Boards have 3 primary roles they are to set guidelines, to make major and strategic decisions, and to oversee the organization’s activity. Well-written policies can help a board to focus its efforts, minimize duplication of effort and maintain the (often thin) line that divides management and oversight activities.
Effective boards need to be able to recognize and address any new mission-critical issues. This requires access to the most comprehensive and accurate data that is possible. The information could include comprehensive reports on budgets and expenditures including financial statements as well as annual and quarterly performance results as well as narrative reports on programs and internal operations, and much more. It’s important for a board to comprehend and be able to communicate the story presented by these data.
Board members should be competent to discuss controversial and complex issues even if it causes tension within the group. It’s important for directors to have the freedom to challenge one another and play a variety of roles on the board – the ruthless cost cutter, the damn-the-details big picture guy, or the split-the-differences peacemaker. Directors can gain a better understanding of the options available to them by taking on different roles.
Research suggests that while it is generally believed that the best board members are those who have a significant amount of personal investment in their business, this is not the reality. The boards of both successful and highly admired corporations, for example were populated with roughly the same percentage of outsiders. The key is the process of the company’s strategy and the risks it faces, as well as the quality of communication.