To adapt to the ever-changing environment in which they must operate today, corporations, both for profit and nonprofit, need to remain flexible –this includes flexibility in an organization’s strategy, its market, its workforce and even its board. This ability to be flexible is one key indicator of a high-performing board and makes board composition more important than ever.
Boards need to remember one theme while planning and structuring the board’s composition: Structure Follows Strategy.
Organizations need to value every seat on the board of directors and recognize that each seat represents an opportunity to increase the organization’s expertise.
Boards should strive to move from a random collection of individuals to a board of “experts” composed of persons each having particular skills or expertise needed for the board to have as a whole, all of the skills and expertise necessary to achieve its future objectives.
The composition of an organization’s board must be built to meet the organization’s strategic goals. The first element of board composition planning is evaluating every seat on the board and recognize that each represents an opportunity to increase the organization’s expertise. The final element is evaluating the skills and expertise of every individual chosen to fill one of those seats and provide each with the information, resources, training and support needed to succeed as individual board members and as a collective board. In between these two steps is the strategic planning process of the organization. Planning and structuring the board’s composition without a developed strategic plan is akin to planning and structuring your retirement on purchasing weekly lottery tickets –you may get lucky but do you really want to base a key component on the future success of your organization on luck?
As discussed in last month’s article titled “Time to Involve the Board in the Strategic Process” the strategic plan involves three components: strategic thinking, strategic planning and strategic execution. The first two of these three components are critical to structuring the organization’s board to have it best equipped to provide the appropriate direction and oversight to the organization in the coming years.
Collecting and analyzing the current status of the industry, competitors and the position of the corporation and taking those strategic thoughts to develop the priorities, actions and objectives for the core components of the strategic plan also will provide the core components of competencies needed on the board. Some of these strategic thoughts that form the strategic plan, and should ultimately from the structure of the Board, include:
- What are the organization’s growth plans?
- Will it expand into new markets?
- Will the organization develop new products, programs and/or services?
- Will it be an acquirer? Or is it a target?
- Will pending/proposed changes in the law/regulatory environment affect the organization?
- Will the competitive landscape force the organization to act?
Always remember—Structure Follows Strategy—the strategic plan of the organization should drive the structure of the board.
A well developed strategic plan will create job descriptions or qualifications of the requisite expertise or skills for future directors and provide for the board to be composed of those individuals with the expertise necessary for the organization to meet its future objectives.