Size Matters!

Size Matters!

One of the most frequent questions we get asked by our clients is how large should a board be. We can safely say that there is no universal agreement on the optimum size of a board of directors. It depends……every Board in unique!

A large number of board members represents a real challenge in terms of using them effectively and having meaningful individual participation. A small number may be too few to carry out all the work that is required on the board.

So, some features that need to be considered in deciding what size the board should be are:

  • Stage of development of the company
  • Number of board committees required
  • Balance of skills and experience

So, let’s look at each of these in turn.

  1. Stage of development of the company

Small companies do not need large boards but having a board meeting is a good discipline even if all the members working in the company are executive directors and shareholders. 

As it grows, it may make sense to bring in certain skills and experience to support the ambition of the founders and to separate out the role of the board and the management team. This separation which needs to be real as it will build trust and confidence in the company with its bankers, shareholders, staff and donors if it is a charity.  This needs to be thought through very carefully particularly in family companies where succession planning will need very careful thought and planning.

  1. Number of board committees required

As a company develops and grows it will need to bring in greater structure and establish board committees.  Typical committees could be;

  • Audit
  • Compensation
  • Nomination
  • Risk

All board committees should be chaired by NEDs if possible.

The audit and compensation committees must be made up of independent members.  Assuming a minimum number for each committee is two or three depending on the size of the company, this means that a minimum of four to six board members are required for those committees so that no one is on more than one committee. It would not be good practice to have an overlap of independent members serving on both the audit and compensation committees, as it may lead to conflicts of interest. So, the more committees, a company has, the more board members and NEDs are required.  Doubling up will be OK as long as it does not lead to conflict or too much of a workload for a director

  1. Balance

We favour boards where the non-executives are in the majority, the Chair is not the CEO and terms do not exceed a nine years maximum. The board should consist of the right combination of skills and experience required to support the achievement of the strategy.

Key Takeaway

We believe boards that can accommodate the features above will succeed. We think any number beyond 10 will be hard to be justified in terms of the effort and cost to sustain them.  Beyond that we are dealing with crowd control!

At The Governance Company our ambition is to make corporate governance a topic that is engaging, stimulating and fun for those who need to know.

We offer the following services to help you in your governance journey:

  • Corporate Governance Advisory
  • Board Evaluation
  • Online Directors Competency Development & Assessment Programmes
  • Corporate Governance Bootcamps 

Join us for topical and practical articles and insights from the world of governance.

Follow us on LinkedIn and Twitter

David W Duffy

Mind the Competency Gap – NED vs Executive Director

Deciding to become a non-executive director should not be done on a whim.  It’s a serious statutory role with specific legal and regulatory responsibilities.

While there may be a certain attraction about serving on a board, it’s not hard to understand why. This could include the perceived status, sitting around the board room table with ambitious like-minded peers, new professional relationships, development opportunities it offers, access to leaders etc. If you are providing your talents to a charity or indeed an unpaid post on a state board, the satisfaction and perhaps the glow of giving back can be very rewarding.

However, before you get carried away and say yes, take a step back and consider the following.

The skills and experience required of a NED director are very different from being an executive director.  Don’t underestimate the gulf between the two.

A phrase to bear in mind on the role of a NED is “Nose in but fingers out” That is NED’s should not get involved in the day to day operations of the business unless there is some issue that is putting the business at risk.  If you are joining a board with only executive experience and you have not been a NED before, you may find it difficult to contribute at the right level, as the operations may currently be your comfort zone.

A NED is there to look at the big picture, the macro economic environment, company policy, strategy and setting the tone from the top in terms of ethics and values.  Executive directors are there to manage the business, implement strategy and focus on the operational.

So, if you are asked to become a non-executive director, you must be comfortable that you are bringing some unique value in terms of skills and experience to the Board and can step up to the NED plate.  Maybe that is why you were asked. If you have skill deficiencies in specific areas, do something about it beforehand, enroll for a course and get the required knowledge.

Next step is to be sure that you believe in the mission and vision of the organisation.  If so great, if not bail out now.

Don’t forget to check out the values, governance and strategy of the company, talk to the Chair, current and former directors, the CEO and take a view. Make sure you respect the other directors and would feel comfortable working with them.

