Effectiveness of Boards of Directors

Effectiveness of Boards of Directors

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Effectiveness of Boards of Directors

Board effectiveness has greatly changed on the recent decades. The board of directors is the main decision-making organ of an organization, and are also responsible for the oversight accountability. Today, board of directors are required to be knowledgeable, engaged, skillful and be effective in their decisions and actions. Boards of directors are tasked with strategy review, budget making, motivation of top management, capital assessment, authorizing of expenditure and reviewing the overall performance of the company. For the company to run effectively, its board of directors should be effective and measures put in place for improving its effectiveness. Improving the boards of directors’ effectiveness is mainly done through assessment, regular training and providing an independent mentors or mentor to facilitate and improve the boards activities. Apart from the mostly used measures, other methods of improving the effectiveness of the board are discussed below.

Establishing Board of directors’ skill base; induction – the company should timely exploit the skills, knowledge and experience of new appointees, and organize and for an effective and best induction programs for both old and new board members. Induction programs should be tailored to suit individual needs so as to bring the best out of the directors. Its is of interest also to make sure that the induction period is long enough and should involve seminars, presentations and visits to key business premises and regular meetings with middle and senior management.

Assessment of board of directors – assessment of the board of directors is a key instrument used by many companies to improve the effectiveness of the board. Mostly the passements are carried out annually, but a company can make and prepare its timeline to best suit its needs. The assessment process should take into considerations, a) Clear objective for board assessment, b) Appoint a skillful leader to drive the assessment process, c) The evaluation process should incorporate the ideas and perceptions of senior and top managers who frequently interact with the directors’ , d) The evaluation process should not be restricted to compliance issues, but it should go beyond and examine effectiveness and broad issues and measures, e) The directors should review the assessment results together and address the issues that may arise (Alice, 2012). If the above principles are met, then we can get best out of the board of directors’ assessment.

Maintaining Board of directors’ skill base; development – development programs will help the directors to be effective. Board skills should undergo regular refreshment, and the programs should be designed as to take into consideration of the company’s culture and should involve assessment, structuring and feedback.

Composition of Board members – it should consist of the right set of skills i.e. appropriate balance and range of skills, knowledge and experience (Dutra, 2012). With the best composition, good decisions are likely to be made.

Size of board – for the board to be effective, its size should be correct, in that the company is directly related to its board size. Too many board members can lengthen the decision-making process and make it difficult to come into an agreement whereas few can lead to poor decisions.

Board culture – the culture of board should adhere to company’s ethics, mutual respect and trust among the members. The chair should make sure that engagement amongst the members is fruitful and guarantee that personal issues and style does not hinder the activities of the board.

My opinion is getting the right composition, induction and assessment of the board members. With the right composition, the board can make good and far reaching decisions that will positively impact the company. Even though having the right composition, annual assessment, training and having refresher programs is key to effectiveness of the board.

Reference

Dutra A., (November, 2012). A more effective board of directors. Retrieved from https://hbr.org/2012/11/a-more-effective-board-of-dire

Alice A., (January, 2012). Improving board effectiveness. Five principles for getting the most out of a board assessment. Retrieved from

https://www.spencerstuart.com/research-and-insight/improving-board-effectiveness-five-principles-for-getting-the-most-out-of-a-board-assessment#principle3