetheless it’s a powerful question I’ve brought ...

There are no HiPPO’s in the boardroom, are there? Yes, there are when HiPPO stands for “Highest Paid Person’s Opinion.”

The HiPPO effect is when the highest paid person’s opinion carries more weight than anybody else’s in the room. That’s because we subconsciously endow highly-paid people with a degree of authority that they don’t necessarily deserve. It’s human nature to believe they are smarter, savvier, and more strategic than the rest of us.

In a boardroom context, the HiPPO is probably...

When it comes to executive compensation, it’s best to be cautious about giving advice. There’s a great deal of variation across industry sectors and geography, a multitude of designs available, and many different factors to consider.

Yet the board of directors is ultimately responsible for making executive compensation decisions. It’s an important responsibility because having the right plan is a key factor in driving organizational performance.

Given these stakes, how can savvy directors...

Most of the available advice about how to improve reports for the board of directors is about content from the senior management team – reminding us that, even though it’s easy to point the finger at management for voluminous reports that are painfully dense, the board itself is accountable to ensure it receives the information needed to fulfill its role. If you, as a director, aren’t happy with the form, length, style, and content of your board’s management reports, go ahead and raise the iss...

Organizations are becoming more and more dependent on third parties to provide the services they need to stay in business – from IT to accounting, from customer service to HR, and more. And the more we rely on third parties, the more important it is to evaluate and manage our exposure to associated risks.

The board of directors plays an important role by ensuring there’s a focus on effective third-party risk management before problems arise from the increased risk exposure.

What do we me...

Whether your board serves a non-profit that competes for funding or a business that competes for market share, having a sustainable competitive advantage continues to be the holy grail.

Your competitive advantage is what you do better than anyone else. If you’re lucky, you could have more than one such advantage. The ‘sustainable’ part of the phrase refers to the ability to continue doing those things better than anyone else over the long term.

Does the board of directors have a strategic ro...

It’s happened to all of us. You’re at a board meeting involved in a lively discussion. But when you take a moment to step back from the conversation, you realize that the topic is rather trivial. In fact, it doesn’t deserve the time and energy that board members have been pouring into it.

Nevertheless, everyone has an opinion and insists on having their say. The discussion goes on and on, well past the time the relatively unimportant matter should have taken. It seems odd, because a more impo...

For me, reading and learning about artificial intelligence (AI) has been like drinking from a firehose. I could choose to ignore it and get a nice glass of water from the filtered jug in my fridge. But that wouldn’t end well.

Instead, I’ve been learning that boards today aren’t yet seeing AI as an important education topic for their meetings or board retreats. There’s some curiosity around ChatGPT, but otherwise little sense of urgency. In my view, that’s a mistake.

Does it get your attenti...