In 2023, a mid-sized publicly traded tech company faced a significant strategic challenge due to rapid industry changes and competitive pressure. Recognising the need for change, the board decided to take a look at its own effectiveness and undergo a thorough evaluation exercise and restructuring process. The results were eye-opening: the board’s strategic oversight was considered weak and the board did not have the appropriate mix of skills, with a particular gap in specific technological expertise.
 
Following these results, the board implemented several key changes, such as (i) revisiting the board composition strategy, bringing in members with AI and cybersecurity backgrounds, and (ii) introducing a digital tool to streamline board communication and decision-making. Within a year, the changes began to show results. Not only was the board’s functionality improved, but the transformation also led to a revitalisation of the company’s strategic direction.

This experience underscored a crucial lesson: by investing in its own effectiveness, the board not only overcame the challenge but also unlocked new potential for the entire organisation. The story of this company is a testament to the transformative power of a well-functioning board.

Understanding board effectiveness 

Understanding board effectiveness in the context of corporate governance means recognising how well a board fulfils its fiduciary responsibilities to guide and oversee an organisation.

This involves two critical components: the board composition and its operational dynamics. A well-composed board is diverse, with skilled members who can make sound decisions and hold management accountable. Furthermore, the way a board functions – which we call its operational dynamics – is equally important. This encompasses the processes, best practices and interactions that characterise board activities. Effective boards set clear goals, foster transparent communication and have a robust governance structure with well-defined roles and responsibilities. 


Building your game plan 

Crafting a game plan to elevate board effectiveness begins with setting clear objectives and deploying a strategy that transforms your board.

Here are some key elements that may help boards boost their achievements:

Let’s start with the basics. Undertaking an evaluation exercise as a general health check is essential to (i) understand where your board stands and (ii) identify areas for improvement. Boards can appoint an internal party, such as the corporate governance officer (CGO), an external party (e.g. a consultant, governance expert) or both in order to coordinate the board evaluation process. Although this exercise might seem cumbersome, numerous board assessment tools have recently been developed to streamline the process.

When it comes to achieving excellence in the boardroom, a thorough review of board documentation, including board materials and their level of reporting, agendas and minutes is another useful task. Boards often feel overwhelmed by the volume of information contained in their board packs, losing sight of the purpose of the paper and required action. Additionally, board papers frequently focus more on operational issues than strategic matters. Obtaining an independent review and analysis of board documentation compared to regulatory and market best practices will help boards to be better equipped to make informed decisions. 

Another crucial element for board effectiveness is the design and documentation of board processes. Clearly outlining the process and timeline of your board meeting organisation and formalising it in writing can be transformative. Adding an annual board calendar that sets out a reporting schedule for standard and periodic reports further ensures that all areas are covered over a defined period.

Reviewing the governance framework of your organisation will also be beneficial, as the board’s roles and responsibilities are often misunderstood. This should, in principle, include a review of how responsibilities are divided across the various bodies (board and committees), as well as the related delegations.


From strategy to action: implementing and tracking board effectiveness

Transforming a well-defined strategy into tangible improvements in board effectiveness requires a detailed implementation plan and rigorous tracking mechanisms.

Ongoing education and development are vital for maintaining an effective board. Regular training sessions can ensure a high level of expertise and help board members to stay up-to-date with the latest industry trends, regulatory changes and governance best practices. Whether board members are looking for practical training on board functioning or a course on the basics of cybersecurity or even a refresh on the roles and responsibilities of the board, there is something for everyone.

Integrating technology and tools in your board activities should also be a must. Boards should explore digital solutions that can enhance communication and decision-making, such as electronic board pack solutions or client portals for tracking board activities and annual reporting processes.

Last but not least, improving board communication by establishing clear channels of communication, such as regular calls or brainstorming sessions with your fellow board members, as well as your CGO, will improve dynamics. It is important for boards to embrace a feedback culture, in which they are encouraged to have open dialogue and trust each other.

To measure the effectiveness of these initiatives, boards need a robust tracking mechanism. Tracking your progress on addressing the identified gaps over time is key. Implementing and maintaining a board development action plan will ensure continuous improvement.


Conclusion 

An effective board is not just a governance necessity. It is a powerful driver for organisational success. When your board operates at its highest potential, it brings diverse perspectives, strategic oversight and robust accountability to the table.

Ultimately, investing in a game plan for increasing board effectiveness means investing in the future stability and growth of the organisation, ensuring it remains competitive and resilient in an ever-changing market landscape.

Now, are you ready to take on your next journey to increased governance?

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Emilie Ramponi
Senior Manager, Governance Services | Arendt Investor Services