Recent large scale corporate failures such as Carillion and BHS have brought the actions of Directors increasingly under the microscope. These failures show that an effective board is essential and a huge asset to any business whether large or small.
Ensuring a board is well equipped to provide leadership and make good decisions is not easy. It takes time to assess, review, develop and refresh a board, time that some may feel is better spent on other things. Meetings spent focusing on firefighting specific issues are a tell-tale sign that the board is not working as it should and there are other red flags that trouble lies ahead. Do any of these apply to your organisation?
- Organised at the last minute with insufficient time to issue or consider board packs.
- Unclear agenda or purpose to meetings.
- Directors’ attention not focused on the matters to be discussed but constant checking of emails and/or interruptions.
- Talking shop with single-issue matters taking the bulk of the board’s time, directors engaging on their individual “hot topics”.
- Decisions regularly deferred with requests for extra information.
- Implementation of decisions not monitored for effectiveness and impact.
- Little constructive debate and discussion of proposal before a decision is made.
- Directors undermining previously agreed decisions or speaking against them outside of the boardroom.
- The executive directors tell the board what has been decided and the non-executive directors “rubberstamp” or “note” the information.
- Ongoing cashflow problems that are not addressed.
- Too high or too low levels of reserves that are not aligned to an agreed policy and no clear agreement as to why there is a divergence.
- Directors depend on the finance director and do not challenge the accuracy and robustness of financial statements.
- High turnover rate of senior staff.
- Not all Directors have a clear view of the commercial realities within which the business operates.
- Strategic plans, operational and business plans are static or non-existent.
- Certain Directors see themselves at the top of the organisation and have little interaction with staff, funders and other stakeholders.
- Unresolved conflicts and/or poor communication between board members.
- Director disengagement, bullying or absenteeism.
- Directors are unclear as to what their role is.
- Good governance is seen as an “extra” and not integral to the running of the business.
A dysfunctional board makes life harder for those sitting around the table and can be devastating for the profitability and development of any business. Addressing the issues can be difficult but a failure to do so can lead to even greater challenges.