What is wrong with the way corporate boards operate today? In essence, the problem is that they act as though the environment of business were still relatively stable and predictable. Traditional boards therefore remain deferential, reactive, and focused on compliance.
Yet today’s successful competitors are constantly evolving—entering new markets, redesigning their systems, and reengineering their organizations. For businesses that seek to stay in the game, corporate transformations never end. Boards must respond by taking more initiative, becoming more collaborative, and adding more value.
Where boards are weak
Problems with boards arise in three areas: processes, or the way boards are run; people, or the personal and professional backgrounds of board members; and culture, or the relationship between boards and management.1
Processes
Reviewing history—not creating the future—is the focus of traditional board processes. The cycle of monthly meetings gives managers little time to prepare carefully considered strategy papers, since one meeting has barely ended before it is time to get ready for the next. Moreover, structured agendas leave little room to consider medium- or long-term issues; instead, discussion centers on the last period’s operating results, problems that have arisen since the previous meeting, time-sensitive decisions, and risk management.
Another...