Board Membership 101: Evaluating CEO Performance

Once a board has hired a capable CEO, it’s important that they continue to offer their guidance and support. For some boards, evaluating CEO performance is a bit of an afterthought. Stephen P. Kaufman, CEO at Arrow Electronics, describes his own first evaluation process as merely perfunctory.
evaluating CEO performance

He explains, “The chair of the compensation committee would pop by my office for just 10 minutes after the year-end closed session of independent directors.

He’d inform me that the board was happy that the company had made its numbers, thank me for my leadership, tell me what compensation it had approved, and express his regret that he couldn’t stay to talk.”

In other words, as long as things appeared to be going well, the board merely patted him on the back and went about its own business. This model, however, does very little to thoroughly evaluate the CEO’s performance.

While it focused on his ability to meet financial goals, it overlooked his influence on company culture, strategic planning, and other aspects of leadership that indicate the development of a well-rounded company.

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Cyber Security Becomes a Boardroom Priority

Data breaches from cyber attacks have wreaked havoc on major industries in recent years. Prominent companies like Target, Anthem, Home Depot, JPMorgan Chase, and EBay have all been affected by targeted attacks. These attacks, which typically put individuals’ private identification numbers and payment methods in jeopardy, come at a great cost to corporations.
Internet security concept open red padlock virus or unsecured with threat of hacking

The Ponemon Institute found that, on average, each individual data loss costs a company approximately $154. Multiply that number by 83 million users, and JPMorgan Chase’s recent loss totaled in at around a staggering 12.78 billion dollars—and that’s just a rough estimate; the number is likely higher.

Obviously, these high-profile hacks and breaches have pushed cyber security to the forefront of board members’ concerns. According to PWC’s most recent Corporate Directors Survey, board members are becoming more engaged with IT strategy—namely cyber security risks.

The study states, “83% of directors describe themselves as at least ‘moderately’ engaged with overseeing the risk of cyber attacks.”
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The Benefits of Diversity in the Boardroom

DiverseOver the last two decades, corporate board diversity has been growing steadily. In 2015 women held nearly 18% of the board positions at Fortune 1000 companies—a percentage that has doubled over the last 20 years.

As for racial minorities, they hold about 15% of board roles in Fortune 250 companies and are continuing to make gains.

Regardless of where the current statistics fall, though, the bottom line is that studies show diversity in the boardroom brings many benefits.

We’ve compiled a few of these benefits to share with you:

A diverse boardroom provides a diversity of thought

All board members bring their own personal background and experiences to their position in the boardroom. Each individual mind is capable of offering unique ideas, solutions, and strategies. For boards with a more diverse membership, the breadth of personal experience is wider and more comprehensive.

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Looking for Signs of Board Success

signs of board successSigns of board success can take any number of shapes, and the bottom line for measuring a board’s accomplishments will vary from organization to organization.

But when it comes down to overall effectiveness, there are some tried and true signs you can look for to better understand your board’s overall functionality:

Your board’s structure is clear and encourages efficiency

Boards vary in size and in structure, but experienced board member and Stanford GSB lecturer David Dodson has found one universal factor that he believes is a sign that boards are on the right track.

He writes that all boards—even small ones—need a clear, outlined structure for how meetings will be held, how often board members must be in attendance, and what is expected from them both inside and outside of board meetings. Dodson insists, “My strongest advice to a CEO or a board member is to put that scaffolding in place.”
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All Boards Need Tech Expertise

boards need tech expertiseAccording to Jean-Louis Bravard at Harvard Business Review, it’s simple: “All boards need a technology expert.” Bravard investigated the banking industry in England—an industry that relies heavily on technology—and found that only one bank had a tech expert serving on their board of directors.

He insists that many major banking leaders in the U.K. need huge tech overhauls but are afraid of the risks—both financially and from a data safety perspective. Bravard argues, “Only a multi-year, board-level sponsored effort can ensure a responsible IT overhaul. But without IT expertise at the director level, how can a board truly make an educated decision?”

To put it simply, get someone who works in high-level IT on your board, and do it quickly—especially if you want to follow a long term, adaptable IT strategy.

For Dambisa Moyo, an international economist, things are a little less cut and dry. She asserts, “The industry structure in which a business operates should also influence how a board assesses technology effects.” She follows that up with three viable paths forward for bringing tech knowledge to a board setting. The first is to “delegate technology tasks to management.”

In other words, let the responsibility of technological evolution stay in-house with a CIO or a CTO. The second option is to draw from the expertise of independent advice. This could mean hiring an outside IT consultant or forming a group of advisers that report to the board. The final option is the one we’ve already heard: creating a seat on the board for a “techie.”

