Board Effectiveness

More alike than different.

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More alike than different.

Private company governance does not receive as much press attention as public company governance. But governance is no less important to private company stakeholders. This is especially true in the midst of the COVID crisis. What private company boards do have in common with public company boards are their three priorities: Leadership, Strategy and Execution. These remain constant even in the face of COVID. Just the emphasis changes.

Priority 1. Leadership: Leadership decisions are mostly long-term. Example: CEO selection has long-term (10-15 year) impact. The board strives to select a CEO who can serve 10+ years (even if average CEO tenure is ≈7 years). Other Leadership decisions include, e.g., executive succession planning, CEO evaluation and compensation, board leadership structure and selection, board composition, and policies that establish corporate culture.

Not surprisingly, private company board leadership structures (e.g., combine or separate Chair and CEO) and governance practices (e.g., committee structure) take many forms. Leadership decisions can be challenging but are critical. Family-owned companies face generational transitions. Start-ups outgrow founders.   

Priority 2. Strategy: Srategy decisions tend to have a medium-term time horizon, i.e., 3-5 years. Examples of Strategy decisions: plans for growth, expansion into new businesses or geographies, reviewing the company’s biggest risks/mitigation, maintaining vibrancy of current products, and new product or service offerings.

 A company’s expresses its strategy in its strategic plan. Management and the board benefit if they align on the approach to plan development in advance of submission for board review. During board review, it’s helpful to discuss current and targeted investors’ expectations regarding strategy and corporate governance to ensure the plan reflects those.   

Priority 3. Execution: These agenda topics focus on tactics and results. Their time horizon is short-term — this quarter, this year. Typical Execution agenda topics include CEO’s Report, CFO’s Report (esp. profitability and disclosure), business continuity plan, updates to corporate governance guidelines or committee charters, and review of the company’s most significant risk/mitigation.  

Private Company Boards and Management Add Value with Advance Agenda Planning 

If agenda overemphasize Execution topics, they skew the company’s time-horizon to the short-term, starving the Leadership and Strategy agenda topics that generate long-term success. This often occurs if management sets agenda meeting by meeting, without having aligned with the board on the its goals for the year.

The Foresight® Advantage for Private Companies

Foresight’s annual agenda planning feature can help avoid misspent board and management time as well as highlight gaps that should be addressed to gain the maximum impact from the board’s efforts. The three categories described above form the basis of Foresight’s agenda hierarchy – and the organizing principles for Foresight board management software. It provides private companies a powerful tool for planning board agenda for the year and then for each meeting as it approaches – and managing the board’s time especially in times of crisis.

Private companies can use Foresight’s analytics to evaluate board effectiveness and adjust future agenda to increase the focus on impactful topics and address unexpected events. One private company board may find it must pivot quickly to address COVID-19 impacts. Another may find it urgently needs to address diversity, equity, and inclusion in its workforce. Another might find it should be spending more time on CEO succession, a Leadership question. Increasing the frequency and depth of board focus on these impactful agenda topics can be achieved by reducing time devoted to other topics or adding more meeting time. Management and the board can set and reset priorities, rather than choosing agenda topics that seem topical before each meeting (which tend to be short-term, Execution topics). Using Foresight to analyze and report board priorities makes priorities more transparent. 

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