The Savvy Director Blog

The board interview – it’s a key step in assessing the fit between a board of directors and a potential new board member. But for both parties – the board and the candidate - it’s so much more than that.

Last week The Savvy Director blog focused on the ‘fit’ – or lack thereof – between a board and potential new directors. We advised using behavioral questions to uncover candidates’ fit with the board. And we provided some questions for potential directors to help determine the board’s fit with them.

So let’s say you’ve thought hard about it and you’ve got a pretty good feeling about the fit between you and a particular board – good enough to take part in an interview, at least.

What should you expect? What should your goal be? And how should you prepare?

We’re going to try to answer those questions in this week’s blog.

What to Expect

Boards differ markedly in their approach to...

Relax!  Having a conflict of interest with respect to something on the board’s agenda need not interfere with your ability to function as a high quality board director.  It’s okay to have them.  It doesn’t make you a bad person or ineffective board member.  The real issue is whether your board has a good process/policy/practice to manage and mitigate any actual or potential conflicts.

What is a Conflict of Interest? 

Let’s get the definition out of the way.

A conflict of interest is a situation in which a director’s duty to the organization conflicts with their own interest or duties to others.  A conflict of interest can come about  either as a result of a personal conflict between the director’s own self interest and their duty to act in the best interest of the organization, or as a result of a conflict of duties that the director owes to the organization and to another organization. Such conflicts of...

Someone on LinkedIn said, “Good governance is like keeping the train on track.” I like that analogy as it runs parallel to the description of the CEO who ‘keeps the trains running on time.’

You need both good direction and good execution.

You also need the third phase of the board’s work – monitoring progress.

It may have been John and Miriam Carver who described the work of the board as:

1. Setting direction,
2. Delegating authority, and
3. Monitoring progress.

In over twenty years working with boards and serving on boards, I find it’s the third step that gets dropped most often. This Winston Churchill quote says it well:

“However beautiful the strategy, you should occasionally look at the results.”

Why is looking at the results such a challenge?

Maybe it’s because evaluating the progress of not-for-profits (NFPs) lacks the clarity of stock price, shareholder value, and return on capital metrics monitored by many in the...

You’ve read the material. You’ve seen the presentation. You’ve listened to management’s request. Now it’s time for the board to make a decision. It’s an important decision, too. You’re expecting a robust discussion.

But the room is quiet. Maybe a couple of directors ask a question or two, just for clarification. Now it looks like the board chair is about to call for a vote.

What’s going on? Groupthink, that’s what. Your board has fallen victim to Groupthink.

We’ve all been there, at one time or another. I know I have. So, what can we do about it?

First, what is it?

What is Groupthink?

The term was coined in 1971 by psychologist Dr. Irving Janis, following extensive research on group decision-making. His findings came from research into why a team reaches an excellent decision one time, and a disastrous one the next.

Janis found that a lack of conflict or opposing viewpoints led to poor decisions, because...

How should a board of directors be spending its time and energy? When I serve on boards, I make sure there is plenty of room on our agendas to regularly spend time on four key topics: finance, people, strategy, and risk. I refer to these collectively as The Savvy Director’s Focus.

Board directors don’t need to be experts in these areas, but we should all have at least a basic understanding of them. And so, today’s blog focuses on what a board director needs to know about risk.

For many of us, risk is top of mind these days as our organizations struggle with the impact of COVID-19. But the board's risk oversight role is not a one-time event. Thinking about risk management as a matter of course, in quieter times, gives an organization a leg-up when it comes to responding to an unanticipated event like a pandemic.

What is risk?

Risk is defined as the potential for uncontrolled loss of something of value. For an organization, a risk is something that could...

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 how much will we spend?

So, if the organization’s strategy is like its travel plan, what kinds of questions does it answer? Keep reading to find out.

The Savvy Director’s Focus

It seems that every board of directors suffers from a time crunch. There is rarely enough time to get through a meeting agenda without rushing through the last few items. As a consequence, boards need to make sure they spend their limited time focused in the right areas.

Which areas? Strategy, people,...

Stakeholders are persons or groups with an interest in an organization who can affect or be affected by its decisions and activities. Given what’s happening in our world, it should be no surprise that the idea that organizations should be accountable to a broad base of stakeholders has gained traction, pushing the topic of stakeholder engagement to the top of many board agendas.

After all, our organizations don’t exist in isolation. They are influenced by the same forces of change that we’re all dealing with – forces like COVID-19, climate change, truth and reconciliation, social justice, activism, and so on.

Increasingly, those forces of change have uncovered evidence of an imbalance of power between corporations and their stakeholders. So now would be a great time for Savvy Directors to dive into the topic of stakeholder engagement.

Stakeholder Engagement

The term stakeholder engagement refers to the work that organizations undertake to identify,...

In a time of rapid change, it’s vital for boards to ensure they have a vibrant team with the right mix of knowledge and skills to keep moving the organization forward.

But many boards find they don’t have the right processes in place to keep their membership fresh and relevant. And boards can find that their quest for renewal is blocked by a shortage of vacant seats, as sometimes directors stay on the board for a very long time.

When is long board tenure too long? What can boards do to encourage healthy director turnover? And what is the individual director’s obligation when nearing their best before date?

Focus on Board Composition

Board composition has become an area of focus in both the for-profit and non-profit sectors, with particular emphasis on diversity, tenure, overboarding, and director skills. In the publicly-traded arena, stakeholders, investors and rating agencies are paying a lot of attention to director turnover, and with good reason.

...

We all believe that groups make better decisions than individuals. There’s power in numbers, isn’t there? Otherwise, a board of directors might just as well consist of one person.

But is it true? Do groups really make better decisions?

How do groups go about making decisions, anyway? More importantly, how should they be making decisions to improve the odds of achieving the best outcome?

And what is the boardroom reality when it comes to decision-making? Do boards really make decisions? Or has management baked the cake?

Do groups make better decisions?

Group decisions often – but not always - produce better outcomes than individuals. They work best in situations where time is not a factor. The group method is not ideal when there’s an urgent need for a quick decision. A group’s advantages include:

• Drawing from the diverse backgrounds and perspectives of more individuals.
• Having the potential to be more creative.
• Being able to achieve results beyond...

When we join a board, whether or not we have prior experience as a director, we all hope to ‘hit the ground running.'

We want to make a difference sooner rather than later.

And our boards share that wish. They want to set up their new directors for success – feeling comfortable and able to make a contribution early on. That’s why many boards hold an orientation session – a few hours devoted to helping new directors get on their feet.

I set out to find out what a new director can do to ensure they hit the ground running. I found a lot of advice out there for boards. But for individual directors who want to ensure they hit the ground running? Not so much.

Let’s explore what boards can do, then consider how an individual director can leverage that information.

An onboarding process, not an orientation session

A single orientation session doesn’t really cut it these days – if it ever did. The board may feel that its part is complete, but...