I’ve done a lot of surveys with boards to discern where their time is invested. Typically, boards tend to like the oversight and hindsight components of their jobs. They prefer the compliance and policing roles.
Many boards are not so good at looking to the future – the foresight role also called the value-adding role. We carried out a survey of 20 companies — that’s 200 directors — and we asked them, “How did you invest your time, according to these three lines of sight?” And the answer came back that they invested about 30% of their time in the future, and the other 70% was devoted to either oversight evaluation or hindsight reporting.
We then asked the question, “In a perfect world, how should you be investing your time as a director on the board?” And the answer was completely reversed. The directors said they should be investing 70% of their time on the future of the corporation to add value to its ongoing trajectory, and 30% of their time on the oversight and hindsight parts.
So here is a very simple question for your board: How did you invest your time in the last meeting — hindsight, oversight and foresight? You can just jot it down on the back of an envelope. And then make an explicit decision for the next meeting, as to how you want to invest your time for that meeting. The breakdown ought to come out of the agenda exercise (that I discuss in a post about the role of the chair). You need to make the breakdown explicit; you can’t just expect it to happen.
A simple but effective tool – estimate, on the back of an envelope where the Board’s time was invested at its last meeting. For the next meeting, take that result and ensure you build an agenda that invests more in the future than on the past. Do this after every meeting to make sure the Board is getting better and better at allocating it’s time.
Strategy is more than a once-a-year, two-day off-site session. Strategy deserves more space in your agenda; strategy should be a part of every single board meeting. As a chair, I work at getting an inventory of the strategic concerns of all my directors. Then I bring that to the attention of my management team, and we work to identify which concerns we’re going to take deep dives on and which ones we’ll say to the board (through me), “we have decided to pass on the following matters at this time.”
When I’m the Chair of the Board, my fundamental operational responsibility is to be the closest friend of the CEO. I don’t mean in terms of going out for dinner together just to socialize. I mean in being there for every single challenge we face — we’re going to face them together. For example, I was the Chair of the Board for a major mining company. The CEO phoned me from Spain and said there had been two fatalities in one of our mines. I got the call at three in the morning in Toronto. And I said, “Do you want me to get on a plane and be with you?” He said, “No, I think we can manage this. I just wanted you to know right away.” So, I was there for him and in that sense, I’m his closest friend.
If you want a board that can add value, you want the chair and the CEO to have that kind of a really close, trusting, open relationship.
And when you go to an off-site planning meeting, get some external people to come and help you think about things in a different way. Typically, the management team won’t like that; they’ll say they should prepare the board briefing papers. In response, I would say, “Why would I want to drink the same bathwater again?” If we’re in industry X, why don’t we get somebody who’s invested in industry X or who ran industry X beforehand? We can give him or her the chance to comment on our strategy. We can ask them how they would reallocate our resources.
Or, if there’s an activist investor out there agitating, I might bring that activist investor in and ask, “if you were managing all of these assets, both physical and financial and human, how would you manage it?”
Or a large asset manager who doesn’t own your stock but does own other stocks in your universe – ask them to come in a present to you the reasons they don’t own you.
Bring external ideas in to off-site meetings to “shake the bag” and get a different perspective on your business.
These types of initiatives to off-site meetings are not very common, but I am confident they’re an essential component of being able to add value to the ongoing trajectory of your business.
To recap some ideas: strategy should be at the top of your agenda, taking up 60 to 70% of your time. Make that an explicit investment decision before each meeting. Make sure that your chairman and your CEO are closely linked. And thirdly, get ideas from outside.
David Beatty is an adjunct professor and Conway chair of the Clarkson Centre for Business Ethics and Board Effectiveness at the Rotman School of Management. Over his career, he has served on more than 39 boards of directors and been chair of nine publicly traded companies. He was the founding managing director of the Canadian Coalition for Good Governance (2003 to 2008). A version of this article will also appear in the Winter 2017 edition of Rotman Management, published by the University of Toronto’s Rotman School of Management.