An important aspect of the board’s impact on organizational performance is how the directors use their powers to discharge their functions and duties. John Mero’s research confirms that some non profit boards use only a few powers, often due to a lack of directors’ understanding or risk aversion. In other sectors e.g. public utilities and superannuation, board powers are restricted by law and some for profit boards suffer regulatory controls on the ability of directors to use their powers to pursue opportunities.
A sound board assessment process must be led by a reviewer capable of checking a variety of evidence sources, understanding the environment in which the board operates, and interpreting results correctly to add value to the board and design improvement strategies.
Preventing poor performance is far easier than managing it. The proven techniques for this include a board charter of roles, responsibilities and expectations, good recruitment processes, a vigilant and assertive chairperson, directors’ understanding and acceptance of their duties, regular performance assessment and feedback, compliance monitoring, board unity and a constitution that enables the removal of directors who pose a threat. However, poor performers are not always easy to spot at the gate and even well-run boards can find themselves with performance issues to manage.
When considering director performance, it is important to be clear what behaviours fit the definition of poor performance. For example, a quiet director may be difficult to engage but can still fulfil their duties; or a director may not agree with the majority view, which might save the board from ‘group think’. Poor performance is a term that should be reserved for directors who do not add value, are disruptive or pose a threat to the interests of the organization. Each of these categories requires a different response.
An external review can assist the board and/or CEO to ascertain where improvements are needed to realize the organization’s purpose and potential. Reviewing organizations requires a macro understanding of what enables organizations to produce results in their operating environment. This foundation knowledge must be integrated with a deep understanding of how people interact with the structure and systems they need for success to produce insights that will improve performance.