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Too much information!

Too much information!

If we are being honest, whatever our role around the board table, whether director or governance professional, the thought of a set of board papers is unlikely to fill us with joy.

The executive team often don’t like to write them, they can be seen as a chore. For the non executive, receiving a massive set of papers days before a meeting can feel really daunting.  For the company secretary, caught between the two camps, the whole process can simply be a very stressful and thankless task.

So let’s explore these a bit more, unpack the issues and see what might be done to make life easier for everyone.


The executives

Issues

For the exec team below board level, the board can seem a bit distant and irrelevant to their day to day operations.  They may see the board as an obstacle to be overcome in order for them to get on with running the business.  They may have to write papers for internal committees – such as an Exco.  Even though the board is a different audience, the temptation will be to change the meeting title and date and send the same paper to the board.  Sometimes this will work but many times it won’t be ideal.

 

 

Tips

Having a brief guidance note for writing board (and board committee) papers which includes information about the function of the board and what it needs can give execs a better understanding of what is required and what to include in their paper to give the best chance of a positive outcome with board approval for their project.  The executive directors (usually the CEO and CFO) can also encourage the rest of their team, although much of the effort may fall to the secretariat.

 

The non-executives

 

Issues

The main problems for NEDs are often the length of the board pack and a lack of time to read the papers properly and reflect on them.  If papers are written initially for the executive team and not suitably edited for the NEDs they can be longer than necessary and contain a lot of jargon.  The execs need to understand that although NEDs are committed to the company they are not full time and sending late papers means they will not necessarily have time to read them before the meeting.  Even if they do read them, in order to make good decisions they will want time to reflect on major items and may wish to speak to board colleagues or clarify some points ahead of the meeting itself.

 

Tips

I came across one situation where updates were sent to the board via email on the morning of the meeting but this was when the directors were travelling to the meeting so was simply frustrating for all concerned.  The guilty party, although meaning well, had simply not given enough thought to this.  A better approach is to provide an oral update at the meeting and send any additional material on for information afterwards.

 

Ask the NEDs for feedback on the board (or committee) pack from time to time.  This can be done by a short survey, perhaps two or three times a year or even at the end of a meeting if there is time.  It should also be part of any board evaluation process.

 

The length of packs can be a real problem, so getting feedback on what is useful and needed (and what is not) can be a productive exercise.  One example is if a share register analysis is included with the board pack, it can run to dozens of pages but most of it is not relevant for the board to see.  It is much better to extract half a dozen pages of valuable information than send out the whole share register cut several different ways ‘just in case’ someone wants to read it.  If they do, they can ask for it separately.

 

The cosec

Issues

The cosec is stuck in the middle.  This means they hear grumbles from both sides and are the one struggling to get out a useful and informative pack on time.  “Clear, timely and accurate” information is good governance practice – but it can often feel that everyone and everything are conspiring against you.   If you get the papers in good time you can review them and make sure they are in a fit state to send to the board.  If they are late, you will likely have to choose between vetting them or sending them out in good time.

 

Tips

Make sure the exec team understand what is needed, when and why.  Have a process which you always follow and alert people in good time when you expect a contribution from them. An agenda planner should indicate what business is due to be considered at each meeting and there are a number of tools available to remind you (and your colleagues) about deadlines.  If late papers continue to be a problem then one solution is for the Chair to refuse to allow a matter to be discussed if the paper is too late.  This only needs to happen once or twice for it to have an effect.  I have also seen getting papers ready on time included in a director’s objectives for the year.  That’s how important it is!

 

 

Content

If you have a guidance note it is possible to set out some expectations and ground rules for good board papers.  Examples are:


  • Setting a word count or page limit
  • Insisting on an executive summary and making it clear up front what the board is being asked to do
  • If specific wording is required for a board resolution, this should be incorporated into the recommendation
  • Dashboards can be a really useful way to present figures, such as highlights of the management accounts and performance against KPIs.  The board will get used to seeing these and it will help them keep track of how the business develops over time
  • Graphs and charts showing trends can be more informative and definitely more accessible than rows of figures in Excel spreadsheets
  • Detailed analysis can be included in appendices

Delivery

With the wide variety of tech solutions now available and environmental concerns about careful use of resources, the days of endless photocopying and couriering out board packs should be behind us.  However, if some directors still insist on using paper it is worth checking in that they have had proper training on whatever package you have – and if you are a director who is not sure of how to get the most of the board portal don’t be afraid to ask for a demo.  Most of the portals offer more functionality than directors use.  Board members may not wish to admit in public that they are not quite on top of the tech but some diplomatic enquiries and assistance can be beneficial for all concerned.

