In a world where Boards have increasingly more responsibilities and expanded areas of oversight, determining where the Board should focus its efforts is essential to ensuring effectiveness.
According to the new Russell Reynolds 2022 Global Board Culture and Director Behaviors Study, there are differences in how typical boards spend their time versus “Gold Medal Boards” – defined as boards whose directors rate board effectiveness as a 9 or 10 on a 10-point scale and report the company as having outperformed TSR benchmarks for two or more consecutive years. In the survey, directors were asked to reflect on their board agendas and identify the top three areas where they spent the most time.
Some key insights into what sets Gold Medal Boards apart from all the rest:
- They are more forward focused. Activities such as setting strategy, overseeing operational performance, developing strategic plans for M&A activities and capital allocation take priority. Backwards-looking financial review and compliance review activities are still important, but do not create new opportunities or add to value creation.
- They emphasize individual director performance. 68% report participating in self-evaluation exercises that result in meaningful improvement in performance, which is 11% higher than what all boards reported. Not only are they more likely to conduct performance assessments, 67% of Gold Medal Boards report they provide feedback and address director performance issues, compared to 53% of all boards.
- They place significantly higher priority on CEO succession with 62% reporting they have a robust, thoughtful CEO succession plan versus 46% of all boards. Great boards understand this is one of their most important responsibilities and should be a continuous endeavor for the company’s long-term success.
The Russell Reynolds survey also examined the role of the board chair and how their performance contributed to board success. In noting that board chairs play a unique role as influencers and facilitators, the survey reports gaps between the behaviors “always” or “often” demonstrated of Gold Medal Chairs and all others including their effectiveness at:
- Fostering and facilitating high-quality debates (84% versus 67%)
- Actively seeking different points of view (84% versus 72%)
- Focusing the board’s attention on relevant matters (97% versus 86%)
Gold Medal Chairs also are more willing to provide constructive feedback to directors (58% versus 43%) which is likely a factor of these boards being more likely to participate in performance assessments to begin with and administering these more frequently.
Boards can “go for gold” when they have members with the right skills focused on the important issues that will propel the organization forward.