100+ Very Smart Things for Boards to Do: Practical Action for People on Boards
Health Governance International (HGI) provides this series of insights distilled from over 30 years of work with governing bodies serving in health sectors around the World. They can be used in conjunction with a new mobile platform App that places “knowledge-in-the-palm-of-your-hand”.
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First: Mission: The Reason for Being
“Think before you act.” Aesop, Greek Author
“Coming events cast their shadows before.” Thomas Campbell, English Poet
1. Mission: Follow it. Make sure it answers three key questions: what do we believe? Whom do we serve? What do we do?2. Turn the mission into policies that guide performance in four areas: quality oversight, finance oversight, planning oversight, and management oversight. Establish specific criteria for each of the four policy areas: how will you know when you are fulfilling your mission?
3. Determine whether the organization’s top managers are in agreement about what the organization is for and what it does. Surprisingly, often they are not.
4. When a proposal comes to the board, ask how it helps the mission, and search for the ways it might hurt.
5. Monitor everything the organization does, in your own mind, in light of how it supports the basic mission.
6. Look over the mission statement every now and then. Talk about it. Change it, if necessary, to keep it relevant to the shifting environment. This is the most important thing you can do and it should receive more of your attention than any other board work you do.
7. Success Note—Written Policies Realizing that board members come and go, the board of a big social services agency in New York City formulated specific policies, in writing, so that it did not have to reinvent the wheel each time a difficult issue came before it. The board policies assured that turnover among board members would not leave the organization without a rudder, or allow strong individuals to take inappropriate actions without formal changes in the written board policy.
Second: Running the Board: Things to Do
“Credentials are not the same as accomplishments.” Robert Half, Businessman
“The art of governing consists of not allowing men to grow old in their jobs.” Napoleon Bonaparte, Emperor of France
8. Ask for a copy of the board’s “job description,” which lays out your specific duties and responsibilities.9. Pick new board members by using specific selection criteria to fill talent gaps.
10. Aim for a board made up of people who could each be chairman, if necessary.
11. Evaluate the board each year, and each of its members: are you doing your job? Write down goals for yourselves every year, just as you worked out written annual goals with management. Give yourself a few criteria. Each year decide ahead of time how you will know if you have done your job.
12. Watch for “trustee burnout.” Don’t be afraid to ask non-productive members to withdraw or become “emeritus.”
13. Rotate the board from time to time. Invite new members, and ask old ones to step aside. Work out a comfortable way to do this regularly enough to keep the board fresh, interested and energetic. Term limits can be good for board members as well as for politicians.
14. Get the staff to send you full agendas, and backup materials that are synthesized especially for the board, far enough in advance that you will have time to read them before the meeting. Read them before the meeting.
15. Demand shorter documents, and better outcome measurements.
16. Success Note—Turnover The board of a large hospital decided that several of its members were getting older and there was no avenue to bring in new members. It set up an “associate board” of up-and-coming young business professionals under age 40 to be used as a farm team from which the best and brightest could be chosen. It also installed an automatic turnover policy, declaring that no future member would serve more than nine years in total without going off the board for a period of time.
“The best way to have a good idea is to have lots of ideas.” Linus Pauling, Nobel Laureate
17. Let the chairman know ahead of time if you want to bring up something that is not on the agenda—no hand grenades!18. Show up. Set a good example of meeting attendance. If you don’t have the time to show up on a regular basis, or to study the materials for the meetings, resign tomorrow!
19. Make sure the board and its committees meet often enough and long enough to cover everything that needs attention, but not so long or so often as to waste people’s time and discourage them from coming.
20. Set time limits on meetings, and stick to them. Board meetings should never go beyond two hours.
21. Success Note—Only Key Facts
The board of directors of a large service company, having become weary of receiving photocopies of management reports disguised as board reports each month, demanded that a member of the management staff be assigned to boil down documents for their key “governance” facts and implications. They wanted one-page board summaries, not 25-page photocopies of management documents.
“Control freaks don’t grow good companies.” Jeffery A. Timmons, Babson College
22. Give each other your full attention, and your honest best thought.23. Hold to the subject: don’t drift.
24. Go for the big picture; stay out of the details. Focus on outcomes.
25. Spend most of your time on the future, not on today’s problems.
26. Know when to let go.
27. Disaster Note
When regents of a big state university came under fire for granting a multi-million-dollar severance package to their President at a time of severe budget cutbacks, several regents complained that it had not been clear what they had been voting on—the staff, they said, had not given them full details. The staff claimed that they had, but that the regents had not read them.