For companies which don’t use one of the popular packages the likely alternative is emailing papers out.  This is not as secure but for smaller companies it is often the only realistic choice.

If this is what you do then sending a single pdf can be easier for people to manage than a whole lot of separate papers.  However, if you do send the papers as individual files, make sure the filenames have numbers which correspond to the items on the board agenda.  NEDs will not appreciate the extra time it will take to work out which paper belongs where – there is nothing more irksome!

Finally, try not to drip feed papers.  Ideally everything should go out together a week before the meeting.  If you cannot manage a week then at least include a weekend.  If there is a genuine reason for a paper to be late don’t hold up the rest of the pack waiting for it.  Another way round this is to send out the latest version and for the presenter to provide an oral update at the meeting or a short supplemental paper with any missing information can follow on from the main paper itself.

Conclusion

 

If you can crack the challenge of producing a great board pack which the execs feel enthusiastic about writing, the NEDs engage with because it is clear, informative and promotes discussion then the board will be more effective and the cosec can relax after a job well done!  Good luck – and remember it is a team effort…

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Battles in the Boardroom?

Battles in the Boardroom?

Healthy debate

Having and managing a healthy debate at board level can be hard to achieve, yet the quality of debate must surely tie in to the quality of decision making.   We prefer things to go smoothly and for the board to support the proposals put before it, because that is so much easier than the alternative.  However, group think and the lack of appropriate challenge can result in poor decision making.  Of course it is not natural to enjoy meetings where there is uncomfortable challenge and people disagree but I suggest we need to be bolder, embrace our differences of opinion and find paths through to positive outcomes, even if it takes a bit longer.

Boards are encouraged – even required – to be more diverse in their composition.  However, a more diverse board is not a more comfortable board.  How do we cope when others don’t hold the same view as ours on a matter?  We will have read the papers, considered a number of factors and – based on our knowledge, skills and experience – we’ll have reached a conclusion about what is the “right” answer and way forward.   What do we do?  Do we (along with the rest of our board colleagues) try to convince them to fall in line with the majority?  If we continually do that, then they may learn not to disagree and the board can return to its cosy but ineffective, state.

Is there another way?  Can we be open minded enough to seriously consider another view?  Do we respect our board colleagues sufficiently to acknowledge that they also have a wealth of knowledge, skills and experience which has led them to a different conclusion to our own?   How do we deal with it practically if the directors don’t unanimously agree on something?

It is worth making sure that everyone has properly understood all the issues and that sufficient information has been provided.  It may be that the exec team are asked to do some more work and bring the matter back to the board – which might be at the next scheduled meeting if time allows or at an extra meeting, especially convened to discuss the matter further and attempt to reach a conclusion.  With the ability to meet virtually now this should be manageable on occasion.

Of course, the hope is that most times, after a debate, the board will reach a consensus on a matter and make a decision, which may endorse a recommendation or approve it with some minor changes, but if it doesn’t the extra effort required to reach a good outcome can actually add a lot of value.

Constructive challenge

NEDs are encouraged and expected to challenge at board meetings.  This should be done in a constructive way – the careful use of questions rather than assumptions should help to put the challenge positively.  The right language and tone are crucial.    NEDs may need a quiet reminder of this from time to time, privately, by the Chair and outside of the meeting itself.

Equally, the executive team should be coached to welcome the challenge and respond to it positively.  Being over sensitive or too robust in response can cause difficulties and lead to resentment or a loss of respect.

Tension vs conflict

Tension in meetings, although difficult to experience sometimes, can be positive and demonstrate that the directors are engaging effectively with the matters they are debating.  What is both uncomfortable and undesirable in meetings however, is its near relation, conflict.   What do you do if there is an almighty row in a board meeting between two otherwise normally civil colleagues?  Even worse, how do you handle it if the disagreements rumble on over a number of meetings? 

The human aspects of managing a board can be some of the hardest.  They make getting out a reasonable length pack of papers, drafted clearly, with all the relevant information (but no clutter) on time, look like a picnic.    If there is conflict, it is all too easy to “sweep it under the carpet” and pretend it didn’t happen.  Or to ignore it and hope it goes away.  However, unresolved conflict in a boardroom can be really damaging not just to the board but to the organisation as it will distract the board and disrupt its decision making process.  The Chair (or another director if the Chair is caught up in the issue) has to have the courage to tackle the situation.  This takes careful handling of course.  Sometimes a quiet word with the directors concerned, perhaps an apology and handshake can smooth things over, particularly where it was a one off occurrence. 

