What makes great ‘Boards of Directors’ great
Lessons for the Cabinet, NGO’s and Private Sector
The Harvard Business Review, September 2002, Best Practices article titled “What Makes Great Boards Great” by Jeffrey A Sonnenfeld, began with the sub headings “It’s not rules and regulations; it’s the way people work together” and “The best boards know how to have a good fight”.
The above article contains very useful tips for the Cabinet of Sri Lanka, as well as boards of NGO’s and private sector companies.
In a section of the article titled “Building an Effective Board”, Sonnenfeld notes that good board governance can’t be legislated, but it can be built over time and states that the best bets for success needs to;
Create a Climate of trust and candour
Share important information with directors in time for them to read and digest it. Rotate board members through small groups and committees so they spend time together meeting key company personnel and inspecting company sites. Work to eliminate polarizing factions.
Foster a culture of open dissent
If you’re the CEO, don’t punish mavericks or dissenters, even if they’re sometime pains in the neck. Dissent is not the same thing as disloyalty. Use your own resistance as an opportunity to learn. Probe silent board members for their opinions, and ask them to justify their positions. If you’re asked to join a board, say no if you detect pressure to conform to majority. Leave a board if the CEO expects obedience. Otherwise, you put your wealth and reputation- as well as the assets and reputation of the company- at risk.
Utilize a fluid portfolio of roles
Don’t allow directors to get trapped in rigid, typecast positions. Ask them to develop alternative scenarios to evaluate strategic decisions and push them to challenge their own roles and assumptions. Do the same thing yourself.
Ensure Individual Accountability
Give directors tasks that require them to inform the rest of the board about strategic and operational issues the company faces. This may involve collecting external data, meeting with customers, anonymously visiting plants and stores in the field, and cultivating links to outside parties critical to the company.
Evaluate the board’s performance
Evaluate directors’ confidence in the integrity of the enterprise, the quality of the discussions at the board meetings, the credibility of reports, the use of constructive professional conflict, the level of interpersonal cohesion, and the degree of knowledge. In evaluating individuals, go beyond reputation, resumes, and skills to look at initiatives, roles and participation in discussion, and energy levels.
Inadequacy of conventional wisdom in the operations, strategic approach and working together as a team, are seen to lead to failures in governance. Board members skills and capabilities they bring to bear in their role as directors have a significant infuence on the ultimate performance. The level of independence exercised by board members is the key to avoid failures in governance. Highest performing companies have extremely contentious boards that regard dissent as an obligation and that treat no subject as ‘undiscussable.’
The structure and performance of the cabinet, the supreme board of the country, lead by the President as the CEO, as assessed from the following reported in the media, appear not committed to the above best practices;
- The sheer number of members of the cabinet makes its effective operations a nightmare.
- Important information does not appear to be disseminated as seen by the secrecy surrounding the state owned private company importing arms and ammunition and some of the key decisions on tenders and projects.
- Polarization of factions and groups within the cabinet is evident.
- Dissent is unacceptable and recent action of the CEO labelling as disloyal and removing dissenting ministers was a sure sign of this.
- A senior minister recently questioned by the media on the agreement signed with USA had openly stated that it was not his business to enquire and know about it as it was the responsibility of another ministry and that he sticks to his assigned subject only.
- Purported control of the 60 percent of the national resources and annual spend by the CEO.
- Lack of alternative scenarios, sensitivity analysis, risk mitigation strategies and assuming that oil prices will remain at $68 a barrel until 2016, as a part of the recently published 10 year national development strategy, makes it evident that alternative scenarios are not a part of the planning framework of the cabinet.
- Individual accountability appears significantly at risk with the reported operation of a parallel informal structure, where all key decisions are taken by selected Presidential Advisors.
- The inability of ministers to develop individual accountability for decision making, even in respect of their own ministries.
- Instead of dissent, what appears to be promoted are sweet words, words of praise, painting pictures of hope and success and exciting project names bearing the name of the CEO.
- The skills and capabilities of the official and unofficial “Team Sri Lanka” have yet to be published.
- Conventional wisdom to return cabinet may need the addition of an “Andare” to the team.
Chambers, NGO and business leaders should first look inwards at their own operating structures and the level of commitment to above best practices and should then demand similar practices from the nation’s CEO and his team.