“It is much easier to be critical than to be correct.” Benjamin Disraeli, Former English Prime Minister
28. Respect your fellow members’ time: make your point and get on with it.29. Vote on the merits, not on the personalities.
30. Take your time when voting on the big things.
31. Ask good questions, even “stupid” ones: if you don’t understand it yet, maybe others don’t either—and maybe it doesn’t make any sense.
32. Keep your disagreements mannerly: don’t get personal.
33. Disaster Note
Sometimes it’s the chairman, or the management, who lobs a surprise hand grenade. One medium-sized pharmaceutical company presented a proposal to the board recommending that the company move its headquarters from one city to another. The company had hired a consultant to study the idea, and had amassed a considerable amount of information. But the idea was a complete surprise to the board—and the CEO asked for a vote at the same meeting. The board voted down the proposal, not because it lacked merit but because they had not had the opportunity to study the key issues. The moral of the story: “Don’t surprise the board. Don’t try to move too fast.”
“When your argument has little or no substance, abuse your opponent.” Cicero, Roman Statesman
“The biggest danger in education is the illusion that it has been accomplished.” G.B. Shaw, Playwright and Author
34. Don’t take it personally, even if it seems to be aimed at you—some people just need to vent before they can get down to business.
35. Keep your disagreements behind closed doors: don’t take it to the streets, or the press. If you have problems with other board members, don’t discuss them with employees, partners, unions, or suppliers.
36. Keep the house secrets: don’t speak for the organization unless it asks you to be the spokesperson. If it asks you to, say only what it asked you to say.
37. Write clear policies about conflicts of interest on the board: what is a conflict, how to avoid conflict, how to resolve a conflict.
38. Tell the chairman about any potential or perceived conflicts of interest you may have; which includes anything you wouldn’t want to see in a newspaper article.
39. Remember that the board’s behavior is often the most important key to the public’s opinion about your organization.
40. Keep your personal business interests separate: work for the organization’s good, not your own good.
41. Educate yourself, as a board and as individuals, about the organization’s market, its environment, and its competition.
42. Educate yourself about governance: read books, go to conferences, and attend retreats and seminars to learn how good boards operate.
43. Success Note—Start Over
The new board chairman of a large non-profit hospital came into the office and immediately disbanded all committees of the board. He then turned to his board colleagues and said, “Now, which committees does this board really need?” They determined that what they actually needed was four key committees–in place of the 13 that he had chopped; an excellent example of “zero-based budgeting” applied to board committees.
“I beg each and every one of you to develop a passionate and public hatred for bureaucracy.” Tom Peters, Business Author
44. See that everyone on the board has some particular responsibility or committee appointment.45. Make sure each committee is clear about its job and has a written “job description” indicating what the committee is supposed to do.
46. Cut back on unnecessary committees. Imagine that you had no committees: how many would you really need to set up? Many billion-dollar corporations exist with only three or four committees.
47. Cut back on unnecessary boards. Many organizations, especially non-profits, have a proliferation of boards: an operating board, a foundation board, a board for each for-profit subsidiary, a series of local boards, and so on. These boards can become feuding centers of power, each dedicated to its own territory, not the good of the organization.
48. Use your committees, and trust them: don’t re-wash all their work at the full board meetings.
49. Disaster Note
The newest board member of a pharmaceutical company complained that he could not vote on any item he didn’t fully understand. As a result, each time a committee reported to the board, this member conducted a lengthy questioning process. In effect, he replayed all of the work that the committees had already done individually, resulting in great amounts of wasted time and frustration for his board colleagues. Only after a year or two passed did this new board member come to the conclusion that it is not possible for every board member to know everything about every item on the agenda. It takes a leap of faith and trust in board colleagues to make the committee process work well.
“We thumbed our noses at rules and procedures.” Perry Rosenthal, Former Chairman, Polymer Technology
50. Be sure that the chairman is firm but fair, allows everyone to participate, doesn’t allow anyone to monopolize the floor, and dispatches agenda items after reasonable time for discussion.51. Ask whether the board is diverse enough (e.g., enough people with different backgrounds in the public and private sectors, from various ethnic groups, both genders, different parts of the country, different stakeholders, different kinds of investors) to keep the organization alert to a changing environment; but only if they are qualified!
