Managing Leadership^®

The key element that drives the agenda of a board is its perception of its purpose in the organization. Ideally, as the representatives of investor intent and interests, the board will confine itself to three central aims: 1) it will develop and maintain a definition of the identity, purpose, and long-term aims of the organization; 2) it will develop, or caused to be developed for its approval, organizational strategy designed to accomplish those aims while operating within the contexts of the identity and purpose of the organization; and 3) it will establish policy to act as guidance for management’s activities in execution of that strategy.

Given that, the board’s agenda should be directed solely at accomplishing those ends. Determination of identity and purpose, together with the long-term aims of the organization are ongoing items that, while generally requiring little effort after establishment, do require constant checking against reality. There should be an opportunity for board members to visit these topics at regular intervals, if not briefly at every meeting. The same applies to strategy, once it is determined, although it will require more frequent and dedicated attention to ensure it retains its realistic and applicable prospects for attainment of strategic aims.

The bulk of the board’s meetings should be directed at the third item, which is the development and application of policy for management to operate by. The establishment of strategy is principally the board’s responsibility (the frequency of the dual CEO-Chairman in the US tends to mask this hard fact). This is where the board and management interact, and where the board, indirectly but importantly, influences the ongoing operations of the organization.

The subject should be approached through two avenues, directed at two questions. First, is current policy serving as an adequate guide (both showing the way and preventing management from straying off the path)? Second, is management effectively giving expression to policy guidance? Additionally, what can be done to aid it in so doing? Inhering in these board areas of responsibility and focus is it’s duty to select and maintain an effective senior management team. It should evaluate the management team against its ability to work together effectively to accomplish goals and comply with policy established by the board.

The converse of this is what the board shouldn’t do. For example, it should constrain itself from interfering in or second-guessing the executive activities of management. It should only evaluate these decisions according to the criteria established to determine effective/ineffective expression of board policy guidance – that is, according to results (Note as well, however, that the board is responsible for the identity and purpose of the organization; if management activities which technically support policy guidance conflict with these higher order measures, then the board has the right and obligation to either intervene directly or to modify policy appropriately, according to the situation.). Boards are often composed of executives or retired executives of other companies, so it can be difficult to avoid trying to look over the CEO’s shoulder. Nevertheless, an effective board with seasoned directors will display the discipline to do its own job, and to avoid attempting to do management’s.

So, the board’s agenda should be directed at ensuring the health and ongoing veracity of the policy/management interface. The agenda items should answer the questions: 1) Is policy as established adequate to the needs placed on it? and 2) Is management effectively giving executive expression to policy guidance?