What is the optimal board size? This question echoes through board rooms of publicly-held, privately-held and tax-exempt corporations across the country as organizations wrestle with seating the most effective board to provide direction and oversight to the organization.
There are numerous studies analyzing and offering empirical data and formulas to suggest what is the optimal board size. There also are surveys of directors with their opinions of optimal size. For example, the Korn/Ferry 34th annual director survey indicates that directors believe the optimal board size is t10 members, composed of eight outside directors and two inside directors.
The answer to the questions “what is the optimal board size?” though, unfortunately cannot be found in a study or survey. The answer is not as simple as the optimal number is “x.” The proper board size for any organization is driven by the organization’s unique circumstances.
It is important to remember that a board is charged with providing direction and oversight to the organization. To adequately provide the appropriate level of direction and oversight the board will need to be comprised of individuals that possess the requisite skills and expertise for the organization to meet its strategic plans and goals. For those of you who have heard me present on this topic, you will remember the simple phrase: “structure follows strategy.” Each organization is unique with its own challenges, strategic goals and strategic plans. So, it should come as no surprise that there is not a one size fits all approach to board size, as one organization’s optimal board size will be different from the next.
There are some general concepts to guide an organization, which highlight the benefits and perils of large and small boards that may provide some guidance for your organization. For instance, a larger board may provide greater access to expertise and a more diverse perspective on matters the board will consider. However, it also can lead to apathy and less engaged discussion by some board members who are content with simply sitting in the background. Additionally, larger boards pose a risk of breaking into smaller groups or cliques. Stephen Bainbridge, a corporate law professor at UCLA, in writing on this topic related board size to a famous 1913 study that measured how hard subjects pulled a rope. In the study, members of a two-person team pulled to only 93 percent of their individual capacity, members of three-person teams pulled to only 85 percent of their individual capacity, and members of teams comprised of eight members pulled to only 49 percent. Essentially, as group size grows, for example, the number of board members who do not actively participate also will grow.
Conversely, smaller boards also bring challenges to the board room. A smaller board may allow for better communication and a better interpersonal relationship amongst the board members and require every board member to contribute. However, certain expertise may be lacking and the individual directors may be unable to meet all of the demands.
It is important to remember the size of your board is not a sacred number -- even if the number is specifically listed in the organization’s bylaws or code of regulations. The number of directors seated on the board can and should change if necessary to help the organization achieve its strategic objectives.
So, is there an optimal board size? Yes, but that number will be different for every board and may be different for that board year after year.