Advice for Management: Four Tips for Managing your Board of Directors

In my last post, I provided a few tips for the Board to improve communication with management and ultimately improve the corporate governance of the company. This post flips things around and assumes the Board needs a kick in the pants. The good news is that management can really influence Board effectiveness.

I have come up with four tips that will put your company’s Board in a position to be a useful part of managing the business. I base my suggestions on my last CFO role. There, we had a really good Board that came to the table engaged and ready to help shape strategy. I think the tips will also work if your Board is fairly unengaged. Here is what worked for us.

1. Be predictable
2. Communicate regularly
3. Prepare quality materials for meetings and get materials to Board in advance
4. Show strategic alternatives but give clear management recommendations

Be predictable. Some people do like surprises, but they are more likely to be your kids than your Board of Directors. It is difficult to provide good oversight if management has a tendency to spring important decisions on the Board on short notice.

To the extent your company wants to branch out into some new things, lead you Board through that decision making process over a reasonable period of time. Avoid an email or conference call with an urgent request to spend dollars. Put yourself in your Board’s shoes. Ideally, you want to make good decisions after careful consideration and debate. Being unpredictable makes this a very difficult goal to achieve.

An easy way to become predictable is by committing to regular communication with your Board. I have a strong aversion to meetings and conference calls*, so my recommendation is a detailed monthly management report that is emailed to the Board. The report is a great tool for management to summarize recent activities and outline future plans.

* Meetings are almost always a big waste of time. If I was starting a new company, I would have a policy of no meetings. To the extent we needed to violate that policy, our meeting rooms would not have any chairs. I suspect the meetings would be quick and to the point if attendees were required to stand.

A well written report will keep the Board fully informed on the company’s activities and plans. This paves the way for management to put forward future plans that the Board will feel comfortable approving.

Most companies will hold quarterly Board meetings; some companies also sprinkle in the periodic conference call. To effectively manage your Board, it is important that management always prepare a complete set of meeting materials. Give the Board at least a few days to read through the materials prior to the meeting.

From management’s perspective, the objective of most Board meetings is to have a Board approve some activities and spending of some dollars. A good set of materials allows this to happen after careful consideration.

When going to the Board with proposed activities, I think it is important to give a sense of the strategic alternatives available. You are not helping your Board if you only present them one option.

It is equally important for management to give their clear recommended course of action. You are not helping your Board if you give five options and then say, “What do you think?”, or worse saying, “We aren’t asking for anything to be approved today.”

Presumably, management has a preferred course of action. The goal then is to have the Board buy in and approve that course of action. If you are going to take the time to put together materials and spend several hours in a meeting, you might as well leave the meeting with the authority to pursue that preferred course of action.

Wrapping up, to manage your Board you need to communicate frequently with clarity and purpose. If the Board comprehensively understands management’s strategic vision for the business, its members will be in a position to add value to management’s proposed activities. The result will be better decisions, a better bottom line and better returns for your shareholders.