Evaluating board maturity: essential steps for advanced governance
I recently had a conversation with a CEO who said his board was looking for a new advisor. They felt they had "outgrown" the ones they had worked with for years. Too much of their board and retreat time was being taken up with fundamentals. They were ready to move on. He was curious about what I offered.
This caught my attention. I hear this sentiment from time to time; but it is rare. It wasn't surprising to hear that they focused on the fundamentals. Most boards lack a firm grasp of fundamental governance principles. I'd go so far as to say that 8 or 9 out of 10 boards could be described this way.
Your average board director is intelligent and respected within their communities. But they often don't receive meaningful governance training. Instead, they follow established board norms without questioning them, which can lead to significant governance failures.
Consider Enron, Wells Fargo, Volkswagen AG, Theranos, and, recently, Boeing—all have boards filled with recognized experts. However inadequate oversight caused or allowed them to make serious and damaging errors. This is most starkly illustrated by Barney Frank, co-author of the Dodd-Frank Act (passed following the 2008 financial crisis) and a board member of Silicon Valley Bank while it collapsed. Having brilliant board members doesn't guarantee effective governance.
The point is that, for different reasons, consultants and experts can 'misread' where a board is at. Frankly, this is most often due to just being lazy. But sometimes it is due to just not being clear about what to look for.
For my benefit, and hopefully, for yours, I decided to build a framework to evaluate the maturity level of a board and what it needs to focus on at each level of maturity. Use this quick reference guide to evaluate where your board might be now and what it likely needs to focus on.
How mature is our board?
#1 Sub-Optimal Boards:
#2 Developing Boards:
#3 Mature Boards:
Recommendations for each maturity level
You've identified the level you believe your board is at. What do you do next? Here are a few suggestions:
#1 Sub-Optimal Boards:
#2 Developing Boards:
#3 Mature Boards:
How to review where we are
Board performance reviews are a best practice. But this is rarely done. They can feel awkward, and directors are often unsure of how to evaluate themselves.
I encourage a conversation instead. Encourage reflection and conversation around these questions:
General Understanding and Engagement
#1 How well can you describe the primary roles and responsibilities of the board?
#2 Can you outline the strategic goals of the organization and how the board contributes to these?
#3 How do you prepare for board meetings?
Decision-Making and Oversight
#1 What process does the board follow for making major decisions?
#2 Can you give examples of recent strategic decisions made by the board?
#3 How does the board evaluate and manage risks?
Training and Development
#1 What type of ongoing training or professional development does the board receive?
#2 How often does the board review the executive's performance, and what metrics are used? How is this information used?
Communication and Collaboration
#1 How does the board handle disagreements or conflicts among its members?
#2 What has been the board's biggest challenge in the past year, and how was it addressed?
Conclusion
This framework is a simple but powerful tool you can use to assess how your current board is functioning and what it needs to focus on.
Christian Muntean is a seasoned expert in fostering business growth and profitability. With a Master's degree in Organizational Leadership and certifications as a Master Coach, Certified Exit Planning Advisor (CEPA), and International Mergers & Acquisitions Expert (IM&A), he guides entrepreneurial leaders through growth, succession planning, and exit strategies. He is an accomplished author of three books, including Train to Lead. Christian resides in Anchorage, Alaska, with his family. Learn More » |