If there is a more deep rooted problem which has run on for some time and the Chair does not feel suitably equipped to defuse the conflict then outside assistance might be needed.  A board review with an experienced reviewer may surface the issue, if it has been pushed to one side or left in the “too difficult” basket.  Mediation (informal or formal) may prove the catalyst to a resolution.  In extreme cases it may be that one director stands down but that should be rare. 

Tips

If boardroom behaviour is an ongoing challenge, try the folowing:

  • Adopt a code of conduct for board (and other) meetings. This can be quite brief, most of it will be common sense but sometimes when feelings run high, it can help to get people back on track.
  • Teambuilding helps to foster good relationships throughout the year, which are more able to stand the tests of tough debate and challenge. Whether it is lunch or dinner around a board meeting, or a site visit incorporating a social event with staff, or an informal event just for the board, simply spending time together and getting to know one another should help everyone to recognise that they are all equally human, with good and bad points and that there is room for tolerance on all sides.  
  • Maintaining a sense of proportion and sometimes a sense of humour can help keep matters in perspective.

 

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Committee effectiveness

Committee effectiveness

Board committees are an important aspect of governance at the top of an organisation. If the board is to be able to focus on strategic issues there are other key matters which need to be properly addressed with adequate time spent on them, without detracting from the main board agenda. So committees that function well can add much value – and the contrary is also true – dysfunctional committees can create real problems.

Which committees do you need?

For most plcs – and many other organisations, there are three key board committees – audit, remuneration and nomination.  

The audit committee will usually cover risk, although for many regulated organisations such as banks, there will often be a separate board risk committee.

You may see other committees – an ESG or equivalent committee is becoming more common as there is so much to consider and this allows the board to maintain some oversight. Some boards choose to have a governance committee (which may be combined with the nomination committee). As a governance professional I absolutely endorse having good governance practices but boards should be careful not to overdo it. Regular governance reviews and board effectiveness reviews should mean that a full on governance committee isn’t really necessary – see further comments below.

Who should be on them?

Each committee will require members with a certain level of expertise. A skills analysis (see my article) should identify where this expertise lies within the board as well as any gaps where some board briefings would be useful. This can help to ensure that all committee members have sufficient knowledge to make informed decisions themselves rather than being overly reliant on advisers.

Best practice is for the audit and remuneration committees to be comprised of independent NEDs only. The CEO may be a member of the nomination committee. However, the CFO would be expected to attend audit committee meetings and the Head of HR would typically attend remuneration committee meetings. Careful advance agenda planning is essential to get this to work smoothly, particularly for the remuneration committee, where you may need some commentary from the CFO on targets and input from the CEO for other executives but neither should be present when their own remuneration is discussed. Regular communication between the committee secretary and the committee chair in the run up to the meeting can aid this process.

Meetings

As for any meeting, a clear agenda, sufficient time for questions and debate on items before the committee are required to make your committee meetings run well. Committee chairs may have been appointed for their particular background knowledge but that will not necessarily make them a skilled chairperson. Board effectiveness reviews should draw this out, however it is obviously better if any emerging issues are tackled as soon as they become apparent. Some coaching from the board chair, SID, or an outside adviser can be beneficial, particularly for someone who has not had to fulfil such a role previously.

Delegation and reporting back

Clear delegation is key, so that the committee members understand their remit. Terms of reference should be in place and regularly reviewed. The committee secretary can assist the committee chair in making sure all areas which are within the terms of reference are covered at appropriate times. Good practice is for minutes of committee meetings to go to the next following board meeting for noting (subject to any issues of confidentiality or potential conflicts of interest). The committee chairs may be asked to give a brief report at the board meeting but this should focus on a few main issues and not be a repeat of the debate at the meeting.

When is a committee not a committee?

It is important to have a clear and purposeful governance framework in place, to allow the organisation to get the most out of the expertise of the directors in the time available. Some committees will be better kept within the executive – for example an ESG committee might be best handled in that way. There may be other projects where a temporary “working group” is the best option – for example if there is the need to review the governance framework and documents from time to time. The group should have a specific set of tasks and outputs to be delivered within an agreed timeframe. It can then be disbanded leaving time and energy for whatever is the next challenge.

