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There is a lot of good advice available for boards of directors about how to become more effective. The problem is, most of it is directed to the board as a group. To date, there has been very little guidance available for individual directors.
Robert Galford
That’s troubling for two major reasons. First, the director’s job has become more difficult in recent years. In the current business environment— replete with the rapid pace of advances in technology and communication, and tumultuous changes in markets and finance—being an effective advisor is an increasingly complex undertaking. There are more regulatory requirements to keep up on. And there’s the issue of increased potential liability: directors shoulder more risk than ever before, extending to both criminal and civil levels.
Second, if individual directors don’t know how to contribute all they can to their board and to the company they’re serving, then the board as a whole won’t be as effective as it can be—even if it follows all of the best “group” advice to the letter.
Net, net, there is a lot of untapped value in most boards; it resides within individual directors. Yet many directors (and the senior executives they work with) don’t know how to tap into it.
In recent years I’ve been fortunate to work with some very high-performing boards. I’ve also conducted numerous independent evaluations of board effectiveness and facilitated dozens of boardroom education sessions involving more than 1,000 directors. That experience informed the research for this article, but to get at the issue of helping individual directors improve their own performance, I’ve conducted in-depth interviews with a few dozen well-regarded board members as well. Reduced to its essentials, this article synthesizes and distills their insights about how to increase the value that individual directors can bring to the organizations they help govern.
Thinking Outside the Boardroom
People are asked to serve on a board because of their experience and expertise in a given area. But what multiplies the value directors bring to the table in the boardroom is the filtering of their own personal expertise through the lens of the company they’re directing. In order to do their best work, directors need that lens—and it has to be clear. That’s why board members need to learn about, engage with and contribute to the company outside of the boardroom. They need to know what managers and employees are proud of and worried about, and they need to experience the company from the customer’s perspective.
The idea is to gain a 360-degree perspective. Otherwise, directors only get what NACD President and CEO Kenneth Daly calls “asymmetric information.” For example, the company may be falling short in its performance, but the board package may be quite thin in the description of that shortfall. It may not get nearly deep enough into the “why” for a director to fully understand what’s going on. If directors have asymmetric information, then they’re at a clear disadvantage when it comes to assessing performance, expectations and strategy.
Michelle Hooper, a highly regarded director at several companies, including AstraZeneca, PPG and United Health, puts it this way: “You can make your best contributions when you’ve pulled back and peeled the onion and you really understand the company. Time spent outside the boardroom, but with the company, can confirm whether what you’re hearing inside the boardroom is correct. Is the culture really what the president thinks it is? Are the priorities I’m hearing about inside the boardroom really embraced by mid-level managers and front-line employees? Are employees throughout the organization really living, breathing and understanding the culture, values and processes that will allow the company to compete with distinction? You might not find out if you’re only looking at the information you review in the boardroom.”
When directors begin to engage with the company outside of the boardroom, they’re able to contribute greater value at board meetings. But that’s not the only advantage they gain. Those directors have also automatically found another point of entry (or several) for delivering value. By reaching outside the boardroom to gain perspective, they’re allowing more people from the company to benefit from their experiences and expertise. As they engage more deeply with the company, they will also be better positioned to play a more active role in raising the company’s profile, in a positive way, in other contexts.
Ultimately, it’s a virtuous circle. By engaging with the company in less traditional ways, they add value. Doing so over time creates an environment throughout the company in which the best board-level advice can really take hold. Board members also gain a better understanding of the company, and they bring that enhanced understanding both out into the world and back to the boardroom, where it helps them react and respond at a higher level than they previously could.
Practical Steps
What does this mean in terms of action? It means that board members need to connect regularly with current and prospective employees, customers and suppliers. Importantly, however, they have to be able to do this in a way that is not burdensome to the company they’re serving. They need to take action in a way that supports the executive team— and stays out of its way. They also need to be able to take steps toward becoming a better director without overburdening themselves. Directors are busy people; for most, time is always tight.