Lastly conduct due diligence on the company, its financials, its D & O, and if it is looking hunky dory, press the GREEN button, but if not, press the PAUSE button and think ……is this for you. If you have any doubt, say NO.

At The Governance Company our ambition is to make corporate governance a topic that is engaging, stimulating and fun for those who need to know.

We offer the following services to help you in your governance journey:

  • Corporate Governance Advisory
  • Board Evaluation
  • Online Directors Competency Development & Assessment Programmes
  • Corporate Governance Bootcamps 

Join us for topical and practical articles and insights from the world of governance.

Follow us on LinkedIn and Twitter

David W Duffy

Fresh air in the Boardroom is vital for Board renewal!

Fresh air in the Boardroom is vital for Board renewal

Succession planning is a key strategic role of any Board. Without good succession planning the organisation will struggle to thrive or even survive and provide the support that the executive needs.

Succession planning should be informed by the strategic plan and upcoming retirements as Board members come to the end of their terms.

However, for me the strategic plan provides the greatest influence.  The plan will set out the vision, ambition and the strategic objectives of organisation. This in turn will imply the type of skills and experience that a Board and Executive will require to deliver on its strategy. Some skills / experience will need to be replaced or enhanced to achieve their objectives. 

Assuming a Board is constantly ambitious, then the horsepower required of a Board will need to be boosted on an ongoing and planned basis.  This is taking a professional and strategic view of the shape of the Board going forward and the skills, experience and competencies required.

Planning should take account of the worst-case scenarios such as the Chair or CEO being unavailable for whatever reason. Planning for Board room succession is easier than with Senior Executive transition as the Board will see less of them than they will of their colleagues. Hence the need for a more systematic approach.

A Board will quickly become unfit for purpose if there is not a constant flow of fresh air in the room brought about by new members, greater diversity, new ideas and constructive challenge.

Seamless succession planning is the hallmark of any good organisation and generally will not hit the media as poor succession planning could. Board terms will be a factor in this and must be carefully planned to ensure Board and Management alignment with the strategic ambition of the organisation.

Succession should be carefully planned for by the Board itself or the nominations committee. It is an ongoing dynamic process. Appointments that are not well thought through will waste a seat at the Board room table.

Good Boards are constantly scanning the market for new Boardroom talent like any good football manager seeking to recruit the talent to win the UEFA Champions League Cup.

Part of the succession challenge at Senior Executive Level will be deciding between developing and promoting from within versus external recruitment.  Every situation is specific and must be treated accordingly.

Predicting the talent that a business will need for its next stage of development is difficult.  The NomCo’s job is to make sure the right talent is around the board room table.  Independence and objectivity come to mind!

At The Governance Company our ambition is to make corporate governance a topic that is engaging, stimulating and fun for those who need to know.

We offer the following services to help you in your governance journey:

  • Corporate Governance Advisory
  • Board Evaluations
  • Online Directors Competency Development & Assessment Programmes
  • Corporate Governance Bootcamps 

Join us for topical and practical articles and insights from the world of governance.

Follow us on LinkedIn and Twitter

David W Duffy

Underestimate the value of soft skills in the Boardroom at your peril!

Underestimate the value of soft skills in the Boardroom at your peril!

Directors Hard Skills are only part of the skill set required.

Our experience at The Governance Company in conducting board reviews is that there is all too often an undue focus on the functional and sectoral skills rather than the soft skills that will help Board performance.

When I ask what new skills that are typically required as part of the board renewal process, the answer is often, financial, commercial, legal, digital, governance skills and also specific knowledge of the sector in which the organisation competes, e.g. social media, food, healthcare etc.

Soft Skills are a vital ingredient in the VUCA (Vulnerable, Uncertain, Complex and Ambiguous) world

The more insightful boards will also consider what soft skills are also required around the Boardroom table.

Part of the challenge in board renewal is ensuring that there is balance in terms of the hard skills required but also in terms of the soft skills.

No board will benefit from having a collection of board members with the same personality type.  So, when thinking about renewal it is worth thinking about the personality profile of the current board and what enhancements or changes are required to it to bring a better overall balance.

So, what are the soft skills should be considered?