Conclusion

Well run committees can contribute much to board effectiveness. There should be some consideration of how effective they are during your board review. Agreed actions for improvement can be included on the overall action plan from the review.

Further reading

The Chartered Governance Institute (UK & Ireland) has for many years provided model terms of reference for committees which can be found on the resources section of their website. You have to be a member or a (free) subscriber to access these. As well as templates for audit, remuneration and nomination committee terms of reference you will find them for risk and ESG/sustainability committees.  

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Diversity and all that…

Diversity and all that

As some large US corporates are ditching their DEI initiatives to stay on the right side of the new administration you may be wondering what on earth is going on and where it will all end. Most of us won’t be in a position to influence those kinds of decisions but we can still strive for good practice for our own boards and choose not to follow that particular trend.

Following on from my previous posts, once you are clear on the direction of travel to achieve your desired strategic outcomes, it is time for the nominations committee to review the board composition.  People issues can always be sensitive but following an objective process gives you a sound foundation on which to base decisions about the future membership of the board. The combination of a skills analysis together with a review of the tenure of NEDs should be sufficient to start the conversation about board succession.

Skills analysis

There will be a core list of skills, knowledge and experience which most boards want. Then there may be other more specialist attributes which tie in to your particular strategic aims. Conducting a skills analysis of your current board members (or refreshing a previous one) has to be the starting point when considering future board composition. I find the best way to do this is to get each director to rank themselves against the list of the top 10 to 12 skills which your board needs and to provide some evidence of what they have done in a particular area to merit that ranking. Most board directors are sufficiently self aware and mature to do this well. The Chair and governance lead can then moderate the results and make tweaks if necessary. I have had more occasions when an increase in the rating was justified than times when someone had perhaps exaggerated their abilities.

The nominations committee can review the output against the future needs of the board and do a gap analysis to inform any recruitment process. The analysis may also highlight some areas on which the whole board would benefit from an expert briefing.

Tenure

The matter of executive director succession planning can be quite a challenge to navigate but boards ignore it at their peril. If the person has only recently been appointed and is performing well, or if they have been in post for a very long time and have indicated their wish to move on, then the situation may be fairly straightforward. Often the tougher call is when someone has been on the board for several years and a decision needs to be made about whether they are still the right person to continue, particularly if the organisation is facing a period of significant change.

NED succession should be easier – at least in theory! Best practice indicates that after three terms of three years NEDs may no longer be considered to be independent and it would be appropriate to plan succession after that. This can occasionally be contentious but you need to start somewhere.  There may be circumstances which mean it is desirable for a NED to stay on a little longer (or to stand down a bit earlier). It is the role of the Chair to manage this process and have the courage to have the necessary conversations. This is much easier if they are supported by the deliberations of the nominations committee. When Chair succession is the issue, a Senior Independent Director or if there is none, the most appropriate NED would be tasked with dealing with the matter. Once you have a NED succession plan, the skills you will be losing as individuals stand down can be factored into your gap analysis.

Pitfalls to avoid

Some of the things I have come across are:

“Our board is great, we have four members who have been CEOs.”
“We have lots of CEOs and CFOs to choose from so we are not considering anyone else” (for a NED role).
Boards always wanting people with experience of the same sector, first and foremost (for every new NED appointment).

You can see (I hope) that these approaches will not lead to a board which encourages diversity of thought from individuals with different backgrounds and experience. They can all lead to the dreaded “group think”. If the board is open minded enough to consider a more diverse range of candidates then they may be pleasantly surprised by the unexpected and discover that the board’s effectiveness is boosted by some fresh thinking.

A true story

 

 

 I will end with an anecdote from an all male board I worked with a long time ago. They were hiring a new NED – they improved diversity on the board by appointing someone who was not called John…

If you would like some assistance with a skills analysis for your board or with any other board governance and effectiveness initiatives please get in touch – lorraine@lorraineyoung.co.uk or here. 

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What is your strategy to keep the board strategic?

How to keep your board on track

The first of my five reflections for your board this year was “Is the board spending its time on the key issues?” So how does the board stay focussed on what it should be doing? The first point to consider is the board’s involvement in strategic planning as this will overarch everything else and can help avoid directors becoming distracted with operational detail.

How do you deal with strategy now?