52. Ask whether your board is the right size: big enough for diversity, big enough to fill committees, but not so big that it’s hard to get anything done, not so big that you can be divided and manipulated, not so big that people lose their sense of unity. The average board size in America is 13 people and, in the business sector, a majority are now “outsiders” not employed by the organization.
53. Write bylaws, and change them, whenever you need to. You are the master of the Bylaws, not vice-versa.
54. Success Note: A frustrated chairman of a community non-profit board began bringing a two-minute egg timer to meetings to control (or at least embarrass) several long-winded members who monopolized the meetings and discouraged others from participating. He got the message across and made himself some friends in the process.
“Any fool can make a rule.” Henry David Thoreau, Naturalist and Author
55. Ask if the organization has Directors and Officers Liability insurance for the board. If not, why not? Read the insurance policy.56. Put together a board manual that lays out the board’s rules for itself, along with its responsibilities; in writing.
57. Make sure new board members actually read it.
58. Don’t let your ego get in the way of what’s best for the organization.
Third: Checking Quality:
“We can overcome gravity but sometimes the paperwork is overwhelming.” Werner Van Braun, Rocket Scientist
59. Check to see that management has a plan in place for tracking quality performance, in all aspects of the organization.60. Look for evidence that the plan is working.
61. Ask for regular reports on quality results in the organization.
62. Read the reports, discuss them, question the organization’s officers about them.
63. See that management is using whatever tools it needs (surveys, focus groups, and service volume numbers) to find out what your organization’s clients and customers think of its quality.
64. Keep your eyes open for trends: has anyone won a suit, a judgment, or a settlement from your organization lately? Was it one that suggests that it may be a problem?
65. Be sure that your quality plan is designed to produce “winners,” not just to find problems.
“There’s no one grand stroke that does it. It’s a lot of little steps.” Peter Cohen, formerly of Shearson Lehman
66. Success Note—Close the LoopSeveral board members of a large manufacturing company complained that they often spent a lot of time discussing and approving major expenditures for new programs or equipment, but rarely heard how things turned out, that is; were the programs successful? Did the equipment generate the expected revenue? As a result they now receive a regular “feedback report” on major new programs and big capital outlays two or three years following initial approval by the board.
67. Disaster Note
For many years, hospitals attempted to monitor quality performance of physicians only by looking for “bad apples,” instead of finding excellent performers and using them as good examples. What boards really need are opportunities to compare themselves with other good organizations to see how their quality stacks up.
Fourth: Monitoring the Money:
“If you would know the value of money go and try to borrow some.” Benjamin Franklin, American Statesman
“It doesn’t matter if a cat is black or white, so long as it catches mice.” Deng Xiaoping, former Premier of China
68. Leave the organization in at least as good a shape as you found it. The budget will be your key barometer.69. Approve or disapprove only major contracts, leases, purchases, and legal settlements. Leave the details alone.
70. Follow up on each big approval item to see how the project turned out a year or two later.
71. Never approve anything the same day you first see it. Look over the annual budget carefully before you approve it. Insist on getting a copy in advance of the meeting where it will be voted upon.
72. Find out who writes the budget: is there input from many parts of the organization? What methods are used to be sure that it is realistic?
73. Demand regular reports that compare the year so far to the budget, and ask management about the differences between what is happening and what was planned.
74. Look over the organization’s financial policies: do they preserve your assets? Do they make the most of your resources?
75. Work out financial targets with the organization’s CEO: what level of profit do you expect? What is an acceptable ratio of debt to equity? How much liquidity does the organization need? What is a reasonable goal for revenue growth? Ask how you compare to other good organizations in your kind of business.
76. Disaster Note
The board of a non-profit organization in a small, conservative community in New England had a policy that the president must get board approval for any outlay over $5,000 even if it had already been approved in the annual budget. The result was a logjam, wasted board time, frustrated staff and a president who always felt as if she were walking on eggshells.
“Any jackass can draw up a balanced budget on paper.” Lane Kirkland, Former President, AFL-CIO
77. Make sure the organization is keeping enough reserves that it will have some flexibility when you run into difficulty; you will, eventually.78. Work out limits on the amount of capital that the organization’s officers can spend or commit to without board approval. Don’t place the limit too low.
