So what does a board actually do? (Part 1)

So what does a board actually do? (Part 1)

The Work of the Board

I am often asked this question – many times by people who run successful businesses and who fail to see the value added by implementing a proper board structure, something they often see as a ‘necessary evil’!

I want to answer this question in a three-part series by addressing three pillars of governance that highlight the things that should be at the top of mind when a board sits to deliberate. These three pillars are;

  1. Establishing Policy
  2. Decision Making
  3. Exercising Oversight

Pillar 1: Establish Policy

The principle ‘tool’ in the hands of directors is policy. ‘Policy’ is the highest level of thought in any organisation and when well-formulated provides a comprehensive and cohesive framework within which the company can operate effectively. Ultimately it is good policy that determines procedure and process in all areas of the business and in the end ‘gives life’ to the behaviour of the people doing the work. Lack of good policy means that the business operates in a vacuum – and of great importance, people are neither guided nor protected!

A few key characteristics of good policy are that it

  • Is based on the organisation’s strategy. Without a robust focused strategy, all policy making runs the risk of simply becoming bureaucracy and red tape. It is strategy that aligns and gives meaning to policy – and every policy needs a meaningful ‘why’ to ensure that people follow it. Strategy is ultimately answering the question ‘what is your difference that makes a difference?’ policy translates the answer to this question into organisational structures, procedures and processes that enable the delivery of this ‘difference that makes a difference’.
  • Facilitates the business model of the business. Each businesses ‘difference that makes a difference’ must also make sense from a business model perspective. Business modelling is, in a nutshell, ensuring that the value you promise to a specific customer or client comprises the right level of resources activities and partnerships to generate more revenue than it costs to create. The business model of the business is ultimately how the business captures and leverages value. The policy framework created and managed by the board must ensure that management, when working within this framework can sustainably create, capture and leverage value.
  • Defines focus and areas of most importance. Business is dynamic. Business operates in an ever changing environment. To be sustainable a business must strike a healthy balance between adapting to change to remain relevant and retaining its core focus and value driver. Without robust, embedded policy that strives to ‘keep the main thing the main thing’ at all times this balance can be lost and the business can either swing toward rigidity and irrelevance or fluidity, loss of focus and dilution of value.
  • Differentiates and delineates responsibility throughout the company. Ultimately the performance of a company is based on its people. No matter how big and deep the promise and vision of the business – ‘the difference that makes a difference’ – it is people who deliver this. As mentioned above a well-structured policy structure ‘gives life’ to the behaviour and performance of the people in the business. Without it, they are unguided and unprotected. With it they have clearly delineated responsibility, they know what to do, and clearly delegated authority, they have been given the power to do it.

Pillar 2: Decision Making

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