Many boards have an annual strategy day to consider where the company is heading. Sometimes this is a fundamental review, with initial “blue sky” thinking followed by the development of a new strategic plan. Other times, the board reviews progress against the current plan and maybe tweaks it here and there to take account of recent and upcoming changes. Occasionally life (corporate activity, tough trading, unexpected developments) can mean that the normal board agenda is interrupted. If that was the case for you in 2024, then the start of a new year is a perfect opportunity to get back on track.

So who leads on strategy – and who should do? Often the executive team (directors and other senior managers) will have their own session to develop the strategy and then spend a lot of time preparing informative presentations which they “pitch” to the board. The NEDs acknowledge that this is a valuable opportunity to assess the executive team and see how well they are doing. Are there any rising stars where some carefully targeted talent management could result in them joining the board one day? However, it can also mean that the board is presented with a fully baked plan which it is asked to endorse. This then misses out on the opportunity for the whole board to contribute and for the executive team to benefit from the knowledge and experience which the NEDs bring.

How could you do things differently?

There are a number of ways to change the process and get the best from it.  For example, going offsite rather than being in the organisation’s own office can prevent interruptions and distractions. Using an external facilitator for the whole day or outside speakers for certain sessions will provide fresh persepctives. Ground rules, such as only looking at phones in the breaks can ensure better concentration on the task in hand.

The programme might benefit from the following:

  • Dedicated time for horizon scanning for risks and opportunities eg geopolitical developments, macroeconomic trends, technological advances, climate change, the evolution of the competitive landscape and so on
  • Preparing open questions and allowing plenty of time for discussion – don’t pack the day with presentations. The NEDs may actually get a better idea about emerging talent from a discussion than a well rehearsed presentation
  • Encouraging constructive challenge and debate
  • Having conversations in smaller groups if the board and exec team together is quite large.
  • Holding a board/exec team dinner for some pre or post strategy day discussion or to explore a particular topic in a more relaxed environment.

At the end of the day, check that you have set appropriate milestones and KPIs – both financial and non financial and decide when you will hold a follow up session and what you aim to achieve by then.

Conclusion

If you decide you want to do things differently in 2025 then the checklist below should get you started.

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My top 5 new year’s resolutions for your board

My top 5 new year's resolutions for your board

It’s that time of year again and I freely admit I have not made new year’s resolutions for a very long time.  It saves such a lot of disappointment when (never “if”) you break them.  I prefer to go for continuous improvement all year round!

However, the turn of the year can be a great time for some reflection.  In those few (hopefully) quieter days before everyone is back at their desks and fully functioning again it’s good to take a breath and think about what went well in the last year and what you might expect in the next – fully recognising that reality rarely matches any forecast.  

How might that work for any boards that you are on, or support?  Here are my top 5 things to consider for your board in January as you plan for the coming 12 months.

1. Is the board spending its time on the key issues for the business?

  • Are discussions strategic or does the conversation get mired in operational detail?
  • Does the board consider risk at an appropriate level – what are the high level risks to the organisation achieving its strategic aims?
  •  Does the board spend time “horizon scanning” to identify new and emerging risks – and opportunities?
  • Are we stuck in a rut – are there new areas we should be focussing on, such as the impact of AI both internally for business operations and externally for our customers and other stakeholders?

I find a board planner to be an invaluable tool to keep the agenda on track.  It is a live document which evolves as the year progresses and gives a rolling 12 month look forward at what the board will be considering. Reviewing this in light of the above questions can help refresh the conversations and reinvigorate the board.

2. Do board members' skills need a refresh?

Once you have the board planner in good shape the nominations committee can compare the knowledge, skills and experience of the current board members against what is required to take the business forward. This may lead to conversations about board development and/or succession planning.

3. Do the committees work well?

Given all that the board has to cover, are the delegations to committees working effectively?  And do board members who do not serve on particular committees feel properly informed about what goes on?

4. Is there healthy debate and challenge?

Is there any debate and challenge or is the board perhaps a little too comfortable? It’s very pleasant when everyone agrees but that should lead to the question about whether there is a danger of “group think”. Healthy debate and constructive challenge should mean ideas and proposals are properly tested before decisions are made and mistakes can then hopefully be avoided.

5. Is the board properly informed?

The age old issue of board packs still seems to be as relevant as ever today. Papers can be alarmingly long and deadlines for packs to go out can get ignored or missed. It’s worth reviewing packs regularly and inviting feedback from the board about possible changes to help them engage most effectively with the discussions in meetings.

So those are my top 5. What would you like to change for your board this year? Do send us your comments and look out for some more tips and insights on improving your board’s effectiveness over the coming weeks.

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