Assuming you’ve been successful in your quest for growth by gathering the right balance of executive, non-executive and independent directors with both commercial acumen and governance understanding, now what?
You may be faced with the task of embarking on a journey of governance yet feel ill-equipped to decide what to do next. The board, once formed, becomes a unit that operates as a whole.
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This requires some start-up activities to formalise new relationships and provide direction. Here are ways you can take that next step:
Get to know each other
A high-performing board is built on the foundation of effective relationships, which take time to develop.
As a team you evolve and deepen your mutual understanding and respect with each board meeting.
The start of this journey can be enhanced by getting to know each other outside the board room and by assuming that you are all in it for the long haul, and therefore invested in each other’s success.
Agree on a governance methodology
Each director and executive will have his or her own opinion of what governance means and how one should go about its effective implementation.
In agreeing on a single comprehensive methodology, you ensure that all directors share the same picture of what they are responsible for and what a high-performing board looks like.
Without this agreed framework in place, precious time can be wasted arguing procedure rather than unlocking value. Stick with the methodology you choose.
Formalise the terms of engagement
Clarify what it means to be a high-performing director in your company and formalise your board culture and the expectations you have of each other in a board charter.
This policy sets clear principles on board values, such as trust, respect, and candour, and scope and functions.
This should include meeting frequency, minute-taking procedures, voting rules, and specific responsibilities bestowed on the chairman. It should become a governing or guiding document to support the board.
Even though the annual board evaluation process holds directors accountable for the terms agreed, the board should hold itself accountable to this charter in every engagement.
Give management appropriate power
In a privately-held company, the executive team members are most likely familiar with making their own decisions and not having to follow a set of ‘rules’ provided by a board. Ironically, this is one of the areas of greatest positive impact that a newly formed board can make.
In providing specific guidelines on what management can or cannot do without board approval, known as a delegation of authority, there is an immediate reinforcement of sound decision-making.
Maverick business leaders may balk at having to explain their rationale or having their plans questioned, yet this should strengthen the company and the maturity of its decision-making.
Plan the year ahead
Governance brings with it a whole new drum-beat for a business. There are many new things to consider and implement in the early stages. Planning is critical in establishing a new business cycle that builds momentum and gets the process flowing.
As such, it is highly valuable to agree board-meeting dates for a year in advance and plan the themes and focus areas for each board meeting in a way that supports the natural cycles of the business. For example, if your financial year-end is February, approve your business plan and budget prior to this date.
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Before you can approve your business plan you need to have an agreed strategy.
Planning each of these steps into your calendar, when most appropriate, ensures a comprehensive approach while establishing momentum and energising progress.