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Brain Circuits
Are you a good board member?
Many board members – including chairs and CEOs – have firm ideas about governance, yet don’t know how to be an effective member of their own board. Take this short test to see if you’re getting it right.
1. True governance is about:
a) Protecting against risk.
b) Decision-making at the top.
c) Maximizing profits for the business.
d) Ensuring returns for shareholders.
Answer: (b). Governance is the art of decision-making at the top of an organization. This includes such activities as providing a clear strategic direction to the business, managing M&As, and CEO nomination. Protecting against risk and maximizing returns for the company and shareholders are essential to sustainable business but prioritizing them over good governance is putting the cart before the horse.
2. The most important element in board composition is:
a) The people.
b) Information.
c) Structures and processes.
d) The culture.
Answer: (a). All the above elements are vital – in fact, they are the four pillars of good governance – but having the right people is the most important factor. You can get everything else right but, without the right people, you will not have an effective board.
3. This quality is most useful in a board member today:
a) Mastery of the technical side of the business (such as financial literacy).
b) Being skilled in the relational/psychological side (such as the ability to manage relations between the board and senior management).
c) Strong management skills (such as the ability to impose your will on other people and the organization at large).
d) Ambidexterity (being skilled in both (a) and (b)).
Answer: (d). Many traditional approaches to areas such as risk identification are obsolete and require new strategic thinking. Ambidexterity – being skilled in both the technical and non-technical aspects of being a board member – is increasingly vital to fulfilling the role adequately because it means being able to think laterally across multiple areas. And while (c) strong management skills are useful, good leadership is about being able to take people with you, not imposing your will on them.
4. It’s not rare for individuals to sit on multiple boards. But the maximum number of directorships you can have and still perform the role well is:
a) There’s no set limit – if you know your stuff, you can apply your knowledge and experience as widely as you like.
b) One – you need to be on top of everything happening in the organization (and ideally be capable of performing everyone else’s job, too).
c) Five – being a member of different boards is hard work!
Answer: (c). Large organizations are complex to govern and being a board member is – or should be – hard work. As a rough estimate, it takes about 20% of one’s time to perform the role well. So, even if you choose to be a full-time non-executive director (NED), the maximum number of directorships you should take on is five (and many experts argue the maximum should be four or less).
Key takeaway
While the same basic principles of good governance apply, the role of the board is evolving fast, but many board members are not sufficiently prepared. Being a good board member requires hard work, dedication, and ambidexterity. To perform the role well, you should be a member of no more than five different boards.
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