Roles & Responsibilities of an Effective BOD

“A really good board is one that only reduces the efficiency of the company by 20%”

5 Key Roles for a BOD

1. Financial Oversight

2. CEO Management

3. Setting Long-term Strategy

4. Succession Planning

5. BOD Governance

To build an effective and successful organization through…

1. Financial Oversight: The Watchdog Role

Prudent

Ethical

Reasonable

Legal

GAAP

Auditor’s Report

Monitoring Health, Performance and Risk…

However…

Unless the business is in a financial crisis, the BOD should spend no more than 20% of a BOD meeting on reviewing and approving the financials.

2. CEO (President) Management

• To select, encourage, advise, warn, evaluate, compensate and… if need be… replace the CEO.

• The BOD directs NO staff but the CEO.

• Most BODs do a VERY poor job in CEO evaluation, development, and performance coaching.

• An important role of the BOD is the informal advising and coaching of the CEO between BOD meetings.

• The most important thing the CEO needs

from the BOD is honesty and candor.

The five keys to accountability

1. 100% Clarity + Appropriate Authority

2. 100% Agreement

3. Track & Post

4. Coach, Mentor, Train and Support

5. Reward Success / Punish Failure

3. Setting Long-Term Strategy

Discuss, debate, adjust, review and approve strategic direction

What the BOD does NOT do…

Build the planGet into tacticsEstablish policies

BOD as Strategic Thinkers

Five Foundations of Effective Strategic Thinking

Business Acumen

Personal Experience

Pattern Recognition

Strategic Insight

Disciplined Execution

The Four – I’s

Ignorance

Inflexibility

Indifference

Inconsistency

How to avoid the Four I’s

• Aggressive external market focus.

• Aggressive customer focus.

• Keep the “Main Things” the main things.

• Bullish on knowledge sharing and learning.

• Passion and commitment at all levels.

• Foster a healthy paranoia.

• Revel in change.

These are ALL key roles of an effective BOD

From the CEO of a little 182 billion dollar company…

“Look, what is strategy but resource allocation? When you

strip away all the noise, that’s what it comes down to.

Strategy means making clear-cut choices about how to

compete. You cannot be everything to everybody, no

matter what the size your business or how deep its

pockets. You have to figure out what to say “NO” to.”

Jeffrey Immelt

4. Succession Planning

Talent

How the BOD facilitate succession planning

• Assisting the CEO in identifying top talent.

• Ensuring the CEO has formal talent development and succession plans in place.

• Ensuring those key individuals get the support, guidance, resources and experiences needed to fully develop them.

• Offering direct support, advice, mentoring and encouragement to the key leaders.

5. BOD Governance

THE most important responsibility of the BOD

• Attendance

• Agenda

• Information Flow

• Focus on Strategic Issues

• Committee Work

• Accountability

• Decision Making

• Behavior

• BOD Evaluations

• Continued BOD Development

These are ALL peer-to-peer BOD issues

When properly self- governed the BOD can be an incredibly valuable strategic resource

ExpertiseExperienceNetworkPerspective

Ram Charan: Three Key Drivers

Focus on Substantive

Issues

Group Dynamics

Information Architecture

Ram Charan: Contributions that Count

• The right CEO and succession

• CEO compensation

• The right strategy

• The leadership gene pool

• Monitoring performance and risk

BOD as High Performance

Team

Results

Accountability

Commitment

Candor / Vulnerability

TRUST

5 Dysfunctions of a Team

• D

• M

• C

• C

• M

• D

irection – vivid, clear, inspiring --- shared

easurements – specific, observable, focused

ompetence – very good at what they do

ommunication – open, honest, courageous

utual Accountability – all team members

iscipline – do this every day

Elements of a High Performance Team

An Effective BOD… 1 - 10

1. Has full attendance -- everyone has done their homework -- all committee work has been completed.

2. The financials have been thoroughly reviewed by all in advance.

3. Keeps each other out of the weeds – stays on the strategic issues.

4. Requests the appropriate type and amount of information from staff.

5. Asks the tough questions and challenges the CEO and each other.

6. Pushes hard to look at issues from multiple angles, plays Devil’s advocate, explores possible scenarios.

7. Has an effective decision making process and a strong sense of urgency to make key decisions in an appropriate time frame.

8. Engages in rigorous debate – but speaks with ONE voice after the meetings.

9. Maintains the balance between control and support of the CEO.

10. Takes BOD effectiveness, evaluation and development VERY seriously.

Workshop

• In your teams, determine what you all agree are the top FIVE most important characteristics of a highly effective Board member? What do you need to do in order to be a stellar BOD member?

Strategic Workshop

What does your team feel are the THREE most important strategic issues facing your industry in the next 5 years?

THANK YOU

If you have any questions at all please do not hesitate to send a note or call.

My email address is: john@johnspence.com

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