So what does the board actually do? (part 3)

So what does the board actually do? (part 3)

The  Work of the Board

As mentioned in the previous blogs we are 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’!

This is the third part of a three-part series that aims to answer this question 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

(See last blog posts Pillar 1: Establish Policy and to Pillar 2: Decision Making)

Pillar 3: Exercising Oversight

The third pillar is perhaps the most challenging – but if got right can unlock the most value at both board and management level within the company. It is difficult because it is an area that can be ‘muddied’ by so many human factors, things like

  • Implicit assumptions
  • Potential hidden agendas
  • Internal politics and power play
  • Personal ambition

As its most simple level, all the role of an ‘overseer’ implies is that they have a different perspective on the business than those they are overseeing. The distinction between the board and management is best summed up in the well-known phrase, often expressed as a question, ‘do you work in the business or on the business?’

While the work of management is to work ‘in’ the business it is the work of the board to work ‘on’ the business.

A few comments on this.

  • Oversight or oversight? The same word that means to oversee others in the way explained above and defined as ‘watchful care’ is also used to mean ‘an omission or error due to carelessness’, or the ‘unintentional failure to notice or consider, the lack of proper attention.’ I think this is significant because boards that do not do the one well (oversight) will tend towards the other (oversight)!
  • Oversight not management! The key distinction here is the distinction between eye and hands – looking and doing. Since the board is instrumental in decision making it is essential that they can ‘see’ what is going on in order to make good decisions that are based on fact and respond to the actual needs of the company. It is the ‘stuff’ that is hidden in companies that is the most dangerous – and especially the ‘stuff’ that is hidden because it has been hidden intentionally. The board ‘sees’ through the information it gets in reports and board packs and communication with and through the CEO and senior team. The board should also have access to whatever it needs to enable it to ‘see’ better. The board should, through the policy framework of the company, also create the best information and communication flows to enable it to ‘see’ well and make better decisions.
  • The role of oversight is the role that is legally accountable. As mentioned in the previous blog on decision-making the legislative framework, which ultimately creates the accountability structure of all organisations has shifted the liability away from actions and onto decisions and decision makers. This is significant! The role of the board, what it, and each individual director, needs to be spending time and attention on is by far the most important part of the organisational structure. The work of policy, decision making and ultimately oversight is the ‘work or the architect’ that by definition precedes the ‘work of the builder’, it is the ‘work of military command’ that by definition precedes the ‘work of the soldier’, it is the ‘work of the conductor’ that by definition precedes that ‘work of the musician’! In organisations the work of the director and the board is by far the most important work – and the work that is recognised in law as that carrying the weight of liability.

I trust that this brief series on the work that the board should be doing in the boardroom clarifies for you the importance of the role of the board.

I would welcome comments and your insights at roger@hitchcock.com .

 

Pillar 1: Establishing Policy

Pillar 2: Decision Making

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