Making Boards More Effective Decision Makers
What makes a Board effective? Is there an established way for Boards to operate or should each Board develop practices that suit the unique needs of its company and management?
If you’re looking to strengthen the impact of your Board, this exclusive interview with Sudeep Mohandas may be useful. As Managing Director for I First International, Sudeep’s mission is to see non-profit organisations rise to a level of professionalism that can eventually allow it to achieve its mission and purpose.
I asked Sudeep about his experiences and insights on Boards, specifically from a non-profit perspective.
How do some Boards make bad decisions in your experience?
Sudeep: I would avoid categorising decisions by Boards to be either bad or good but would instead use the words relevant and significant. Boards often struggle in ensuring their decisions are relevant and significant to the purpose, mission and aspirations of the shareholders, founders’ dreams or the stakeholder’s needs.
The litmus test of a sound Board lies in the results achieved and how things develop, in the end, for both people and planet.
So how do some Boards make decisions that are irrelevant or insignificant? The answer is simple – poor governance and or a lack of leadership. These are two issues that are at the crux of why an organisation is successful or not.
How then do well-run Boards make decisions?
Sudeep: A well-run Board makes relevant and significant decisions simply by focusing on good governance and ensuring their decisions matter to the organisation’s purpose and their stakeholders. The litmus test of a sound Board lies in the results achieved and how things develop, in the end, for both people and planet. Taking risks, being innovative or improvising are all necessary and fundamental to progress. But if the rationale of being innovative runs away from the purpose of the organisation and the results fall flat, then the Board must be prepared to be accountable.
Given what Boards do and the decisions they make are largely hidden from public view, what are some visible structural changes they can make that go to the heart of their work?
Sudeep: Those visible structural changes that you are referring to are the same for any organisation either for-profit or non-profit. For example, staff turnover, decision-making process, financial management, conflict management, setting the position statements during tough times and the power of its influence with government or public policy and opinion respectively.
Thus, the Board must have the power to intervene and provide the checks and balances to matters of operational concern as well.
What do you suggest as formal processes for deciding on the kinds of decisions that should go to the Board?
Sudeep: I can share my view from a non-profit perspective. It is extremely important that the operational aspects stay with the most senior staff or volunteer who could be the Administrator, General Manager or Chief Executive Officer. It does not mean that just because operations fall under the purview of the senior staff member that decisions can be made unilaterally. There is a high level of ethics, moral and legal compliance to follow. Non-profits do deal with public money. Thus, the Board must have the power to intervene and provide the checks and balances to matters of operational concern as well. This includes, for example, financial management, human resource management, facilities management and legal aspects.
Where the Board should be seen to be accountable and responsible is at the macro level. This includes the roadmap, the direction for the organisation, the follow up at the AGM (Annual General Meeting) with members, the concerns addressed with stakeholders, the brand management as well as issues that concern policy and government liaison. Another critical aspect, from a financial angle, is how it complies with the tax exemption requirements in order to conform to government regulations.
How can management make strategic decisions in such a way that the Board can address these decisions effectively?
Sudeep: Again, from a non-profit perspective, management has a very important role to play in guiding and ensuring the Board understands the issues. When they do so, they can have an effective role in the decision-making. If management has to offer and provide strategic decisions or recommendations, then the issue at hand is how trained and competent the management is in arriving at their desired outcome. The knowledge, attitude and commitment to see change through is vital. It is achieved by understanding the concerns and issues related to the purpose and mission of the organisation.
Sometimes the strategy could be to just stop a project or activity. It could be to start a new activity or perhaps, continue with it. It could also be deciding not make any alterations and to leave things as status quo. Whatever it is, it is necessary for management to be the ‘eyes and ears’ for the Board because they do rely heavily on the wisdom, appreciation and understanding of the issue at hand.
To avoid the corporate messes we have seen as evidenced at Worldcom and Enron to name but two, we need Boards that can make effective decisions. How would you define effective here?
Sudeep: Worldcom and Enron set their relevance and significance slanted towards an agenda that did not comply with legal standards and the regulatory framework. The problem with Boards today is that there is an air of intellectual arrogance. Some (not all) strongly feel they are the masters of how things should be especially when it comes to using public donation or investment.
For a Board to be effective, I would use the analogy of the difference between effective and efficient. Let’s suppose a person buys his dream car. When does the car become effective? As long as the car takes him/her from point A to point B.
When does the dream car become efficient? If he/her can enjoy his/her ride and save petrol and time while moving from Point A to point B. So to put it in a business context, for a Board to be effective, they need to set the roadmap and organise the day to day running of the business such that there is little delay and disorder. Thus, for a Board to be efficient, the organisation needs to move towards achieving its mission or purpose, thereby making itself relevant and significant.
What is your view of the role of the Board today?
Sudeep: From the perspective of a non-profit Board again, I have seen most people who have little experience contributing their services to a non-profit Board having a sense that it is not too difficult to make a difference. An unconscious bias sets most of them to think that just because they were successful in their own business, managing a business or even because they hold such senior roles in government, that holding a Board member role is peanuts.
This mind-set must change as Boards today (especially those that sit in the non-profit sector) must be prepared to unlearn, relearn and face the reality that they may not know everything about management.
- Watch Sudeep’s interview on Astro – Vbuzz from June 2017;
- Discover the difference between coaching and mentoring in Sudeep’s short video.
Dr Sudeep Mohandas, author of Managing a Non-Profit Organisation, is the Co-Founder/Managing Director of I First International, an organisation that focuses on professionalising purpose-based organisations. He offers consultancy, training and mentoring services to his clients who focus on people and planet.
He is a Visiting Professor to the Swiss School of Management, Italy and an Industrial Advisor to a few private universities in Malaysia. In Malaysia, he is one of four certified by the International Association of Facilitators (IAF) to facilitate anywhere in the world. His podcast channel, “Interview with Experts in the Nonprofit World” is available on nine stations including Google, Spotify and Apple.
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