Building Effective Boards — the Do’s, Don’ts & Who to Recruit
When we think of ‘boards’ we often relate to extremely senior board members governing large corporations, making enormous profits and employing thousands of people.
However, in reality, boards are set up to oversee the operations of a range of organisations, including private companies, government authorities, non-profit organisations, educational bodies, sporting, and community clubs.
Although the specific responsibilities may vary due to mission, focus and different phases of an organisation’s existence, the basic role and purpose of all boards remain the same. There are legal, ethical, and practical reasons to build a board and to ensure it runs effectively no matter the size, the organisation or interest group.
We recently spoke to Reddin Group’s Andrew Telburn about some of the do’s and don’t when it comes to building an effective board and recruiting non-executive directors.
Andrew believes the biggest mistake he sees when organisations are appointing Board members is recruiting individuals who do not truly understand their role.
“Board members are, of course, absolutely accountable to the organisation’s shareholders and /or stakeholders, but if the individuals selected are not aware of their role, there can be legal and financial consequences. Most of the large organisations and businesses understand this, but some smaller companies or interest groups aren’t always fully aware of their obligations, so understanding why an individual would like to join a board, for me, is critical to ensure potential pitfalls are avoided,” he says.
Another unfortunate characteristic of an ineffective board can occur when members potentially campaign for, or entirely ‘look out’ for their own, or their representative interests. The role of Board members is not political and there is no room for personal bias. Their role is to serve the interest of the organisation as a whole by calling out risk, understanding financial performance and guiding them through critical junctures. A lack of experience or understanding in this area will see boards being run inefficiently and, in fact will end up being dysfunctional, ultimately leading to the organisation or group not being set up for future success,” he explains.
Inexperienced Board members may also tend to interfere with the Executive, almost try to do their job, rather than focussing on setting strategy and supporting the company direction. This type of behaviour, while ‘well-meaning’ can be culturally damaging.
Diversity on boards is also something Andrew believes we need to focus on.
“Diversity of gender, background, age and expertise is critical to effective boards to avoid the pitfalls of ‘group-think’. While it is something that we are more aware of now than ever before, we still have such a long way to go, and I’d encourage all boards to look at their diversity balance and make change for the better. Diversity of representation on a board isn’t simply a ‘nice to have’ or a quota to be filled, it is critical now and for our future generations,” he says.
When recruiting for board positions in the non-profit sector, Andrew believes that getting the right people is absolutely crucial.
“One of the things I love about the non-profit board appointment process is the passionate people it attracts, but we still have to ensure the right calibre of board member is appointed,” Andrew says.
“Non-profits have key ethical reasons to build a board, ensuring the public and all stakeholders are in good hands. The board assumes the responsibility for the actions and decisions within the non-profit organisation, and its role in this capacity is to go beyond the legal requirements and ensure that the organisation not only does things right but does the right thing. Those on the board of non-profits must fully understand and agree with this concept,” Andrew explains.
When making board appointments, Andrew has a clear set of attributes that he looks for in potential board appointees.
“Aside from understanding practically what the board role is and the obligations that come with it, I look for people that are open-minded. Equally as important is understanding their impact on others. Boards will not function to their potential if those leading the way don’t understand that their actions can carry weight. I look for those who are brave — those who are willing to call out risks when necessary. A Board member must have the ability to navigate conflict, while ultimately looking out for the best interests of the organisation or group they are representing. There is no room for self-interest. Above all else, I look for someone is who committed to the needs of the organisation and that they are willing to put in the time and work,” Andrew says.
Boards often require a specific sets of skills or expertise. Often these are financial, but can range from project management skills, or something as specific as engineering depending on the type of organisation the board is leading. Seeking specific expertise guides the appointment of Non-Executive Directors. Often appointees are individuals with a strong background in accounting/finance, risk management and governance. However, it is important to note that Non- Executive Directors, whilst not employees of the organisation, still carry the same fiduciary duties as other Directors.
Whatever the size of the organisation or sector, boards have an important role to play in ensuring businesses, non-profits and various groups represent the interest of shareholders and stakeholders, and that they act in accordance with Australian laws and moreover, in good faith.
If you would like to speak with Andrew or a member of the Reddin Group Team about building your next board or recruiting Board members, please get in touch via LinkedIn.