Evaluating Board Maturity: Essential Steps for Advanced Governance

I recently?had a conversation?with a CEO who said his board was looking for a new advisor. They felt they had?“outgrown”?the ones they had worked with for years. Too much of their board and retreat time was?being?taken up?with fundamentals. They were ready to move on. He was curious about what I offered.??

This?caught my attention. I do hear this sentiment from time to time. But it is rare.?I’m?aware of the advisors he mentioned, they?work nationally, but?don’t?know them. It?wasn’t?surprising to hear that they focused on the fundamentals. Most boards lack a firm grasp of fundamental governance principles.?I’d?go so far as to say that 8 or 9 out of 10 boards could?be described?this way.??

Your average board director is intelligent and respected within their communities. But they often?don’t?receive meaningful governance training. Instead, they follow established board norms without questioning them, which can lead to significant governance failures.

Consider Enron, Wells Fargo, Volkswagen AG, Theranos, and, recently, Boeing—all have boards filled with recognized experts.?However?inadequate oversight caused or allowed them to make?serious?and damaging errors.?This is most starkly illustrated?by Barney Frank, co-author of the Dodd-Frank Act (passed following the 2008 financial crisis) and a?board member of Silicon Valley Bank?while it collapsed.?Having brilliant board members?doesn't?guarantee effective governance.

The point is that, for different reasons, consultants and experts can?‘misread’?where a board is at. Frankly, this is most often due to just being lazy. But?sometimes?it is due to?just?not being clear about what to look for.??

For my benefit, and hopefully, for yours, I decided to build a framework to evaluate the maturity level of a board and what it needs to focus on at each level of maturity. Use this quick reference guide to?evaluate?where your board might be?now?and what it likely needs to focus on.??

How mature is our board?

1. Sub-Optimal Boards:Lack of engagement:?Members are often unprepared for meetings, rarely participate in discussions or actively deliberate, and may have poor attendance records. Limited understanding of roles:?Members do not fully understand their responsibilities or the?strategic objectives of the organization.Poor decision-making:?Decisions?are made?without adequate information or consideration of long-term impacts. There may be a lack of critical questioning and reliance on a few dominant voices.
2. Developing Boards:Increasing engagement:?Members?begin to?prepare more thoroughly for meetings and participate actively in discussions.Growing awareness of governance:?There is a noticeable effort to understand roles and responsibilities better, often facilitated by training sessions or workshops.Improved decision-making:?Decisions start?to incorporate?more data and a broader range of perspectives, showing an understanding of their implications.
3. Mature Boards:High engagement and preparation:?Members consistently come well-prepared,?having reviewed all background materials ahead of?meetings.A clear?understanding of governance:?Members?not only understand their roles but?actively work to fulfill them, focusing on strategy and oversight rather than management.Strategic decision-making:?Decisions are made based on thorough analysis, long-term strategic goals, and robust discussion, often with expert consultations when needed.

Recommendations for each maturity level

You’ve?identified the level you believe your board is at. What do you do next? Here are a few suggestions:

1. Sub-Optimal Boards:Governance training:?Comprehensive training on basic governance principles, fiduciary duties, and strategic oversight.Role clarification:?Clear definitions and documentation of the roles and responsibilities of each board member.Performance assessment:?Implementation of board evaluation processes to identify areas for improvement and hold members accountable.
2. Developing Boards:Advanced governance education:?More specialized training sessions?focusing on areas like?risk management, financial literacy, and ethical governance.Mentorship programs:?Pairing less experienced board members with more experienced ones or external advisors to foster growth and understanding.Strengthening committee structures:?Ensuring that committees are well-structured and aligned with the?organization's?strategic priorities to enhance effectiveness.
3. Mature Boards:Continuous education:?Keeping abreast of new governance trends, regulatory changes, and sector-specific challenges through ongoing education.External reviews:?Regularly engaging external consultants to review board processes and effectiveness, offering an outside perspective on potential improvements.Succession planning:?Focused?efforts?on planning for leadership transitions to maintain board continuity and stability.

How?to?review where we are at?

Board performance reviews are a best practice. But this is rarely done. They can feel awkward, and directors are often unsure?of?how to evaluate themselves.

I encourage a conversation instead. Encourage reflection and?conversation?around these questions:

General Understanding and Engagement

1. How well can you describe the primary roles and responsibilities of the board?This question helps assess whether board members understand their?basic?duties and the scope of their governance role.
2. Can you outline the?strategic goals of the organization?and how the board contributes to these?Responses will indicate how well-defined these goals are?as?well as?how board members align with and contribute to the?long-term objectives of the organization.
3. How do you prepare for board meetings?The preparation process can reveal?the?level of engagement and commitment?of each member.

Decision-Making and Oversight

1. What process does the board follow for making?major?decisions?Insight into the decision-making process can show whether the board uses a structured, thoughtful approach reflecting best practices or follows the by-laws.??
2. Can you give examples of recent strategic decisions made by the board?Examples of decisions and?their?outcomes can demonstrate the?board’s?ability to handle complex issues effectively.
3. How does the board evaluate and manage risks?Understanding risk management approaches will show the?board's?proactive versus reactive tendencies.

Training and Development

1. What type of ongoing training or professional development does the board receive?Responses will indicate whether the board values continuous improvement and is?keeping?up-to-date with governance best practices.
2. How often does the board review the?executive’s?performance, and what metrics?are used? How is this information used??A board should establish clear goals and success metrics to evaluate executive performance regularly. This data should guide incentive structuring and development objectives.

Communication and Collaboration

1. How does the board handle disagreements or conflicts among its members?The approach to conflict resolution can signal the?board's?maturity in maintaining collaborative and respectful interactions.
2. What has been the?board’s?biggest challenge in the past year, and how was it addressed?Understanding the challenges?faced?and?the?strategies employed to overcome them can indicate maturity in problem-solving and resilience.

Conclusion

This framework is a simple but powerful tool?you can use?to assess how your current board is functioning and what it needs to focus on.??

Take good care,

Christian

#ChristianMuntean ,?#LeadershipAdvisory ,?#ExitStrategyService ,?#ChristianMunteanAdvising ,?#LeadershipCoaching ,?#ExitSuccessService ,?#ChristianMunteanConsulting ,?#ExecutiveLeadership ,?#ExitandTeamAdvisory ,?#ChristianMunteanCoaching

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