Induction programs for new Directors typically do not provide a sufficient understanding of the business. New Directors should take ownership of their induction, designing, and conducting their own due diligence. One way to start is by asking 12 critical questions that can guide new Directors as they assume their role as Board Member. These questions are not the questions new Directors would ask during the first Board meeting. These are questions new Directors must keep in mind while scanning through company documents and during one-on-one conversations with top managers.
First Things First: The New Directors Orientation
A new Director must be provided a board orientation that is tactical in approach to be effective. A typical orientation for new Directors is a combination of a few internal meetings to learn about the company and an external program to learn about the fundamentals of governance. Yet, often internal meetings are too brief and external programs are too standardized to provide real insights. In the end, Directors are rarely prepared to effectively assume the role they are about to play. A new Director must have an initial starting point.
The 4 Core Areas to Strategic Governance of New Directors
There are 4 Core Areas to Strategic Governance new Directors must keep in mind. Each core area encompasses 3 critical questions that new Directors must deeply delve on and analyze.
- Board Roles & Relationships. Understanding the dynamics within the Board Roles and Relationships will ensure new Directors become effective as soon as possible.
- Industry and Company Context. Industry and Company Context provides an understanding of the external context the company is faced with.
- Strategic Direction. Strategic direction focuses on Corporate Strategy and alignment of resources. It is at this point where it is determined whether the organization’s strategy taps a true source of Competitive Advantage.
- Organizational Health. Organizational Health focuses on value-driven dashboards, talents, and setting the company’s risk parameters. This is necessary as the emergence of sophisticated risk-transfer markets have encouraged a shift from pure risk mitigation to risk-return optimization.
Taking a Good Look at Core Area 1
Core Area 1 looks at board roles and relationships. Under Core Area 1 are 3 critical questions. The first question is “What strengths are they expecting you to leverage?” As new Directors, we must learn about the role that we are expected to play on the Board. This also includes the skills that we have that other members may lack. As a starting point, we may ask the Chairman and CEO what they are looking for. We may ask what are the weaknesses of the Board and how we can help to address these weaknesses. Once we have deeply addressed the first question, we are now ready to proceed to the second question. The second question is “What will be our level of engagement and contribution to Board dynamics?” As new Directors, we must have a good read on the level of engagement of the Board. As a starting point, we must determine the norms prevailing within the Board and decide the degree to which we may want to follow them. Every analysis we make for every question we take gives us a good perspective on how we can effectively establish strategic governance in the Board. Each Core Area has 3 critical questions. When these are thoroughly studied, analyzed, and answered, only then can we say that we are ready to take on the challenge of being an effective Board Director.
Author bio: David Tang is an entrepreneur and management consultant. His current focus is Flevy, the marketplace for premium business documents and FlevyPro, a subscription service for consulting frameworks and tools. Prior to Flevy, David worked as a management consultant for 8 years. His consulting experience spans corporate strategy, marketing, operations, change management, and IT; both domestic and international (EMEA + APAC). Industries served include Media & Entertainment, Telecommunications, Consumer Products/Retail, High-Tech, Life Sciences, and Business Services. You can connect with David here on LinkedIn.