Fish rot from the head down and so do organisations. Every advice business should have a board – a committee of the key senior people who discuss and record their most important decisions about the firm on a regular basis.
Without a reasonably formal structure that includes a board, it is hard to set and keep to business objectives. It is also difficult to nurture a healthy and compliant advice structure.
So if you have a board, or something similar, how well is it doing? It makes sense, and is good governance, to take a long hard look at the board’s performance regularly. What follows is a framework for assessing a board’s performance. It was designed for financial advisory businesses but probably works for other bodies as well. If you use it, mark your performance out of five or 10 and comment on the reason for your score.
- The board meets often enough but not too frequently: The aim should be to consider key strategic issues, monitor performance and deal with the essential formalities. You may aim to meet five or six times a year but more often at times of crisis or ahead of big events.
- The board has annual or more frequent strategy meetings that are effective and produce appropriate strategic guidance and decisions: Strategy days are essential for more in-depth discussions. They are best held away from the office.
- The board focuses on strategic and policy issues: Keep day-to-day management for other arenas.
- The members come to board meetings: If they do not turn up, are meetings too long? In the right place? At the right times?
- The chair conducts meetings efficiently, facilitating relevant, fair, open and challenging debates: If a chairman cannot chair a meeting effectively, replace them or send them on a course.
- The board encourages members to take part in discussions and be candid, constructive and critical: The board is there to challenge plans, results, behaviours and trends. That means asking awkward questions but always politely.
- The records of the meeting are clear and accurate and reflect the discussions and decisions: If you or an outsider read your board minutes after memories had faded, would it be clear what was said and concluded?
- The board has the right range and balance of skills and experience: Boards can be big or small. Make sure there is a voice for each function and there are no holes in required skills.
- There is a non-executive director: It is good to have an NED to comment on process and decisions – without an axe to grind.
- The board has an effective committee structure that has terms of reference: Specialist committees provide detailed oversight of key areas and projects such as risk, finance, remuneration and investment. If you are buying a business or have a big project, you may set up a special group.
- Someone assesses the performance of each board member and the board as a whole each year: This is necessary but does not have to be scary.
- The board receives adequate management information about the performance of the business: Few boards spend enough time deciding what MI they need. It is vital.
- The board papers provide enough information, are the right length and quality and are delivered on time: The best board papers are just one or two pages setting out the main issues, with detailed back-up to refer to.
- The board receives enough information to be able to ask the right questions: If you want value from your non-execs, you need to be open with them.
- The board has set the right targets and benchmarks to measure performance: The board should review targets and benchmarks each year or more frequently.
- The board is able to identify and monitor the key risks facing the business: There should be a risk register and the board should review it regularly.
- Board members receive enough training about the main areas of the board’s responsibilities: For example, keeping up to date with regulatory issues, company law and the business environment.
- Board members understand the main issues the business faces, as well as their board responsibilities, to act in the company’s best interests: They should be thinking about the business as a whole.
Danby Bloch is editorial director of Taxbriefs Financial Publishing
Pensions flexibility – the new rules
Keep your clients up to date with a personalised guide to the new rules and proposals announced in the Budget affecting retirement income. The latest edition to our Key Guides series covers:
- Revisions that took effect from 27 March.
- Total drawdown flexibility that should be available from April 2015.
- New Class 3A NICs.
- Likely increases to the minimum pension age.
- Reductions on death benefits for some individuals.
To find out more call Alex Broughton on 020 7970 4196.