Goals: Setting the direction for success

??Goals: WHAT

What do we want to do?

High-impact boards create value for the organizations they lead and serve.? The foundation of this value creation is having and sharing clear goals and objectives that guide the actions of board members and align the board as a whole into a high impact team. In this discussion, we delve into the critical component of goals, to see how they provide direction, purpose and drive for the board's endeavors.

When contemplating the role of the board over the next few years, it becomes imperative to align objectives with the company's long-term goals. This alignment process involves a careful examination of the company's strategic momentum, industry trends, and stakeholder expectations.

Board Goals are the North Star for the board, providing a shared vision of desired outcomes and expectations, making achieving these much more likely. Whether it's advancing a nonprofit's mission, fostering corporate growth and profit, or making a meaningful social impact, clearly defined goals ensure alignment within the board and with management regarding the organization's overarching vision and strategic trajectory. Board objectives explain WHAT the board should help achieve.

The participation of senior management is integral to this process, as their insights and collaboration facilitate a comprehensive alignment between board objectives and organizational goals. While the degree of involvement may vary across companies, the synergy between the board and management ensures a robust goal-setting process that optimally serves the organization's interests and is essential to a High Impact board process.

1. Operating Within Shareholders' Framework:?

In setting its goals, a High Impact board must work within an overarching framework established by shareholders for the company.??

The board will need to understand what the shareholders of the company expect regarding:

• Values, Mission, Vision: Ensuring that board decisions and actions guide and? align with the company's core values, mission statement, and long-term vision.

• Scope of Functions: Clearly understanding what the shareholders expect the board’s functions to be, beyond what is legally established.

• Representation Model/Shareholder Agreements: Understanding how shareholders have determined their shares will be represented on the board and any shareholder agreements that might be relevant to the board’s composition or decision making.? Clarity on voting rights, board seat allocation, and decision-making processes fosters transparency and accountability

• Profitability and Dividend Objectives: Understanding shareholder expectations regarding? profitability and dividend distribution policies.

• "No-Fly Zones": Establishing clear boundaries or "no-fly zones" that shareholders may wish to establish, such as avoidance of certain markets or setting limits on use of debt.

In privately-held companies, with a well aligned shareholder base, the shareholder framework is typically established by the shareholders themselves. However, in companies with a large number of shareholders, like a listed company, the board might propose many of the shareholder framework, and shareholders will vote on its adoption. Alternatively, shareholders who are not aligned or disagree with the framework, whether explicit or implicit in the company’s actions, will vote against it, or vote “with their feet”, selling their shares - or “with their teeth”, becoming activists.?

In essence, setting clear and achievable goals within the legal and shareholder framework is paramount for the board to fulfill its strategic role effectively. By aligning objectives with the organization's overarching vision and operating within the established frameworks, high-impact boards can steer their companies towards sustained growth and success.

2.? Defining Board Objectives for the Next Three Years: Within the Shareholder Framework and the legal framework of where it operates, the board will set its course for the future.? In doing so it must consider various areas of focus and decide how much effort to assign to each. We broadly delineate the board's role in guiding, assisting/advising, and overseeing functions. Most of what a board will do will fall into these categories.?

Boards Roles

If executing tasks creeps into this list, think again.? Ordinarily, a board should be delegating essentially 100% of executive action to the Senior Management. Not doing so denotes dysfunction either of the board or the management.

As we conclude our exploration of goal-setting within the board context, it's essential to recognize the interconnectedness of WHAT we want to achieve (board goals) with the HOW (structure and processes) and the WHO (composition). While goals provide the overarching direction, it is the alignment of structure, processes, and composition with the goals that drives the board's effectiveness in achieving them.

When we talk about structure (HOW), we refer to the organizational setup, roles and responsibilities, within the board. A well-defined structure ensures efficient functioning and clear delineation of duties among board members.

The second pillar of HOW is the board’s processes. These are the methods, procedures, and protocols that govern the board's operations. Effective processes foster a culture of transparency and collaboration that are essential for an impactful board.?

Finally, composition (WHO) refers to the individuals who make up the board, including the expertise, skills, diversity and engagement they must bring to the table to meet the board’s goals.?

All these elements work synergistically to empower the board in fulfilling its goals and driving organizational success. In the upcoming articles we will delve into each of the components and their collective contribution to a High-Impact board.

Let us know what you think about this article in the comments below! Do you agree? What has been your experience?