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Treading the boards effectively

A RECENT survey conducted by an executive recruiting firm found that the boards of a staggering 5...

Michael Vaughan
Treading the boards effectively

The survey – conducted by recruiters JDA Executive – also revealed 37% of the survey participants thought the make-up of the board was inappropriate and stifled debate and effective decision making. Some 27% of board members felt their opinions were ignored on important decisions.

While these statistics would be alarming to shareholders and investors, JDA group chairman Kelvin Hutchinson said the results were not surprising, given the extensive list of reasons that cause a board to function ineffectively.

These reasons include a disparity between a director's experience and the current business requirements, a lack of diversity of experience, personality clashes, micromanagement by the chairman or other long-serving members, director conformity, inappropriate board size and mix and the entrenchment of director's ideologies.

According to Hutchinson, one of the most important aspects of board management is the ability to recognise skill deficiencies and restructure in order to fit the company's strategic direction.

"Companies today are looking for directors that are committed to operate effectively within the boardroom and have the right strategic fit with a diverse mix of skills and experience," Hutchinson said.

"Besides sourcing the core attributes of a depth of executive and industry experience, exceptional communication and people skills, today's performance-savvy boards are looking for people that have the ability to ask the right questions and the added resolve to ask the difficult ones.

"Skills such as debating, on-the-spot decision making, and critical thinking are imperative to the success of the modern board environment, so too is a good grasp of interpersonal agendas so that information being presented can be assessed on its true merits."

JDA advises boards to implement succession plans by identifying talented individuals and attracting them to the board before their profile increases and they are offered positions on other boards.

"Having been a company director and chairman for many years, I understand that it is easy to look at a list that is presented and start selecting potential board members by reputation," Hutchinson said.

"Although reputation speaks volumes, companies should take stock of the diversity mix of their board prior to compiling a list of potential candidates."

Appointing a new member to a board can be a far easier task than removing an incumbent member, but JDA Executive chief executive Denise Quinn says it is a road that must sometimes a board must go down in order to function at an optimum level.

"People who are not carrying out their full commitments as board members can impede overall board effectiveness," she said.

"If the same people serve on the board year after year, stagnation occurs, leaving limited opportunity for fresh ideas and innovation.

"Rotation planning helps to remove unproductive board members and prevent boards from self-perpetuating.

"The presence of new people with varied experiences can also bring new perspectives which helps to promote creativity and imagination in board decision making."

JDA encourages self-evaluation by boards in order to consistently be assessing whether the best people for the job are the ones in the director's positions.

Reviews of board effectiveness become more important when a company is in a transitional period such as a time when a business model has become outdated, the business is changing direction, during a period of growth or consolidation or when a director retires.

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