  • Connectedness, the ability to forge connections with people through networking
  • Directorial presence, the ability to be able to convey, confidence, credibility, gravitas and decisiveness often with less than perfect information under the pressure of the boardroom clock
  • Ability to communicate, the real skill of a director is in being able to read the room and deciding when to make the appropriate intervention in language that everyone understands with the appropriate authority and assertiveness
  • Being positive, inspiring and daring to dream beyond the here and now. Part of the role of the NED is to push out the boundaries of what could be and to rattle the cage of the company comfort zone
  • A high degree of emotional intelligence which is the ability to identify and manage your own emotions and the emotionsof others around the table.  In the often-charged atmosphere of the boardroom this is a key skill to be used judiciously
  • Being in the here and now. This means being very aware of the topic at hand, who may own it and what a constructive contribution might be
  • Ability to understand the personality profile of the boardroom to help inform the language and position of one’s contributions
  • A steady and consistent hand which will earn trust and confidence

The Governance Company, in conjunction with Odgers Berndtson, a global head-hunter surveyed more than 200 non-executive directors in Ireland and Overseas to identify the DNA of directors required to sustain and thrive in the changing, challenging and complex VUCA world.

This survey throws light on the most crucial competencies, behaviours and soft skills for future directors to ensure boardroom effectiveness. The survey responses indicate that boards of the future – and how they are assembled – will have to adapt in fundamental ways to meet the challenges of a fast-changing VUCA world.

Directors of the future will need to combine their innate curiosity with the ability to listen to others and then imagine and articulate future business scenarios for the benefit of the organisation. Listening, observing and constructively challenging board colleagues and executives will be a key requirement for directors in the future. Directors of the future will need to have and apply greater levels of emotional and social intelligence to their advisory role.

It will be important for future boards to cultivate greater diversity in how they think. One director said, “Boards will need to find a way to encourage [a] diversity of views and complementary skills, rather than defaulting to easy-to-measure [director] profiles such as ethnicity [and] gender.”

It is unlikely that all these skills will be resident in one person, so it is critical that the Board / Nominations Committee have done their homework to ensure that in recruiting new board members that they complement and enhance both the hard and soft skills required.

Diversity can only help!

Download full copy of the survey “Building a board to face the future” from our website.

At The Governance Company our ambition is to make corporate governance a topic that is engaging, stimulating and fun for those who need to know.

We offer the following services to help you in your governance journey:

  • Corporate Governance Advisory
  • Online & Offline Board Evaluation
  • Online Directors Competency Development & Assessment Programmes
  • Corporate Governance Bootcamps 

Join us for topical and practical articles and insights from the world of governance.

Follow us on LinkedIn and Twitter.

David W Duffy

Investment in Boards Creates more Sustainable Charities

Investment in Boards Creates more Sustainable Charities

The Governance Company has carried out numerous board evaluations of organisations in many different sectors, including, charities, commercial organisations, hospitals, membership bodies, statutory organisations and regulatory bodies to name but a few.

One of the common threads across all sectors is the lack of investment in board development and senior leadership in the organisation. The same applies to charities.

Charities are by their nature frugal with expenditure that does not contribute directly to their mission and that is understandable.

However, investment in the development of a charity’s board and leadership should be viewed as a necessary investment rather than a cost and one which increases an organisation’s effectiveness by strengthening its skills, capacity and knowledge base.

The Australian Charities and Not-for Profits Commission (ACNC) supports charities’ efforts to invest the appropriate time and resources in the development of their boards and leaders.  The ACNC also sets out to ‘support and sustain a robust, vibrant, independent and innovative not-for profit sector’.

The Italians say that a fish rots from the head, so if the investment is not made in the board, how can one expect the organisation not to be impacted by a poor board and leadership.

Undertaking meaningful investment in a charity’s board and leadership is a vital component of sound charity governance that helps to improve skills and foster trust and confidence in the sector.

There is drive towards creating the conditions to develop charities of scale, which should enable them to be more sustainable. To facilitate this, prudent investment by charities is required in the development of its board and leaders.  In my view this is not an optional extra but should be an ongoing activity to increase the ability of the organisation to govern and lead.

This is a defendable cost, which many charity boards may be reluctant to commit to for perhaps fear over adverse public reaction that often accompanies these types of investments.

