3. Carve out Time for Ongoing Board Education
What does a board need to make a shift towards adopting a longer-term perspective? Rarely is board education treated as a priority, but the complexity of board agendas and the scope of what boards oversee demand it. Especially as new technologies gain traction, boards need to have a full grasp of the competitive landscape, industry trends, customer needs, and new business models. Particularly when board compensation is involved, directors should be expected to do whatever is necessary to get fully up to speed.
The CEO and management team of one cybersecurity company in Silicon Valley felt the board’s input on strategy was lacking. Management reported wanting the board to have deeper knowledge of the technology, markets, customer and shareholder needs in order to help guide the long-term growth of the business. Being able to foresee potential problems, understand the competition, and bring relevant and recent corporate experience to the table was hoped for. Yet, directors did very little, if anything, to educate themselves, despite receiving a generous compensation package. Not only did this cause the board to lose credibility with the management team, it drove a wedge between the board and CEO, limiting the potential for increased shareholder value.
Some companies and boards are taking a creative approach to board education. Bill Snyder’s piece for Insights by Stanford Business reported that the Netflix board is invited to observe monthly and quarterly senior management meetings. The board meeting pre-reading packet is concise, but includes links to the relevant data that lives on the company’s network. This level of transparency makes a huge difference when they get into the board meetings. While the time commitment is greater for directors, their discussions are informed, efficient, and strategic. This arrangement is unique, but it’s worth noting Netflix’s commitment to ensuring the board is deeply educated about the company.
4. Build a Competency Based Board
To be a truly high performing board that offers strategic guidance based on the data management provides, boards have to be competency based. Appointing highly qualified individuals who bring the necessary qualifications that fill certain gaps in the board’s overall expertise without conflicts of interest is essential. The board must operate with the absolute best interests of the organization at heart, but too often, the way boards are assembled contradicts that very notion.
When venture capital firms or corporations invest in a startup, they often require a seat on the startup’s board as a condition of the partnership, and yet, what is driving that decision? While investors might want a seat at the board table to influence strategic decisions, they should honestly ask themselves in whose best interest that really is. Just because they are an investor or represent one, does not inherently mean they have the right skill set to add sufficient value to the board and company. Someone with a background that is more relevant to the product, strategy, industry, etc. could be a better fit, and as a shareholder, they should commit to supporting the most qualified individuals for board election.
Ignoring technology and waiting to respond create risk of being disrupted. Creating opportunities for the future means investing now for the long-term, and not getting hampered by short term thinking. That requires boards and CEOs to work together to adopt a longer time horizon while employing a set of innovation metrics that guide the company’s innovation-related business objectives. It also means that boards have to be deeply educated about the business and industry in order to contribute the most value to management’s efforts. Finally, a competency-based board structure that allows highly talented, independent directors to serve will establish a strong foundation for good governance that can have lasting impact.
