Top Boards Do These 4 Things Differently

Reviewing financial statements, audit activities, and compliance activities are all part of the work required of board members to keep the company running on the right path. But the most successful boards do far more than this, focusing on more forward-looking, value-creating, strategic issues. 

Earlier this year, Russell Reynolds Associates surveyed 750 board directors about where their board prioritized its time and energy in the preceding 12 months. When we combined that data with insights from our work, and discussions with other directors and outside experts, what stood out was a group we call “Gold Medal Boards,” those that rate themselves as operating in a highly effective manner and that oversee a high-performing company (one that has outperformed relevant total shareholder return benchmarks for two or more years consecutively). The data around this group is clear: Gold Medal Boards don’t spend any more time on their work than other boards, but they spend their time in vastly different ways. 

Gold Medal Boards were 10 percentage points more likely to list strategic planning or review as a top area (69% vs. 59% for the broader director population), 7 percentage points more likely to list oversight on major transactions (36% vs 29%), and 6 percentage points more likely to list CEO and management succession planning (29% vs. 23%). Along the same lines, Gold Medal Board directors were also more likely than others to report engaging in enterprise risk review, board refreshment activities, and crisis management scenario planning. 

It’s not that these boards don’t fulfill their review and compliance responsibilities. They absolutely do. But they don’t spend any more time than is necessary, and they use the time they save to focus on more value-add work. Gold Medal Boards were 17 percentage points less likely to list financial statement review as a top area (11% vs 28%), 8 percentage points less likely to list audit-related activities (3% vs 11%), and 7 percentage points less likely to identify compliance-related activities (6% vs 13%). 

Beyond simply asking Gold Medal Board directors how they spend their time, we also asked them to tell us how their board operates. Four best practices for board leadership emerged: 

1. Refocus the board agenda

Gold Medal Boards spend their time in looking forward, not back. The full board needs to move beyond an agenda heavy on reviews of financial statements and audit reports, and realize that the big picture is unlikely to be found in the rearview mirror. The most important — and most impactful — activities are forward-looking ones: strategic planning, CEO and management succession planning, and improved oversight of enterprise risk and M&A transactions. These activities help the company create its future. 

2. Make debate a top priority

On Gold Medal Boards, board members and committee chairs acted as facilitators. In this role they fostered high-quality debate, built trust among the directors and with management, actively sought out different points of view, and ensured that everyone was contributing their experience and expertise. All of these activities help to ensure that the board gets maximum value out of its time together and reaches decisions that have been fully thought through. 

3. Give clear feedback

Gold Medal Boards make sure they are giving directors clear performance feedback. There should be an annual assessment of each director’s contribution, with the board chair (or another senior director) responsible for giving clear and actionable feedback and coaching to each director. Additionally, boards need to move beyond survey-driven assessments that provide almost no qualitative insights into the board’s overall effectiveness. Strong feedback leads to strong performance. 

4. Be present and ready to speak up

When individual directors are distracted, overall board performance drops. This isn’t just about ignoring their phone during meetings. Directors need to be present themselves and help keep fellow members focused on the matters at hand. Actively listening, speaking up and encouraging others to do so are all important. Finally, a willingness to speak up and avoid groupthink is essential to making good board decisions. Reviewing financial statements, audit activities, and compliance activities are the responsibility of the board, not the mission of the board. The most successful boards not only know this, but they craft their work and interactions to reflect it. 

Reviewing financial statements, audit activities, and compliance activities are the responsibility of the board, not the mission of the board. The most successful boards not only know this, but they craft their work and interactions to reflect it.     

Authors: Rusty O'Kelley III, PJ Neal