Setting up Effective Boards

Setting up Effective Boards

Introduction

Effective Boards are crucial for effective running of organization. Success of an organization is underpinned by the quality of governance. Boards are steering heads of the organizations which contribute to the overall growth and development. In order to smoothly govern the organization, the board must be staffed by individuals who are competent, influential and knowledgeable. For effective running of the board it is essential that each and every member of the board understands his roles and responsibilities. A board which is incompetent can cause missed opportunities and result in liabilities that may cause going concern issues for the company. Board members have a legal and fiduciary responsibility which means that they must act in the best interest of all (Bona fide).

Discussion

A board which is functioning properly can drive the company towards success. Effective boards ensure unbiased advice by board members on several topics ranging from strategic partnerships to key hiring. An ineffective and improper function board is a liability and is worse than having no board at all.

Companies which are in the process of setting up boards for the first time may face challenges in the form of miscommunication, misunderstandings or on issues as to who will have the final say. Companies may also fear setting up boards in the first place as this will lead to dilution of power. However what is important is that a qualified independent board will reap results that will contribute to overall growth of the organization.

In setting up an effective board the following six steps can be taken into consideration:

Expertise

Boards need to consider the expertise they are missing. Inducting independent non executive directors may help to fill the gap and bring in the required expertise. For example if the company is looking forward to a major merger and acquisition decision they may decide to hire someone who has vast experience in this field. This will help prevent the organization into entering a business merger/acquisition that will hinder the survival of the company. It has repeatedly been seen in the past that many merger and acquisition decisions didn't pay off because the board of directors failed to weigh the necessary downsides. Board of directors is often reluctant to introduce new members to the group as it might lead to further disagreement and additional costs for the company (Evans, 2013).

Inducting newer members into the board can give the insight and experience that may currently be lacking in the current board composition. For example, chief executive officers (CEOs) of companies who are in similar line of business (but not directly in competition) can provide with in-depth industry trends and analysis that are vital in obtaining a competitive edge.

Experience

In setting up an effective board it is crucial to look for experience. There is no other best alternative than experience. Individuals who have served on boards of various other companies can provide the company with the understanding of issues relating to finance, compliance, audit, strategy and other dynamics that make an impact ...