{"id":1154,"date":"2021-03-04T13:32:41","date_gmt":"2021-03-04T05:32:41","guid":{"rendered":"https:\/\/www.praxonomy.com\/blog\/?p=1154"},"modified":"2022-10-18T06:43:51","modified_gmt":"2022-10-18T05:43:51","slug":"4-characteristics-of-an-effective-board","status":"publish","type":"post","link":"https:\/\/www.praxonomy.com\/blog\/4-characteristics-of-an-effective-board\/","title":{"rendered":"Four Characteristics of an Effective Board"},"content":{"rendered":"\n

It is no secret: an effective board of directors is critical to the success of any organisation. Clear, strategic and focused leadership that meets (or exceeds) the expectations of shareholders and stakeholders is imperative \u2014 especially in these times.<\/p>\n\n\n\n

But what are the core characteristics that allow for value-creation in the boardroom? What are some of the foundational elements that lead to board success?<\/p>\n\n\n\n

In this article, we seek to provide an overarching view of the attributes of high-performing boards.<\/p>\n\n\n\n

Enhancing Governance with an Effective Board<\/h2>\n\n\n\n

1. The Right People<\/h3>\n\n\n\n

A truly effective board calls for a mix of directors with the right skillsets, interests, industry knowledge\/experience, behavioural qualities and strong value systems. An ideal board is composed of directors who have the breadth and depth of experience to lead management while commanding the respect and confidence of their peers.<\/p>\n\n\n\n

But the reality is that there are a myriad of factors that impact the board\u2019s composition \u2014 from evolving regulatory requirements to closing a technical skills gap. However, regardless of external or internal requirements, the selection of board members should be the end result of a strategic exercise and a careful, deliberate process. <\/p>\n\n\n\n

To obtain a macro-level snapshot of where your board stands in terms of its composition, the use of a skills\/competency matrix might help. This may highlight or identify gaps and aid in the evaluation, assessment or selection of directors. See an example here:<\/p>\n\n\n\n

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Source: Kiel, G., Nicholson, G., Tunny, J.A., & Beck, J., Directors at Work: A Practical Guide for Boards, Thomson Reuters, Sydney, 2012.<\/em><\/figcaption><\/figure><\/div>\n\n\n\n

2. Diversity: Differing Perspectives<\/h3>\n\n\n\n

European countries, such as Norway and Germany, continue to advocate for gender quotas in the boardroom. More countries are expected to follow their lead. But the global movement towards diversifying boards isn’t merely a socio-cultural exercise. Studies have established the positive impact of board diversity<\/a> (gender and race, in particular) on company performance. <\/p>\n\n\n\n

A diverse board yields different perspectives. This makes them less susceptible to “groupthink.” <\/p>\n\n\n\n

Groupthink is described<\/a> as the \u201c\u2026tendency for a group to make bad or poorly thought-out decisions because its members aligned themselves with one other, insulating themselves from outside opinion and reinforcing viewpoints they already share.\u201d It places group cohesion and solidarity as a priority over independence of thought. A board with more diverse members will not as easily succumb to this mode of thinking because a greater number of personal, individual characteristics are at play.  <\/p>\n\n\n\n

Diverse boards exhibit a wider range of competencies, differing risk\/reward orientations, and approaches to stewardship \u2014 all of which make for better identification of opportunities and innovative solutions in the boardroom.<\/p>\n\n\n\n

3. Leadership: A Strong Chair<\/h3>\n\n\n\n

Great leadership attributes are required from the board, but more so from the Chair. The Chair does not only facilitate meetings, although that is critical to his role. The Chair also has to be effective in managing key relationships.<\/p>\n\n\n\n

An effective board requires a Chair who can:<\/p>\n\n\n\n