She encourages boards to take a long look at their particular industry to weigh the pros and cons for each of these options.
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Boardroom Spring Cleaning

While some of our neighbors to the north are still dealing with the occasional snow flurry, down here in Birmingham we’re settling into a lovely spring. The flowers are blooming, the sunshine is splendid, and it’s just the right time for some good old-fashioned spring cleaning.
boardroom spring cleaning

While you’re on a cleaning kick, why not transfer some of that energy into your boardroom? No, we’re not talking about vacuuming the carpets or dusting the shelves: we’re talking about sparking efficiency and productivity!

Now is a great time to organize some of your board operations and make the move towards a tidier board experience overall. Here’s our step-by-step spring cleaning guide:

Clean up your communications

Let’s start with the issue that’s nearest and dearest to our Directorpoint heart: simplified and streamlined communications. Currently, your board of directors might connect via any number of methods: email, hard copy mail, phone calls, txts, and more. What if you could incorporate all of those touch points into a single, easy to understand hub?

Well, the great news is that you can!
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Being an Effective Board Chairman

effective board chairman

Effective leadership is a topic that has been visited and revisited by business publications, psychology magazines, and more. People have a lot to say about leadership and what makes a particular style of leadership great.

But when it comes to board leadership, what really puts a board chair a head above the rest?

Effective board chairs seek meaningful contact between board meetings

According to Harvard Business Review, “Impromptu discussions strengthen a board’s hand on the company’s pulse. Keeping board members informed also minimizes the time spent on background that slows up regular board meetings.” When board chairs take the lead to spark conversation outside of meetings, other board members are more likely to follow suit.

At Directorpoint, we encourage this sort of collaboration outside of the meeting with our member-to-member messaging system. Instead of clogging one another’s inboxes, board members can reach out to their cohorts quickly and easily both during and outside of meeting times.
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Three Ways to Liven Up Board Meetings

Board of directors meetings are notoriously long—sometimes lasting upwards of 4 or 5 hours for boards that meet less frequently. Meanwhile, in the age of tech, we’re also being told we have attention spans shorter than a goldfish.
liven up board meetings

So how do we liven up board meetings to help the collaborative and innovative nature of the boardroom thrive?

Incorporate movement

This is a strategy that elementary school teachers have been employing for decades. When they see their students growing antsy or bored, they encourage kids to get up and dance around or do some group exercises.

Then, they refocus the students to the task at hand, or they incorporate the movement into the actual task.

OK, so maybe we’re not going to see board members dancing around the boardroom, but the principle behind this tactic is a good one: the happier and looser our bodies are, the easier it is for our minds to focus. So how do we translate it?

It can be as simple as employing a series of really regular bathroom breaks or as involved as incorporating some stretching elements into the actual meetings. Either way, board members need time to decompress physically and mentally. Marathon-ing through a 4-hour meeting probably won’t lead to top-notch attention and involvement.
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Learning from Nonprofit Boards

Nonprofit boards of directors and corporate boards have a lot in common. Both groups of leaders exist to guide and better an organization through strategic leadership. Board members bring their various talents and experiences to the table in order to collaborate for a better end goal.
learning from nonprofit boards

There are some innate differences between these two groups, though. For example, a nonprofit board focuses on gaining a deep understanding of its organization’s mission and seeks out ways to promote it in an ever-changing world.

For corporate boards, however, loyalty belongs to shareholders. As Beginnger’s Invest puts it, “The primary responsibility of a corporate board of directors is to protect the shareholders’ assets and ensure they receive a decent return on their investment.

The board of directors owes its shareholders the highest financial duty.”

Although these two types of boards have a different “chief goal” in sight, they can actually learn a lot from their counterparts.

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Better Boards: Avoid Data Inundation

If you’ve ever been to a board of directors meeting, you know that they are stuffed to the gills with information: documents for review, presentations, votes, financial reports, and so much more. These meetings are not for the faint of heart; board members spend a large amount of time poring over the latest company statistics.
Avoid Data Inundation

They have to be prepared to dive into a sea of data and information while maintaining a “big picture” mindset in order to help steer their organization into a successful future.

Most board members will tell you that data inundation is a major nonstarter and can make their role at your organization more difficult.

As one Business Insider columnist writes, “Boards are there to strategically direct management for success and growth—overwhelming them with data will get them in the weeds and off the strategic path.” In other words, if boards spend the majority of their meeting time reviewing past facts and figures, it hampers their ability to spend time in strategic brainstorming.

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