How to Enhance Your Board’s Effectiveness [McKinsey & Company Report Recap]

An effective board creates value through fundraising, budget management, and strategic thinking capabilities.

According to a report by McKinsey & Company, 36% of corporate boards cited that their board of directors had a very high impact on long-term value creation.

But what happens to your organization’s health when boards are ineffective? Below, we overview the causes of ineffective boards as pulled from the McKinsey & Company report and pair them with our own tips to improve member effectiveness.

Causes for Ineffective Boards

According to the report, ineffective boards had the lowest impact on long-term value creation. Some causes of ineffective boards include:

• Lack of trust and respect in the boardroom. Less than half of ineffective boards feel there is a sense of collaborative respect and trust established.
• Inability to align with the organization’s vision and strategy. Seventy percent of directors on ineffective boards agreed that their board is not appropriately aligned with executives on risk-management strategies.
• Lack of talent or qualified pipeline management. Only forty-two percent of ineffective boards cited that their boards properly evaluate top talent.
• Inability to execute on tasks due to lack of training and onboarding resources (i.e. software training, board manuals, etc.). Only 1% of ineffective boards expressed directors having received sufficient training during onboarding, according to the report. Without proper training, board members may lack the knowledge and resources necessary to acclimate with policies and processes.

Without streamlined processes to fuel a strong culture, talent and organizational health, decreased engagement, efficiency and board happiness can result.

Importance of Effective Boards

It is no secret that effective boards can improve the overall health of your organization, but what characteristics do strong boards possess? The report cites that successful boards demonstrate:

• A solid grasp of strategy and performance management. Sixty-nine percent of effective boards cited being able to effectively adjust strategies regularly.
• Consistent feedback and evaluations. Thirty-five percent of effective boards engage in formal evaluations regularly.
• A strong sense of culture and trust. Eighty-eight percent of striving boards expressed having a strong culture of trust and respect in the boardroom.
• Constructive challenging of other board members. Seventy-six percent of boards and management teams cited they constructively challenge one another.
• Commitment to more board work. Effective board members spend an average of 41 days per year on board tasks and duties, compared to ineffective boards that spend 32 days on board work.

How to Increase Board Effectiveness

How can you help boards deliver the most long-term value for your organization? Below, we provide tips from our internal experts:

• Streamline communications and critical documents. Provide boards with a centralized, easy-to-access location, such as a board portal, to stay connected on-the-go.
• Establish a culture that fosters board member trust. Encourage board members to get to know each other by sharing mission stories during meetings or incorporating icebreakers. You can also consider bonding exercises, such as retreats or happy hours.
• Provide proper training and resources. Give boards the materials they need to onboard, such as organization history, mission and vision, board member bios and budget details. Store critical information in a board management system, and provide members with their own logins so they can access materials at their convenience.
• Solicit board member feedback. Encourage board members to provide feedback on their overall experience, such as meetings or training, to improve board -related programs.
• Conduct regular evaluations. Board member evaluations should be conducted on a yearly basis to provide insight on performance management, board engagement, and talents and skillsets. Provide members with constructive feedback that enables them to improve upon critical areas, such as meeting attendance or communication.

Interested in better engaging board members to increase effectiveness? Download our guide, “Board Management Tips and Tricks.”

Image Source: ITU Pictures