In simple terms, board packs bring the board up-to-speed with what’s happening in the business prior to board meetings. But that definition, albeit true, is somewhat one-dimensional and underestimates how integral they are to board meetings. Board packs define and shape the discussions of board meetings, and its contents underpin the decision-making process of the board. The information presented in board packs become the basis for the strategic direction and the risk appetite of the organisation.
It is not far-fetched to state that an effective board pack is necessary for an effective board.
CURRENT CHALLENGE PRESENTED BY BOARD PACKS
Today’s regulatory environment has impacted the preparation and compilation of board packs. Senior management and executives often err on the side of caution when preparing board pack data and reports so as to ensure compliance and transparency. The end result is often a board pack that can easily run into hundreds or thousands of pages (and that comes with a definitive financial impact). But what’s not so obvious is that this can undermine and impede the board’s ability to function effectively.
The board is given a prescribed time frame to absorb, question, and challenge what is presented in board packs. If the board is inundated with data that lead to sheer information overload, directors might not be able to see and/or build the “Big Picture” that is so critical for strategic decision-making. The board pack loses its purpose and value in this scenario.
Having said this, below are some suggestions on how to build effective board packs that offer concrete value and insight.
SEVEN RECOMMENDATIONS FOR CREATING VALUE-DRIVEN BOARD PACKS
1. Filter your content
Directors rely on good, credible, and insightful information. Before including information in board packs, it would be worthwhile to subject it to this well-defined “litmus test”:
- Can directors trust the data?
- Does it cover critical issues?
- Is it sufficiently up-to-date?
- Is it presented in a way that directors can digest it quickly?
- Is the information purely historic or does it assess future risks?
- Do directors receive summarised information or data?
Answering this set of questions in the affirmative ensures that data has been “filtered” to make it meaningful for directors.
2. Include looking-forward information
While it’s true that board packs provide a historical snapshot of the business, it is just as important to emphasise future events, exposures, and possible risks (e.g. cyber risk). Forward-looking information aids the long-term planning and strategic functions of the Board. Forecasts, trends, and projections are invaluable pieces of information.
3. Identify KPIs
The board should be engaged in the identification of Key Performance Indicators (KPIs) that they would like/need to see in every board pack. The KPIs should balance financial metrics (e.g. P&L statement, balance sheet, etc.) with non-financial indicators (market share, demand, sales pipeline, etc.).
Engaging the board ensures that performance reporting is lined up with the organisation’s objectives, principles, and processes.
In addition to these, the use of dashboards for KPIs and other metrics often help make information more digestible.
4. Well-written board packs go a long way
Board packs should be structured and easy-to-navigate. Templates are useful for structure in this regard. Indexing, labelling of pages, executive summaries, and supplementary information should be annexed or be labelled as exhibits.
Well-written board packs are written in the active voice, contain short sentences, and use simple language. In terms of structuring content, apply the “inverted pyramid” method as discussed in this blog article.
5. Company secretaries play a vital role
The role of company secretaries can be of significance in the preparation of board packs. They can establish and monitor reporting lines, deadlines, and length of papers.
Deadlines are important because it determines when – and how much lead time – directors have to study the board pack prior to the meeting. Board packs should be typically delivered to directors at least seven to ten days before the board meeting.
In addition, by managing rules around the length of board documents, company secretaries help ensure that board pack authors are more mindful of creating reports that are not only shorter, but are also focused on the issues that need attention and prioritisation by the board.
6. Insert assessment of the board pack as an agenda item
The board can demonstrate its commitment to continuous improvement by including the assessment of board pack as an agenda item. Feedback can then be communicated to board document and report authors.
7. Use a board portal
Consider the use of board management software, or board portal solutions, that allow for the distribution of digital board packs. Digital board packs not only eliminate the hassle of carrying around volumes of papers that are unwieldy and overwhelming, but they are cost-effective and more secure. Updates can also easily be made so that directors work with the latest information. Furthermore, board portals offer the ability to make inline annotations and markups, or even exchange comments, directly on documents.
THE EFFECTIVE BOARD PACK BLUEPRINT
Steven Dunn, a senior partner at Frog Capital, applies the Kaplan and Norton balanced scorecard approach to building an effective board pack. He states that, on a high level, the architecture of a good board pack addresses the following points:
- Customer perspective (How do customers see us? – client acquisition, churn, penetration, new product take-up, satisfaction ratings, references)
- Internal business perspective (What must we excel at? – unit economics, product innovation, lead times, staff retention and development)
- Learning and growth perspective (Can we continue to improve and create value? – life cycle to product maturity, time to market versus the competition, market dynamics, responding to competitors or substitutes)
- Financial perspective (How do we look to shareholders? – sales growth, cash burn contribution margins, fixed overhead build, capex, trade debtors)
In addition, Mr. Dunn adds this:
- Governance perspective (How would we look under investigation, could be regulatory, litigation or due diligence related – minutes, actions, fiduciary duty disclosures, controls, reviews)
With this macro perspective, a board pack can be designed and built.
SUGGESTED BOARD PACK CONTENTS
Board packs vary in terms of structure and content from company to company, but it usually includes the following:
- Minutes of the previous meeting
- Documentation supporting items that require approval/decisions
- Business updates (financial, non-financial, risk indicators)
- Trading performance (when applicable)
- Progress with key initiatives
- Action Items
When creating board packs, there are two things to consider:
Start with the end in mind. Board packs are designed to support strategic decision-making and the management of risk for the organisation. To overwhelm directors with data without clear insight or focus diminishes their capacity to perform their responsibilities in an effective manner. Information in board packs should always seek to address the “What Does This Mean?” question.
Quality over quantity. Large volumes of information does not necessarily equate to thoughtful analysis. On the contrary, boards derive more value from data that is “filtered” and “drilled-down” so as to be concise, sharply focussed, and render insight.
It cannot be emphasised enough: the board is highly dependant on the value it is able to derive from the information presented to them. The board pack is a springboard not only for high-value, impactful, and effective board meetings, but ultimately also for good corporate governance.