A charity that does not meaningfully invest in the development of its boards and leaders is unlikely to be particularly robust, sustainable or innovative. The foundation of public confidence in charities is based on evidence of sound values, a credible purpose, good internal processes and skilled staff and board members.

The governance training carried out by The Carmichael Centre, Charities Institute Ireland and The Wheel is commendable. But more investment is required by the sector to ensure all charities, their boards and leadership can avail of ongoing and meaningful development.

Lack of investment in boards and the leadership will eventually lead to dysfunctional organisations and possible extinction.

Charites need to be able to provide the evidence to the public at large, donors and funders that they are investing in governance and not merely engaging in a box ticking exercise.

At The Governance Company our ambition is to make corporate governance a topic that is engaging, stimulating and fun for those who need to know.

We offer the following services to help you in your governance journey:

  • Corporate Governance Advisory
  • Online & Offline Board Evaluation
  • Online Directors Competency Development & Assessment Programmes
  • Corporate Governance Bootcamps 

Join us for topical and practical articles and insights from the world of governance.

Follow us on LinkedIn and Twitter.

David W Duffy

Selecting the CEO is the Board’s most important job

Selecting the CEO is the Board’s most important job

To many the most important job of the board can be any and all of the following:
  • Making sure the organisation has a strategic plan
  • Understanding the line in the sand between the role of the board and the role of the management team.
  • Ensuring the governance of the organisation is fit for purpose
  • Etc.
While these jobs are required, unless the organisation has the right CEO, it will not reach its full potential.

If the wrong CEO is selected the following can happen:

  • The organisation will stagnate because of a lack of vision and poor leadership
  • Poor leadership can lead to the departure of key staff
  • Innovation and productivity will decline as the staff do not believe in the CEO
  • Morale collapses and the company risks terminal decline
  • The Board may also need to get more involved in operational matters as it has lost confidence in the CEO’s ability to manage the company effectively.

So, the Board needs to consider the following in selecting the CEO:

  • The ability of the CEO to develop, obtain board approval and implement the strategic plan.
  • Does the CEO understand the sector and can he/ she bring and add value?
  • What skills and experience are required to deliver the plan? This could include outstanding leadership skills if this had been an issue with the previous CEO. There may be a need to reconnect with the staff to convince them that they have a future and that the organisation has as well. This is where those vital soft skills come into play such as:
    • Ability to communicate in the language of staff and customers
    • Empathy, authenticity and presence… the ability to be able to convey, confidence, credibility, gravitas and decisiveness often with less than perfect information
    • Being positive, inspiring and daring to dream beyond the here and now.
    • A high degree of emotional intelligence
    • Being in the here and now.
    • A steady and consistent hand which will earn trust and confidence
  • Has the CEO worked with a board before and knows how to use it as a key resource rather than a bi-monthly nuisance?
  • What has been the record of the CEO before?  Does that experience jell with the board’s aspirations for the future of the organisation?

There may well be other considerations!

Finally, a CEO should be appointed on a fixed term performance related contract that is evaluated annually.

Appointing a CEO without this framework will only bring heartache down road as not every CEO appointment will work out.

At The Governance Company our ambition is to make corporate governance a topic that is engaging, stimulating and fun for those who need to know.

We offer the following services to help you in your governance journey:
  • Corporate Governance Advisory
  • Online & Offline Board Evaluation
  • Online Directors Competency Development & Assessment Programmes
  • Corporate Governance Bootcamps 
Join us for topical and practical articles and insights from the world of governance.
Follow us on LinkedIn and Twitter.
David W Duffy

Effective boards need well-presented information to do their job

Part of the challenge for any executive is to be able to present the information a board needs to do its job in an imaginative and concise manner.

Few board members will thank the executive if they have tried to dig out the key information that matters from the poorly assembled board papers.

One of the key findings from the board reviews that the The Governance Company have carried out is that very few boards sit down once a year and assess if they are getting the information they need to do their job. Many boards are happy to put their trust in the executives to provide the information they need.  This may work at times.  But it’s no harm to sit back and review it.

