Biz Tips: Tips to create an effective board
Pick directors who share your organization’s goals
By Jean D. Sifleet
Some boards of directors are perfunctory, and accomplish little. Others are motivated and highly effective. A good combination of people, process, and planning makes the difference between the two.
Those looking to assemble a board should keep that in mind in picking directors, and structuring the group.
People
The most effective directors understand their responsibilities, and commit to actively participating in meetings.
A company should avoid choosing board members who are too busy or too narrowly focused in their views. Directors should have the organization’s best interests at heart, and also need to have the time, talent, and motivation to work for its good.
As far as legal requirements, directors have both a "duty of loyalty" and "duty of care." Duty of loyalty requires directors to act in the best interests of the organization, and prohibits use their position for private gain. Any conflict of interest, or potential conflict of interest, must be fully disclosed.
Duty of care requires directors to act with the care of a reasonably prudent person under similar circumstances, and in a manner that they reasonably believe is in the best interests of the organization.
Effective board members prepare for and attend meetings, ask questions, and review their organization’s financial information.
Process
A board should operate with some structure and formality, including a schedule of meetings, notice, agendas and minutes.
Meetings are forums for respectful, orderly discussion, and consideration of all points of view.
Boards should make decisions as a group, and that group must meet a required quorum, or specified minimum number of directors present at the beginning of the meeting.
In general, directors must meet to make decisions in person, although electronic meetings may be acceptable - so long as all members present can simultaneously hear each other.
Directors should abstain from voting on a matter in which they have a conflict of interest.
Lastly, minutes of every meeting provide a record of what happened. The minutes should include the date, location, attendees and a summary of the decisions and votes taken. The board should review minutes from its prior meeting at the beginning of each new meeting.
Planning
Directors need to understand an organization’s goals and constituencies. But how do you ensure all members possess that understanding?
One good way to hold an annual review of an organization’s purpose, priorities, finances, and accomplishments. From that discussion, directors can help clarify the goals and strategic initiatives for the coming year.
In future meetings, effective boards review an organization’s progress against its strategic plan and goals.
Effective directors deal with problems and complaints proactively, and try to learn from what happened to prevent recurring problems. Usually they establish committees to successfully implement new initiatives or solutions to problems.
A board of directors can be a powerful tool for an organization. If your board has done things the same way for years, it may be time to take a fresh look at your organization’s purpose and plans.
A strategic planning retreat can help to focus and re-energize your board. It need not be expensive or lengthy; much can be accomplished in a half-day session with a focused agenda and committed participants.
Jean D. Sifleet is an attorney with Hassett & Donnelly in Worcester, and the author of Advantage IP - Profit from Your Great Ideas (Infinity 2005) and Beyond 401(k)s for Small Business Owners (Wiley 2004).
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