Leadership

12 typical mistakes in poorly run boards

Many boards do a good job. Yet, far too many people make these 12 typical mistakes.

The authors of The effective board mentions in their report 12 typical fallout groups in bad board work.

Leadership

But the report does not only deal with what the effective board does, it also gives an insight into which mistakes can lead to bad board work.

1. A passive or defensive director who is not open to the board.

Leads to heated discussions and difficult issues not being addressed and resolved. Means that board members do not feel free to make decisions and therefore contribute less and less.

2. Shoot the messenger of bad news.

If the management team cannot confidently report bad news, there is a risk that such news will be withheld and therefore cannot be investigated and treated professionally in time.

3. The leadership group presents poor material.

Both the quality of the writing and the topics or issues where the answers are given mean that the board's opportunity to explore solutions is limited.

4. Inability to confront problems.

A problem you often see with board members who have been in office (too) long. They cling to perspectives and ideas that were valid when they joined the board.

5. Lack of time.

This happens when board members are too busy to live up to their obligations in the company. The director therefore does not get the expected time and support.

6. No common goal and community of interests.

If, for example, "new" and "old" board members disagree about whether the company should be sold or developed. It is problematic that some board members think long-term and others short-term, as the board loses the ability to make effective decisions. Which in turn hampers the director.

7. The board is divided.

If the director chooses to work alone with part of the board and thereby does not create a common understanding and seek consensus.

8. Role confusion.

If board members with great operational insight become overinvolved in the company, they can push personal ideas through without support from the rest of the board.

9. No strong chairman.

A strong chairman is especially important when a company is facing difficult changes.

10. When hope is given up.

If the company runs into a serious crisis that threatens survival, the board gives up. Some board members simply lose interest.

11. A passive board.

When the board uncritically nods "yes to the director's presentation."

12. Lack of discipline in recruitment.

If you do not make sure to spend the necessary time and effort on the recruitment of a board, you often end up with a poorly composed board.

To avoid these pitfalls, companies must take care of several different things. Firstly, it is about maintaining a balance between the company's three main groups: the shareholders, the board and the executive board. According to the authors, this relationship must be characterized by trust, transparency and a clear division of tasks in order to be in balance.

Secondly, in order to establish an effective and value-creating board, a company must meet the six prerequisites below:

  1. The company must convince new board members that it has interesting development potential and that it can offer reasonable remuneration to the board members.
  2. Once a year, the board must determine the board's tasks for the year, which are incorporated into the board's calendar. This planning task is particularly important because the guide is based on a completely different involvement of the board in solving the company's tasks compared to traditional board work.
  3. The chairman's personality, commitment, background and tasks must define the framework for the board's work. The chairman's tasks are described in detail because he/she plays a particularly active role.
  4. The other members of the board are chosen based on the specific needs of the company. Ongoing replacements of board members and individual responsibility must follow the company's development and needs. In other words, it should not be embarrassing to leave a board after, for example, a year.

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