Building a better board: six keys to enhancing corporate director performance

Citation

Maher, P.M., Munro, M.C. and Stormer, F.L. (2000), "Building a better board: six keys to enhancing corporate director performance", Strategy & Leadership, Vol. 28 No. 5. https://doi.org/10.1108/sl.2000.26128eab.001

Building a better board: six keys to enhancing corporate director performance

Building a better board: six keys to enhancing corporate director performance

P. Michael Maher, Malcolm C. Munro and Flora L. Stormer

Abstract This article summarizes the findings of a recent corporate governance study that was designed to answer several questions: how can a hard-working, top-performing corporate board that is ready to meet current challenges be developed? Which factors most motivate or deter directors? What most affects a director's individual performance? The authors describe six factors that can enhance the performance of board members and augment company performance as a whole.

Keywords: Boards of directors, Corporate governance, Performance, Teamwork, Directors, Selection

"A war is won with many advisors." Any company with a board of directors pays homage to this proverb, acknowledging that experienced individuals can apply their business expertise to financial, technical, and managerial issues, as well as help to define and implement overall corporate strategy. In fact, a recent US study indicates that corporate performance improves when the board of directors performs well.

But not all boards are created equal; a strong one is viewed as a competitive advantage and strategic asset that adds value to the company it serves. Spencer Stuart, an international consulting firm specializing in board of director recruiting, reveals, "The pressure on boards has never been greater, nor the expectations higher. Not all boards, however, are up to the task. Just as military leaders are often accused of planning for the last war, some boards may be best equipped to handle yesterday's issues."

...The basic human need for recognition is a strong motivator and enhances director performance...

How can a hard-working, top-performing corporate board that is ready to meet current challenges be developed? Which factors most motivate or deter directors? What most affects a director's individual performance? These questions were posed in a recent corporate governance study in which a group of senior directors were interviewed, many of whom were or had been board chairpersons and chief executives[1]. As a group they were able to draw on the experience of service on 73 boards of companies both small and large in a wide variety of industries. Based on the results of the research, six keys were identified that can enhance the performance of board members and augment company performance as a whole.

1. 1.

   Understand the impact of peer acceptance

   Ego is a powerful motivator. Without exception, directors acknowledge that peer recognition is inherent in a board appointment. Just asking someone to join the board of even a modest enterprise conveys an acceptance and approval of the individual's wisdom, knowledge, and advice. Directors understand that their performance on a particular board is being directly witnessed by other directors who may be in a position to impact future board opportunities. The desire to maintain a current appointment and perhaps secure new board appointments can trigger the energies required for top performance. Give your directors clear opportunities to demonstrate their abilities and reveal their competencies to their board peers. The basic human need for recognition is a strong motivator and enhances director performance.

2. 2.

   Check for sparks

   Associating on a regular basis with leaders in the same field of endeavor can be deeply satisfying. Directors indicate that they are motivated to work hard and perform well simply as a result of "being on the board." The enjoyment and sheer "fun" (as one director described it) of working with a particular group can produce greater effort. The mental stimulation produced by interaction with bright, experienced individuals is another significant benefit of the board experience. Thus, as is the case with so many endeavors, simply enjoying and respecting the people you work with makes you want to work harder and perform better. In short, "board chemistry" is important! Select board members accordingly, paying attention to their work experiences, personal interests, volunteer commitments, and interactions with others.

3. 3.

   Provide real opportunities to "make a difference"

   Each of us wants to make an impact, to feel our presence makes a difference. Directors are no exception in this regard.

   They uniformly agree that if their expertise is recognized within the board and their talents are sought out, they will work harder. The desire to help, to have something to do, to make a difference, is a constantly recurring theme. Board appointees are individuals of accomplishment, and their need to contribute is a powerful motivator. Bear in mind that individuals with this level of skill and experience generally have many opportunities to contribute to the business community. Ensure that your board provides an environment in which individuals with energy and talent can make a genuine difference through committee work. Further motivate your directors by acknowledging and appreciating these contributions.

4. 4.

   Communicate effectively

   Directors frequently commented on the importance of having the right information on a timely basis in order to perform well. An agenda received well in advance of the board meeting and accompanied by well-focussed material pertinent to each agenda item creates a positive attitude and motivates directors to prepare for board meetings. One director spoke strongly of the need to understand the strategic thinking of management as an important factor related to her ability to perform.

   Directors also underlined the importance of ongoing and effective communication with management and other board members between meetings. While boards commonly meet in person, directors who actively use the telephone and electronic mail between meetings dramatically expand the communications pipeline, thereby expediting the business of the board and enhancing overall board performance. The medium may not be vitally important, but the message is.

5. 5.

   Celebrate your victories

   Directors spoke about the motivation derived from participating in a company's success. They described the excitement that flows from helping a firm prosper. Working with a healthy organization, observing positive results from strategic moves, and taking the company in new directions engenders a higher level of effort and a greater desire to perform well. Several directors noted that a hard-working board communicates a level of effort that all board members try to attain. Comments such as "if others get pumped up, I get pumped up," and "I tend to work harder and longer on a board that expects more" were typical. Challenge your directors to become a top-performing team by understanding the factors that motivate individual members.

   Conversely, directors spoke candidly about the de-motivating effects of constantly dealing with crises, and the erosion of enthusiasm that can result even among the most dedicated. Unfortunately, a crisis requires peak efforts and the highest levels of board performance. Selecting some directors with crisis management experience may be a critical success factor in difficult situations.

   Corporate boards that operate for a lengthy period are eventually forced to deal with the highs and lows of a changing economy. Commemorate corporate successes to which board members have contributed. Take time to savor these accomplishments in board meetings and thereby motivate your directors. The remembrance of past victories serves to encourage board members when they are "in the trenches."

6. 6.

   Choose the board chairperson carefully

   Finally, directors pointed out that effective use of the knowledge and skills present on the board is a major factor in determining board performance, and that the board chairperson is primarily responsible for calling forth these strengths. The chairperson interested in harnessing the energy and talent of members present can do so by creating the conditions where individual board members can add value. As one board member stated, "The chairperson plays an important role in establishing the culture of a board and 'sets the tone' with respect to the board's attitude toward levels of effort by directors." The board chairperson who understands the factors that improve individual director performance holds the key to improving both board and corporate performance. A board leader should stay abreast of current research that helps to explain director motivation, always seeking to clarify his or her role in helping the board evolve into a top-performing group of select individuals.

   A hardworking, effective board is a significant competitive advantage for your organization. Improve overall corporate performance by making the most of your council of company advisors. Challenge your directors to become a top-performing team by understanding the factors that motivate individual members. Acknowledge the importance of peer acceptance and board chemistry to your directors. Give individuals the opportunity to make contributions, and remember the importance of good communication. Celebrate your corporate victories, and choose your group leader carefully. In time, another proverb may ring true in your organization: "Success breeds success."

Note

1. A lengthier discussion of this study can be found in "What motivates the corporate director?" by P. Michael Maher and Malcolm C. Munro, which will appear in a forthcoming issue of Ivey Business Journal.