As a basic principle, the board information pack should enable the board to assess how the organisation is performing against the:

  • Strategic plan
  • Annual Business plan
  • Financial and operational targets

In a survey conducted by insyncsurveys.com in relation to board papers, the respondents said:

  • More thoughtful management recommendations evidencing analysis of underlying material rather than presenting all the underlying material
  • Revamp the monthly board report to reduce the volume of data and change the focus to KPIs, analysis/interpretation of major variances and corrective actions, commentary on future trends and expectations
  • More incisive commentary in board reports would help us focus on the real picture underlying the performance reports
  • Board papers being so structured that they focus more on the issues that are challenging management re the future

In constructing board packs, the following should be made very clear:

  • “Matters for Decision” papers
  • “Matters for Strategic Discussion”
  • “Matters for Noting/Information”

Bear in mind that non-executive board members will be nowhere near as familiar with the detail the Executive will be. Executive directors will have intimate knowledge of the business and live it day in and day out, so Executive directors need try to see things from the NED perspective and make it as easy as possible for them to reach a prudent decision.

I am a great believer in less is more. The challenge for the Executive is to be able to present information in a manner that can be easily understood by an 18 year old!

The best way to do that, of course, is to provide them with comprehensive information…but presented in terms and language that is clear and easy to understand. Use lots of visuals, clever graphics, trend charts etc.

Lastly, if you can’t explain what you want to say and document in simple terms, chances are you don’t understand it yourself”.

At The Governance Company our ambition is to make corporate governance a topic that is engaging, stimulating and fun for those who need to know.

We offer the following services to help you in your governance journey:

  • Corporate Governance Advisory
  • Online & Offline Board Evaluation
  • Online Directors Competency Development & Assessment Programmes
  • Corporate Governance Bootcamps 

Join us for topical and practical articles and insights from the world of governance.

Follow us on LinkedIn and Twitter.

David W Duffy

The DNA of the directors of the future will need to able to navigate a more changing, challenging and complex world.

The DNA of the directors of the future will need to able to navigate a more changing, challenging and complex world.

The Governance Company, a Dublin based Enterprise Ireland backed EdTech start-up surveyed more than 200 non-executive directors in Ireland and overseas to identify the DNA of directors on boards of the future.  This DNA X factor is required by boards to enable their organisations to sustain and thrive in the changing, challenging and complex VUCA world.  This survey was conducted in conjunction with our partners Odgers Berndtson, a global search company.

Corporate governance is attracting unprecedented levels of scrutiny due to changes in the economic, technological and political landscapes in past few years. There is a heightened interest in ethical business practices and associated behaviours, backed by tougher regulatory frameworks.

For non-executive directors’ competencies around digital media, new technologies, climate change, geo-political insight, and innovation will be in demand and may even be more useful than industry-specific experience. There is also an increased focus on cyber security and innovative business models as organisations respond to the opportunities that technology provides.

This survey throws light on the most crucial competencies, behaviours and soft skills for future directors to ensure boardroom effectiveness. The survey responses indicate that boards of the future – and how they are assembled – will have to adapt in fundamental ways to meet the challenges of a fast-changing VUCA world.

Directors of the future will need to combine their innate curiosity with the ability to listen to others and then imagine and articulate future business scenarios for the benefit of the organisation. Listening, observing and constructively challenging board colleagues and executives will be a key requirement for directors in the future. Directors of the future will need to have and apply greater levels of emotional and social intelligence to their advisory role.

It will be important for future boards to cultivate greater diversity in how they think. One director “Boards will need to find a way to encourage [a] diversity of views and complementary skills, rather than defaulting to easy-to-measure [director] profiles such as ethnicity [and] gender.”

Board renewal and rotation is important for maintaining independence, otherwise directors may become complacent, lack perspective and cease to add value. Directors in the future will need to demonstrate more independence in their thinking, according to the survey.

To sum up, corporate boards of the future will be more diverse, will encourage more director turnover, and will foster an environment of organisational mindfulness and constructive challenge.

One of the directors said -“Every board should ideally have one or two directors who are more comfortable watching the sea, rather than watching the waves.”

Download full copy of the survey “Building a board to face the future” from our website.

At The Governance Company our ambition is to make corporate governance a topic that is engaging, stimulating and fun for those who need to know.

Join us for topical and practical articles and insights from the world of governance.

