I'm now involved with Boards of larger organisations with $10+ million turnover and over 200 employees, and also many organisations at the "smaller end of town". Whilst the size and operations of these organisations may be very different, the purpose and objectives of the Board are essentially the same.
Through my experience working with Boards, I have found that it is common for there to be a lack of clarity around the respective roles of the Board and the CEO. In this blog, I share some insights on how to define those roles and how to run effective Board meetings.
The Role of the Board and the CEO
Fundamentally, the role of the Board is one of governance. This means that the Board is responsible for ensuring that there are policies, systems and processes in place for the efficient and effective operation of the organisation. A critical element of this is for the Board to set the strategic direction of the organisation.
The Board are also responsible for appointing the CEO who is in charge of implementing the Board's strategy and of the day-to-day management of the organisation.
The Board should not interfere in the management of the organisation and should give the CEO sufficient authority to manage the organisation and pursue the strategic objectives set. Or to put it another way, if the Board undermines the CEO's authority, then how can the CEO be held accountable for achieving results?
To ensure that there is accountability throughout the organisation, this type of "no-by-pass" policy should be reflected from the top down. Eg the Board should not by-pass the CEO and go to management. Likewise, the CEO should not by-pass management and go to staff.
The Board Meeting
To fulfill the governance role, the Board should have regular scheduled meetings. The purpose of these meetings is to monitor the performance and position of the business and to develop strategy.
For these meetings to be effective, it is critical that a comprehensive agenda and accompanying information is made available to Board members ahead of each meeting. It is also important to ensure that the meeting is properly chaired to ensure that the discussion remains on-track.
The CEO and CFO should also be invited to attend Board meetings so that:
- They can answer any questions that the Board may have;
- They remain abreast of, and aligned with the organisation's strategic direction; and
- They can contribute their valuable insights to aid in the development of strategy.
A well structured agenda should include:
Reviewing the minutes of the last meeting
From time to time, there is a need to refer back to earlier discussions and resolutions and it is vital that the organisation has good quality minutes.
After each meeting, minutes should be circulated. The first matter of business in each meeting should be to review those minutes and to ensure that they are signed-off as a correct record of what was discussed and resolved.
Reviewing the financial results
Being charged with the responsibility of governance, it is essential that the Board exercise oversight of the financial management of the organisation. It is therefore mandatory that quality financial information is presented to the Board and that their is time in the meeting to review that information.
This financial information is also essential for good decision making.
We recommend that the Board go beyond merely looking at a Profit & Loss and Balance Sheet. In our view the Board papers should also include cash-flow projections, budget analysis and other key metrics to assist the Board in understanding how the organisation is performing.
For example, metrics on things like the marketing function and customer satisfaction can be very valuable.
There will always be matters arising which require the Board's input or decision making. As such, time should be allowed in the meeting to discuss these matters.
However, we note that matters of general business should always be tabled prior to the meeting to allow the Board to properly prepare for the discussion.
We know from experience how easy it is to get caught up dealing with the matters of the day.
However, if all that the Board focuses on is short term matters and decision making, there will be a lack of strategic direction and the organisation will suffer.
It is for this reason that we recommend that Boards set aside time in Board meetings to work on the strategic stuff that will drive improvement throughout the organisation.
Specifically, we believe that a higher level of accountability and progress can be achieved by listing business improvement strategies/projects for review and discussion at each Board meeting.
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If you would like to find out more about our virtual CFO and finance team services, please do not hesitate to contact us.
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