I have just completed the Institute of Corporate Director’s (ICD) program which began for me in Winnipeg last September and finished in Edmonton this past weekend. The course is offered across the country by the ICD and you can take the four modules in different cities.
It was a powerful learning experience and will help me to advise mid-market companies on adding a board of directors such as a formal fiduciary board or a less formal advisory board, improving their existing board, or how to function effectively without a board.
The first role of the board is to hire the CEO. This is less of an issue in a privately-held company with a majority shareholder, who therefore has already hired him or herself!
Next on the list in a private company is the board’s role to assist the CEO in achieving the company’s strategic goals. At my recent course in Edmonton, our group worked on this exact topic. It is management’s role to develop the strategic plan and it’s the board’s role to evaluate and approve it. Here is our framework for how a board can provide the effective oversight of strategy.
Figure 128.1 Strategic Oversight Framework
This is about the people on your board. The three major factors in building a strong board are the skills of your board, the selection of a chair, and the selection of a CEO, which is the board’s most important job in the first place.
- Competence — First, select the appropriate board members for your organization, based on their skills matrix,
- Experience — next, evaluate their industry and board experience, the industries they have worked in, the roles they’ve held, and the results they’ve achieved. Ideally, they will have worked for a larger organization then yours so they can help guide the way.
- Diversity — diversity refers to many factors that will strengthen your board, including gender, age, geography, and the various perspectives of your different stakeholders such as shareholders, employees, and customers.
A good board chair is the core of a high performing board. So, what does a good board chair look like?
- Independence — A strong chair will be independent of management so they can ask the important questions in a professional manner without being conflicted with long standing personal relationships.
- Engagement — They will be able to engage others, including the CEO and the other board members so that everyone contributes their expertise and experience to the topic at hand.
- Time — Finally, a good chair will commit the necessary time to communicate effectively and separately with the board and CEO to ensure important issues are identified, that the board receives appropriate information in advance of the meeting so they can prepare to contribute
Finally, for today, let’s talk about the CEO. Hiring the right CEO is the board’s most important job. The board, in fact, only has one employee, the CEO. A good CEO will have leadership, vision, and experience, to help the organization achieve its strategic goals.
- Leadership — the CEO will be able to lead the management team as well as work effectively with the board and major customers, and, if you’re a public company, external stakeholders such as shareholders, investors, analysts, and regulators.
- Vision — the CEO must lead the management team by creating the future vision of what the organization will look like, or is trying to become, in five or ten years. This includes what types of products and services you offer to which kind of customer in which geographic or industrial markets.
- Experience — The CEO needs a track record of success in working in the industry, with the customers, and with leading employees. It’s interesting that the most successful CEOs are internal promotions so they may have not had CEO level experience before, but they know the company or the industry.
This starts to give you a framework for effective oversight of strategy by your board.
Next week, we’ll continue our discussion by exploring the Purpose, which is the actual formulation, evaluation, and approval of your strategy.
If you’d like help on enhancing the strategic oversight function of your board and executive team, give me a call at 1-306-992-6177 or send me an email at [email protected].
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