Top Boards Do These 4 Things Differently
Jack "Rusty" O'Kelley III, PJ Neal
The Harvard Business Review article, "Top Boards Do These 4 Things Differently," was written by Russell Reynolds Associates Consultant Rusty O'Kelley and Russell Reynolds Associates Thought Leadership Architect and Lead, PJ Neal. In it, they describe how the most successful boards go above and beyond their regular duties. The article is excerpted below.
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.
To read the full article, click here.