The following may help board members find the right level of engagement. No single individual will likely have time to do all of the things suggested below, but most of these activities can be fairly easily integrated into a director’s existing schedule.
- Experience products the way regular customers, vendors and prospective employees do, if that’s feasible. Experience interactions the way customers or prospects do. Find out what alternatives customers might be considering. Who are the competitors? If your company makes a consumer product, chances are, as a director, you’ve received a sample. But what is it like to shop for the product on your own? (Once upon a time, GM used to deliver a new car to each director regularly—but what was it like to buy one at a dealer?) If you can’t be a direct customer (say, for example, you’re a director at a military aircraft manufacturer and unlikely to buy your own fighter jet), then go to the website and find out about the vendor process. Find out how easy or difficult it is to navigate your way in. Also, find out how the company looks to prospective employees. What is it like to apply for a job there?
- Sit in on a new-employee orientation. See what’s promised about the workplace culture. How are the norms and values presented? Compare what you observe with the information you find on the company’s own website, and also on job evaluation sites. Also, visit independent workplace discussion sites. Search online for “What’s it like to work at X company?” Sites such as Glassdoor.com can tell you about the job search process. What are people saying about your company?
- Dial in on analysts’ calls. Often, after the board meeting, the CEO and CFO will do an analyst call—when quarterly results get announced, for example. Dial in. Find out what sorts of questions are asked during that call.
- Subscribe to Google Alerts or other automatic news alerts for mentions of your company or its competitors. (This is the easiest action step—yet it’s surprising how many directors don’t do this.) Once you do, then anytime there is a news story or a new web mention about your company and its competitors, you’ll get an email. It doesn’t matter if you don’t read them all. Anything you do read will give you that much more current information and context. It will raise awareness of the company in your mind.
- Develop relationships with people other than senior-level executives. Listen to the rank and file, unfiltered. Instead of having a regular board dinner the night before the board meeting, suggest that the directors attend separate dinners at area restaurants, where one or two or three directors go out with randomly selected employees. (The night before Forrester Research board meetings, for example, outside directors routinely attend informal dinners at local restaurants with a half dozen or so randomly selected employees.) Or, do the same with a lunch or at a site visit, or arrange to have coffee with a small group of employees.
- Buddy up with senior staff. Two or three times a year have coffee with those in senior staff roles, such as managers from HR, procurement and marketing strategy or the general counsel’s office. Map their locations to your regular travels and request these meetings. Over time, you’ll gain multiple, diverse perspectives on the company—from people who care deeply about it.
Anne Sheehan is the director of corporate governance for the $150 billion California State Teachers’ Retirement System (CalSTRS). As she puts it, “Better directors go around and talk to people in internal operating roles. They develop their own internal feedback loops. These are important because they give you a constant internal pipeline into what’s going on. They aren’t secret meetings; they are not intended to fuel ‘gotcha’ situations, where directors then blindside the president during a board meeting. Instead, feedback loops enhance the ability to have frank—and more fully informed— discussions about strengths and weaknesses of the organization that you wouldn’t otherwise be able to have at the board level.” - Visit many different company locations. All too often, board meetings take place at an off-site location or in a boardroom. Occasionally, meetings take place at “ceremonial site” company locations. Again, map all of the company’s locations, and let contact with the company become a part of your regular travels. Call up the board secretary and say, “I’m going to be in Houston. I’d like to have coffee with the head of such-and-such department at that location.”
- Attend a company meeting you’re not usually on the guest list for. Present at in-house training meetings or “brown bags.” Attend a kickoff session for a new product or initiative. Be a fly on the wall at an employee town meeting or a quarterly update meeting. Becoming more visible to the management team beyond the faces you see at board meetings will help break through the mystique that so often shrouds a board. The more the company’s managers know about an individual director, the more they’ll be able to request and utilize the talents of that director in ways that are most helpful to them.