Follow us on LinkedIn and Twitter.

Educational technology will transform how directors of boards are educated, developed and assessed.

Educational technology will transform how directors of boards are educated, developed and assessed. Last month, our Founder & CEO, David W Duffy spoke at EdTechX London along with 134 other speakers from 56 countries and 902 attendees. The theme of the conference was “Learning is the new Technology”.  Two keys driver of this were personalisation, predicative analytics and engagement and behaviours in learning environments. It was predicated that we will move from EdTech to AI and Deep Learning. The Governance Company plans to harness these new technologies and trends to revolutionise how board directors are educated, developed and tested to ensure that they have the competencies to carry out their role. Currently, most of the focus on director education is on professional NEDs rather than on the directors who sit on the boards for example of:
  • The subsidiaries of multi-national companies around the world
  • Non-profits (on a voluntary basis )such as charities, housing associations or sports organisations
  • SME’s
To get access to quality corporate governance education and training will mean potentially travel, accommodation costs and perhaps time off work let alone the cost of the programmes themselves. The proposition we presented in London included:
  • Online induction programmes for charities which would help to speed up the induction process for new directors for organisations such as charities. These would be offered to new directors in addition to face to face induction. The content would cover, charity law, basics of good governance, how to be an effective director etc

  • Programmes to help the development of existing board directors which would not only help to advance their knowledge but also provide knowledge tests over 8 key competency areas. The resultant data will identify the strengths and weaknesses of Boards once the individual director data is consolidated at Board level.
  • The ability to consolidate the data for the boards of say 900 publicly funded companies. This data here will help to identify the risks of poor governance to the funder which is usually using taxpayers money. See diagram above.

Our eLearning programmes can include, gamification. video clips of the experience of real directors, case studies and knowledge tests.

Our online approach lowers dramatically the cost of this education, so that learners can learn where they, when they want.

At The Governance Company our ambition is to make corporate governance a topic that is engaging, stimulating and fun for those who need to know.

Join us for topical and practical articles and insights from the world of governance.

Follow us on LinkedIn and Twitter.

12 steps on how to improve trust in your charity

12 steps on how to improve trust in your charity. 

The publication recently by Charities Institute Ireland on the level of trust in charities is a welcome development in tracking respondents perceptions on trust.  It notes that trust has risen from 24% in 2017 to 30% in 2019. However only 1% of respondents completely trusted Irish Charities.

The sector has been blighted by many well publicised governance meltdowns in the sector over the last 10 years which has had a huge impact on trust and giving. In a nutshell, greater trust should mean more income.

Good governance is about transparency and accountability.  Organisations with good governance should not hide their light under a bushel and should be open about what they do well.

So what can charities do to visibly demonstrate that they take  governance seriously.

Well here’s 12 steps they can take.

Publish the following documents on their website

  1. Code of Conduct for the Board
  2. Annual Report
  3. Terms of Reference for all Board committees
  4. Board policies
  5. Reports by the Chairs of Board committees on their stewardship for the year of their committee.
  6. Bios of all the directors and length of terms they have served
  7. Attendance record of directors at Board and Committee Meetings.
  8. A Donor Charter
  9. Financial Accounts with the salaries of all senior management displayed in appropriate salary bands.
  10. The date of the last board review, the scope and results of the review, who carried it out, and their qualifications.
  11. Indicate that they are compliant with the Charities Code. And if not why not.
  12. The CPD programme taken by the directors for the last 12 months

If your charity operates in the USA, get your governance rated by such organisations as Charity Navigator, CharityWatch, Universal Giving, Philanthropedia, GiveWell, Great Nonprofits, and The Life You Can Save.

Although Charity Navigator does not operate in Ireland yet,  by following its criteria for highly rated organisations, you can bolster your reputation among donors.

For example, Charity Navigator assesses the ratio of overhead expenses (particularly fundraising costs) to a nonprofit’s overall budget. Donors want most of a nonprofit’s revenue to go toward its programs. But Charity Navigator has revised its evaluation process considerably so that overhead expenses are only one part of the rating equation.

The Ireland Funds in the USA have a 4 star rating which is the highest one can get.  The more sophisticated donors will be guided by this in their giving.