While it’s true that the CEO is accountable to the board, it’s important to note that board members are also accountable to the company and to each other.
Continuous improvement doesn’t just happen. The board should periodically reevaluate what the company needs and adjust its priorities to meet those demands depending on the stage that the business is in. Modifying and adjusting the board over time not only helps ensure scalable growth but also helps to raise the profile of the business in the eyes of potential acquirers.
An active board is an effective board. Best practice is to conduct a board self-assessment and discuss results as a board agenda item annually. To align with business needs and the company’s long-term strategy, boards need to consistently ask themselves:
- What skills and capabilities do we need to help the company scale?
The answer to this question depends not only on the company’s stage of growth, but also on any special circumstances or other opportunities (fundraising, M&A, etc.) that might be on the horizon. It’s important that the competencies and experiences present on the board align both with where the company is now and where it intends to go in the future. An effective annual planning discipline can help board members make these considerations.
- Does the composition of the board need to evolve over time to accomplish this?
The answer to this question is most likely yes. We often remind our CEOs that the management team that got their company to point A isn’t necessarily the team that will get the company to point B and beyond. The same goes for the board of directors. As the company grows and the macro environment changes, the board will likely need to put different people in certain seats. It’s all about padding the board with the skills, expertise, networks, and other resources needed to take the company to the next level.
With the answers to these questions in mind, boards should conduct three types of evaluations:
- Full board evaluation: a review of the board’s overall strategy and composition. Leverage this template to get started on the full board evaluation.
- Director peer review: board members evaluate each other based on the role they’ve played in decision-making, the value of their skill set, their preparedness and availability for board meetings and more. This evaluation is often driven by a third party.
- Individual director self-assessment: an individual review of use and allocation of time, appropriate use of skills and experience, knowledge of the company and its industry, and awareness of key personnel.
Generally, a third party will consolidate responses and report back to the full board so they can collectively determine any necessary changes or improvements. Remember: evaluation and evolution are two of the hardest things for a board to do, but they are critical to make sure the company is getting the most value possible from its board.
Continuous improvement is all about accountability, and the board is never exempt. Board evaluations help keep the board aligned with where the company is and where it’s going. Moving on from a board member, though potentially difficult, might just be the action needed to propel the business to its next level of growth.
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Throughout this series, we’ve tapped our partners’ decades of operating and investing expertise to help growth stage companies implement best practices around corporate governance. We’ve explored critical board foundations, uncovered what an effective board looks and acts like, offered tips for driving board efficiency and more. To conclude this series, though, I’d like to point back to where it all began: with the Four Cs.
A board is not effective without a culture rooted in psychological safety, mutual empowerment, and a general respect for and appreciation of individuals’ expertise. Nor is a board effective without open and frequent communication and a high level of engagement between board members and the management team. A board cannot be effective without being connected to the long-term vision of the company and the steps it will take to get there. And, as I argue in this blog, a board is nothing without continuous improvement.
Each of the Four Cs are critically important in ensuring the success of the board (and, thus, the company). When all four are prioritized, the board of directors truly becomes what it was always intended to be: a strategic weapon.