During a brown bag or an in-house training, you can give attendees a sense of what you do. Encourage questions, because what they ask you will give you a hint about how you might be able to contribute. The same goes for attending a kickoff session for a new product or initiative. - Be an active cheerleader. While board members are often instrumental in making introductions to other companies (potential suppliers, partners, customers), this is a little different. Being an active cheerleader means referring to the good work of the company on a regular basis in other contexts. Do you talk about this company in speeches you give for other organizations? Do you use it as a positive example back at your own office? Think about how you might be able to wave a flag for this company. What about it makes you proud?
Directors generally keep a low profile outside the boardroom, and that is usually a good thing. But there may be opportunities to raise your head above the parapet and draw attention to the company you serve—and when you can, you should take advantage of them.
Ripple Effects
When one director engages in even a few of the activities listed above, he or she inevitably raises the bar for other directors. Over time, the caliber of discussions— and decisions—made in the boardroom should improve.
How to Add Value
If you can spare 20 minutes in the next two weeks:
- Set up a Google Alert for the company on whose board you serve, and maybe a competitor or two. If you are worried about email overload, you can narrow the search further—“ABC Company + Asia,” for example—or specify the frequency of when you receive notifications.
- Do a web search along the lines of “What it’s like to work at Company ABC.”
- Check out the company’s website and see what it’s like to apply for a job, buy a product or become a vendor.
If you can spare two hours in the next two months:
- If your travel schedule takes you near the company’s headquarters, take the company’s head of HR, procurement, technology, or any staff function you don’t spend time with regularly to lunch.
- If your travel schedule aligns, take a tour of a company facility you haven’t visited (or haven’t visited in a while), especially if it is not at or near corporate headquarters.
- Read analyst reports about your industry or major competitor(s).
If you can spare a half-day (in a single block of time) in the next six months:
- Sit in on a new-employee group orientation session if the company offers one.
- Do an anonymous “comparison shop” of two or three major competitors, all on the same day or proximate geography. For example, if the company is a retailer, then buy a product and a competitor’s product, and compare the service you receive. If you can’t engage directly (say, if the company is an industrial component provider), then figure out how complicated or easy it is for vendors or suppliers to work with the company. Do a proxy for a comparison shop by finding out from the website what it’s like to make a product inquiry. If yours is a professional service firm, does the website show how you differentiate your value? Is there an independent competitive rating you can check? If your company is not one of the “top 100” in a general rating of companies in the area, does your knowledge of the company’s policies indicate why that’s the case?
- “Ride along” with an employee. Literally, trail a salesperson for two hours, or spend a morning with a manager of front-line employees. Ask the board secretary to work with your schedule so that you can participate in a “take your director to work” program of your own design.
Make the First Move
Want to start a productive conversation about how individual board members can add more value to the company they serve? One way is to be direct. Ask your CEO/president: “How can I be more useful to you outside the boardroom? How can I add more value to this company, given my experience and skill? Are there customers or potential investors or suppliers you’d like me to meet with or facilitate a conversation with?”
Another option is incorporating the “ask” as an essay question or as a fill-in-the-blanks question on an annual evaluation form. This should not be a “check the box” question, but rather an open request to senior managers to articulate what help they could use.
Here’s one way to frame that request for a company’s senior managers: “How, given the background of board members, could they be deployed more effectively? What could you use help with? How might they make the company stronger? How might they help you contribute more to the company?”
Robert (Rob) Galford is a managing partner of the Center for Leading Organizations and a leadership fellow in executive education at the Harvard Graduate School of Design. He is a director at Forrester Research where he chairs the compensation and nominating committee.
What a practical/tactical approach to adding value as a director. You have addressed many of the questions I have had about a deeper engagement as an individual director. I am sending this on to our Board Chair of ATB Financial for more feedback.
Thanks, Colette. Hope it has a positive impact!