Best Practice Board Reporting

Best Practice Board Reporting

Who is responsible for the quality of board reports—management or the board? If you said both, you’d be correct. Boards function best when they receive reports that have enough information for them to develop business strategies for short and long-term growth. Boards that don’t fully analyze trends and data run the risk of making poor decisions, which may lead to increased liability for the directors. What happens when the board receives reports with too little or too much information? What happens when pertinent information is missing?

The board of directors has a responsibility to set management’s expectations and provide directions for them on the type of information they need. Moreover, the board needs to put processes and controls in place to ensure that the information they receive is relevant and timely. Senior management has a mutual responsibility to make sure the reports are thorough, yet not so lengthy that board members won’t read them. Best practices for board reporting will help you cover all of your bases.

Key Points for Quality Board Reporting   

 Senior management makes critical decisions every day. While they are responsible for the day to day operations of the company, they need to share information that the board needs to make key decisions. There are several ways that management can get in sync with the board.

The board secretary has a significant role in bringing management and the board together by putting together an effective agenda. The agenda should reflect the priorities of the board and management.

In addition to an effective agenda, the board book should be complete and consistent in the way that it presents methodology, objectives and reports pertaining to the objectives. A complete picture of the state of the company’s affairs forms the basis for enlightening board discussions.

Boards need to inform management that they want to see more than standard financial statements. They want to see how the company arrived at the current financial state, including any drivers and sensitivities. Hard information gives the board the facts, and soft information adds a brief narrative to explain some of the hard data.

A positive up-and-coming trend for boards is to go paperless. Board portal software takes the place of stacks of paper documents. Using a software portal allows board members to see the numbers in between board meetings and do their own research to prepare for meaningful board meetings.

The Board Chair’s Role in Requesting Information from Management

 The board chair plays a vital role in securing effective board reports. The board chair is that catalyst that works with management to request information that matches the direction, broad strategy, objectives, guidelines, and effects on policy. This discussion should include an agreement on key performance indicators.

The board chair acts as the liaison between management and the board to make sure they have adequate information to form a basis for questioning and exploring data. Using the key indicators that they agreed on, the board needs information that lets them analyze positive and negative variances where management played a role in the performance of the company’s projections.

In addition, the board chair should review the information that management provides to make sure board members have the information they need and that they understand it.  The board chair may offer suggestions for management to leave out data the has little or no impact on board decision making.

The board chair should evaluate the information that management provides to make sure that it links the company’s needs with the board’s objectives.

Best Practices for Preparing Quality Board Reports

 Let’s take a closer look at what timely, relevant, clear, reliable, and integrated mean as they pertain to best practice board reporting.

Management is responsible for monitoring daily financial reports and balance sheets. Automation streamlines daily reports so managers can check for trends and variances. Boards don’t need the daily reports, but they do need to see trends in easy-to-read graph form and have an explanation for anomalies. The board chair needs to request this information in enough time to provided it to board members so they have time to review it.

Financial reports should reflect an analysis of the trends as they pertain to the historical data and future projections to give the board perspective on the data. It’s helpful to present data that reflects any cyclical data as well. These reports are a good example of how hard and soft data reporting dovetail nicely with one another to form a brief, but accurate report. The graphs provide a snapshot of the company’s financial health and the narrative gives a summary of trends and variances.

Board chairs should review management reports to be sure that non-financial information integrates with financial information. The board needs this information to properly evaluate risks, opportunities, and challenges and use that information for strategic planning.

Because of the breadth of information the board needs, all reports need to address key issues and present them using graphs where appropriate, and adding succinct summaries, as in the financial report example above. The board books should be well-organized with clear chapter headings and consistent color coding.

It helps to ask a few questions to learn whether the board has the necessary information for decision-making:

  • Can the board trust the information?
  • Do the reports cover all critical issues?
  • Are the reports up to date?
  • Is the data clear?
  • Does the data assess past and future risk?
  • Is the data reported in a consistent manner?
  • Is the data presented in a way that board members can understand it?
  • If it was electronically provided, was it sent via secure internet settings?
  • Do the reports reflect negative information for review?

Final Thoughts on Best Practices for Board Reporting

Having a template for board books is useful for delivering reports that are uniform and consistent.

Lengthy reports may include a format with an executive summary, table of contents, and have sections with numbered pages. Draw board members’ eyes to key points and recommendations using separate sections or bullet points. Compile a glossary to explain technical or unusual terms.

It goes without saying that board reports should be presented in a professional way and that good grammar, spelling, sentence structure, and syntax should be reviewed by someone for clarity.

Jeremy Barlow

Jeremy is the Director of Digital Marketing at BoardEffect.