Rock Star Board Members: Four Principles To Consider

In an earlier article I noted that founder-led companies achieve growth and profitability levels greater than those of other companies and that a Director’s primary responsibility is to the company’s stakeholders—those individual or institutional shareowners who elect the Directors to represent them.

The Directors should strive on behalf of the shareholders they represent to help the company achieve optimal performance. Below are four key points on how to achieve this important objective.

First, recognize that you have something specific to contribute.  Each Director was likely nominated for a Board position for a specific reason—one might have industry expertise, another might have risk management expertise, a third might have recognized strong management capabilities, a fourth might have financial reorganization, legal or compliance expertise, etc.  Each discipline is important and generally represented on good Boards, but not always, and the absence of one key talent could cause management headaches when needed; thus balance is essential. 

Second, and perhaps the most important – Directors should become work tirelessly to create a partnership mentality with the management, operating as one team.  Seek to help them accomplish what they are trying to do, rather than to make them do things.  Work cooperatively.  Seek to help management optimize company  performance through offering ideas that come naturally to you from your expertise.

Third, respect the knowledge of the management team.  They know their industry, their people, their company’s abilities, their competitive situation and constraints better than can any outside Director.  So ask questions and offer ideas but let them decide on day to day operational needs as well as strategic objectives that are long term.  There is no substitute for being “the person in the seat,” which no outside Director is.  If relationships falter and senior management ignores insight from one or more Directors, a realignment of expectations is needed, ranging from a performance discussion to the need for a mini retreat of sorts to ensure that the team mentality referenced earlier is, indeed, underway.

Fourth and finally, motivate them.  The best way to produce desired results is to pay management to produce them.  People work to achieve based on their compensation, short and long term.  Pay them for sufficient profit and growth.  And consider paying them for profit and growth that is better than their competitors achieve and consider a long term incentive plan if they are truly exceptional.  It is critically important to get these incentives right, because people will strive to achieve what they are paid for, even if given the wrong incentives.  Insurex offers a full range of strategic services to help with compensation and incentive programs for all employees, not just your senior team.

Alignment is dependent upon candid communication.  If leaders wait to inform a Board about key decisions on product, pricing, competitive leaps and more, that Board could respond positively or they may have insight that the C-suite is cowboy-like, knee-jerk… shooting at the stars without the collective wisdom a Board can bring them.  This is where the informed insight of those of us who have led enterprises and served as Board members can help the entire organization thrive.