79. Scrutinize the organization’s plans for capital expenditures, including land, buildings, and major equipment: are they sound investments? Will they burden the organization or add to its financial strength?
80. Make sure that you have strong ethical financial policies in place, that they are in writing, and that management understands the statement of ethics.
81. Disaster Note
When Ray Waston was asked to become chairman of Disney, it was drifting, losing market share and falling in the stock market. He discovered one of the surprising reasons for the drift: this worldwide entertainment company had no strategic plans, and no planning professionals to help construct them
Fifth: Strategic Road Maps
“Prediction is very difficult, especially about the future.” Neils Bohr, Nobel Laureate (Favorite Saying)
82. Make sure you have a strategic plan that’s up to date. Ask for a copy.83. Evaluate the strategic plan: does it make sense for your organization?
84. See that the strategic plan evaluates the competition, as well as the organization’s own strengths and weaknesses.
85. Disaster Note number of large, well-known corporate boards come under intense fire each year from the stockholders they represent for continuing to increase the compensation of executives while the organization’s financial position nosedives or just muddles along.
86. Find out who wrote the strategic plan and who “owns” it: just the planning VP, or all the major players?
87. Quiz the CEO periodically over how the organization is doing in fulfilling the plan.
88. Work with the CEO to set out measurable written goals for the organization to meet on its way to fulfilling the plan.
89. Update the plan continually, so that it is always a real road map to the next three to five years that measures performance.
“It ain’t bragging if you can do it.” Dizzy Dean, Baseball Hall of Famer
Sixth: Managing the Managers:
“Silence gives consent.” Oliver Goldsmith, English Writer
90. Hire the boss. Use outside help: the professional recruiting companies will usually save you much time and money.91. Work out a method for recruiting future top officers without interfering with the CEO’s prerogatives, and assure the board that there is adequate depth in the top management team.
92. Have a plan in place for smooth succession in case your CEO should die or suddenly get hired away.
93. Tell the CEO what you expect.
94. Disaster Note
The board of a small, growing and successful company was shocked to learn that their capable CEO was leaving for greener pastures (about the worst news that any board can get!). As they began to search for a successor it became clear that the CEO’s compensation and benefits package, while high compared to other jobs in the small town, was below the going rate nationally. The board had failed to see that they were competing for top talent from a much larger pool, and their local community pay standards were not applicable.
“Good results without good planning comes from good luck, not good management.” David Jaquith, Former President, Vega Industries
95. Each year, ask the CEO for a written set of measurable goals for the coming year.96. Evaluate these goals against the organization’s mission and strategic plan.
97. Evaluate the CEO each year on the basis of the goals. Make sure the management’s interests are aligned with the owners of stockholders.
98. Tie the compensation of the organization’s top managers to measurable accomplishments of the written goals.
99. Look at how you are paying your top officers, as well as how much: is it competitive enough with other organizations to make sure that you keep the talent you need? Is it reasonable? What does it reward?
100. Talk to the CEO often and clearly about your concerns.
101. Watch out for “confidential information” passed to you from subordinate executives. Some board members will believe anything if it is whispered to them.
102. Help shield management from undue political pressure, or any outside force that is not operating in the best interests of the organization or its “owners.”
103. Keep your eye on the organization’s business—and keep your hands off. Let management run the show.
104. Success Note—All Aboard
United Airlines’ board of directors, facing major financial losses, agreed not only to cut employee staffing, but also to reduce top management salaries by five percent and to reduce the board members’ own compensation by 10 percent. This sent a clear message that it was going to endure some of the pain along with other stakeholders. The key: tie compensation directly to performance with tangible benchmarks.
“A leader is a dealer in hope.” Napoleon Bonaparte, Emperor of France
“When the best leaders work is done the people say ‘we did it ourselves’.” Lao-Tzu, Chinese Philosopher
105. Back up the management. Give them your counsel, not your criticism. Remember that everything looks possible if you don’t have to do it yourself.106. Clarify for yourself the boundary between governance (what the board does) and management (what the executives do). React to what the management does. Don’t take the ball into your own hands unless it’s an extreme emergency.
107. Demand better information from top management, but don’t get more involved in the management yourself.
Author: James Rice
Founder, Vice-President and Treasurer of HGI