Modern Governance Approach to Better Board Decision-Making
Decisions, decisions — they’re part of governance, leadership, and life. No matter how comfortable we are (or aren’t) in making them or how prepared we are (or aren’t) to make them wisely, we are faced with countless opportunities to decide something, especially as board members. In fact, effective decision-making is a key indicator of board effectiveness.
As we’ve discussed in recent blogs and our recent conference, how a board works is just as important as whatever work it does. According to Bridgespan, effective decision-making processes are among the top factors that enable effective board leadership. Ideal is when the board and chief executive agree on the board’s involvement in decision-making processes and on which decisions fall under the board’s purview. In addition, it is essential for the board to understand when it can or should inform management decisions vs. when it should expect to be informed about them. Bridgespan further notes the agenda of each board meeting should clearly reflect whatever decision-making process is in place.
Modern governance makes that easier. At the first-ever Modern Governance Summit for BoardEffect users, hosted by Diligent Corporation in September, 2019, board effectiveness was a key theme, thus making better board decision-making a key priority in using board management software.
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Tips for Better Decision-Making
Not-for-profit boards typically ease into utilisation of board management software through the creation of agendas for board and committee meetings. According to the American Hospital Association’s Trustee Insights, designing board agendas strategically is one of several tips for enhancing board decision-making. Among them, the following recommendations align particularly well with modern governance solutions:
1. “Avoiding decision fatigue by restructuring board agendas.”
According to the AHA, the more decisions a board makes, the more susceptible it is to “decision fatigue,” which can compromise the quality of decision-making. Ironically, though, most boards front-load meeting agendas with “pro-forma decision issues (approval of minutes, consent agenda, approval of reports, etc.) at the beginning,” placing the more significant decisions toward the end of meetings. A more effective approach can be flipping the sequence so that significant decisions happen first and technology makes it easy to adjust agenda layouts accordingly.
2. “Decision sequencing.”
When urgent information is presented to boards just as they are expected to vote, their decision-making processes are cast aside. Even in emergencies when such actions might seem necessary, rushing through decision-making should not be a norm, especially when board management software can facilitate swift distribution of critical information. By developing a “decision sequencing” policy, boards can indicate what information they want to have, from whom, and by when in order to ensure sufficient time for discussion before a vote. According to the AHA, this approach helps boards generate better discussions and greater ownership of decisions.
3. “Nonbinding straw polls.”
Modern governance solutions enable voting and polls, which can be used unofficially to gauge board members’ points of view on a given matter. Board leadership can collect that information to inform discussions about an issue before voting is required. By allowing time for exploration and deeper discussion, the board ensures any final decision is fully informed.
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For effective boards, decisions are informed by data. According to Felicia Fett, Board of Directors Liaison at the National Association of Secondary School Principals, “Data is the most compelling factor that influences board members to adopt new ways of approaching their governance responsibilities, from the most basic to the more advanced ends of the spectrum.” Data fosters change and improvement through better decision-making.
She cites, for example, the conflict of interest policy for board members. “It’s not just about the form, but how it can be used to ensure every vote on a given issue includes the right people, informed by current data.” She explains it’s critical to “avoid being in a position where you don’t know a board member was involved in a transaction that could compromise a board decision or vote.” Sometimes board members aren’t aware of all the connections their peers or they themselves bring, but board management software can make it easy to profile board members and preserve decision-making integrity. As she was reminded at the Modern Governance Summit, it is imperative to “get people to think about the ways digital escalation changes the way governance can be approached.”
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While discussion and data are essential to effective decision-making, efficiency matters, too, for busy board members. Accordingly to Mary Lou Leeder, Director of Client Success at BoardEffect, the typical user of board management software has changed. “Board members and board liaisons alike are increasingly attracted to self-serve access to information. They are more attuned to governance and know what information matters, so they seek more immediate and direct ways to access it.”
Since “no one reads a 1,000-page board book,” she explains, “boards must be intentional about what’s included in their meeting materials.” Using modern governance solutions, boards can provide links to supplemental information, or even create secondary board books for board members who seek additional material, while expecting board members to read fully and discuss the contents of the primary board book. Technology enables them access to the right information at the right time.
Speaking of time, speed can be essential in a crisis. According to Felicia Fett, “we now live in a highly connected world and board members must collaborate in ways they didn’t in the past. When an issue goes viral, board members must be able to receive information instantaneously in order to make informed decisions accordingly.”
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Culture and Conclusion
Smart decision-making requires not-for-profit boards to be intentional. By creating a board culture that values discussion (as opposed to passive agreement) and efficiency (as opposed to inconsequential distraction), boards can frame meeting agendas for good governance and rely upon current data to inform decisions. As Felicia Fett explains, modern governance finds boards engaging in mission, sustainability, reputation, and their organisations’ capacity to deliver. “That paradigm enables them to catch up with the technology that gives board members more information and analytics to make effective decisions.”
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