The Four Pillars of Board Effectiveness

Over the past decade, we have witnessed dramatic and unprecedented developments in business, politics, technology, and society. The main consequence of this has been the realization that governance is the determining factor behind the performance, success, and failure of organizations, not just in business but also in governments, NGOs, and other institutions. Indeed, governance fundamentally is the quality of decision-making and its implementation at the top of organizations. Boards are central to governance within an organization.

Today’s boards are thus eager to improve their performance and to continually fine-tune their effectiveness. So, if ‘business as usual’ is not an option for boards, what are the main dimensions to target when trying to make a board function better? In our ongoing clinical work across the last two decades, my team and I have identified four concrete pillars of board effectiveness.  These are: people, information architecture, structures & processes, and group dynamics/governance culture.

This simple framework for assessing a board’s effectiveness has a deep-rooted underlying rationale, based on the dialectic process of well-informed constructive dissent towards better decisions. Its practical application has helped transform boards for the better in many different contexts. These include large publicly traded companies, large asset owners and investors, family-owned businesses, non-profit organizations, Councils of Ministers, government agencies, and other bodies, across all geographies, and in both developed and developing contexts. The four-pillar methodology, focusing on systematic and continuous improvement along each dimension, has proven to be a strong asset for all types of organizations.

The first pillar: People – building on quality, focus, and dedication

The first of the pillars that support a board’s effectiveness consists of the people who socialise, interact, learn, make sense of situations, and reach decisions in the boardroom. Their quality, diversity, focus, and dedication are often what make or break a board’s ability to perform effectively.

Boards are often composed of high-quality individuals who are outstanding in their respective fields; for example, CEOs, academics, government officials, etc. However, they may lack the necessary knowledge to perform their tasks as members of a specific board. The case of Credit Suisse’s $5.5bn loss in 2021, linked to the collapse of Archegos Capital Management, illustrates this point. It later emerged that the bank’s risk committee lacked the expertise and vigilance required for effective oversight of complex counterparty exposures. This case, involving a major global financial institution, clearly underlines the significance of the quality of individuals, all the way to board committees: each committee’s members are expected to have the necessary and relevant expertise.

I am amazed to still see boards without skill maps, but this can be only a first step. Effective boards establish performance and knowledge standards for individual directors, educate their board members, and conduct evaluations along those standards. The quality of the board is enhanced by diversity in terms of industry and professional background, as well as diversity of gender, personality, and opinion. Diversity brings specific expertise as well as more potential for innovation, creative thinking, and stakeholder understanding (e.g., employee reps). Poorly managed diversity, however, can be disruptive as communication may become more difficult and trust may be lower among more diverse directors. A strong board will thus develop processes to manage diversity well. We recommend that the boards have a systematic board composition oversight, with regular assessment of capabilities required (from expertise to familiarity) and a current composition matrix, even for well-established boards.

More often lacking than skills themselves, the directors’ focus and dedication to the organization’s activities are both essential. Focus could be diminished by directors’ misunderstanding of their roles and functions within the board, or simply because regulatory or other activities take time away from strategic matters for the organization. To strengthen their focus, boards establish their statement of purpose and define their role in a manner that adds value to firm activities while materializing an action plan for the next two to three years. Boards need to regularly reflect on their involvement and strive for it to be first, distinctive (in the sense that it does not replicate efforts from other quarters in the organization), and second, additive (in that it improves decisions made by the firm).

Dealing with ambiguities in decision-making is inevitable and is a sign that the board addresses real issues. Well-focused boards distinguish the adequate context in which to perform a supervisory role and offer support to management. Such boards are quick to determine when a proactive risk oversight is needed, but they are also efficient in identifying and acting on the need to communicate the firm’s strategic objectives to manage its reputation during a crisis. Additionally, the focus of the board is strengthened by a successful agenda that looks more to the future than the past, and whose aim is to capture long-term issues while managing short-term matters.

Dedication to the organization is also an important aspect of this pillar. Dedication goes beyond meeting time and includes serious preparation. While some directors are highly motivated, many are not well prepared, often reviewing materials only briefly. More than half estimate just one to three hours of preparation per board meeting hour; around 25% report three to seven hours, and only a small minority prepare for seven to ten hours or more. It is rare to find directors who spend over 10 hours preparing for each hour of a meeting. Alarmingly, some report less than one hour of preparation. Few invest the level of time and analysis that effective governance demands.

A typical checklist for self-assessment on the first pillar could include the following questions:

• How close to the heart of every board member is our organization?
• Where do I truly add value to this board?
• How confident am I in my board colleagues steering our company in the right direction?
• How is our diversity in terms of abilities, personalities, and competencies?
• How clear are we about the role of our board? The role of each committee?
• Is the agenda sufficiently future-oriented?
• How does my knowledge compare to that of the ideal board members for this company?

The second pillar: Information architecture

Sophisticated information architecture is key to successful boards. An easy rule of thumb is that each director should benefit from a balance of internal and external information, a balance of information dependent on top management and information independent from top management, and a balance of formal and informal information. When these balances are achieved, information design is usually solid.

Indeed, information is best when it is designed in a way that informs the board about all the essential activities undertaken by the company and the issues facing it. When thinking of information design, boards typically think of information coming from management (how brief, well-focused, and strategic it is, prioritised, with executive summaries, key issues to tackle, and options to consider). But information architecture should also include external information (what can we source from outside the company, such as from social media). It should also include formal information and informal information sources. For example, the chairman of Singapore Airlines maintains strong relationships with union representatives, serves as an important informal information channel for the company.

For the formal internal information, jointly designed board briefings that include financials with forecasts, a CEO report, risks and opportunity maps, materiality maps, analysis of the gene pool, and a summary of financial analysts’ views contribute to the quality of the information architecture. Additionally, regular communications between management and the board – management letters shared between meetings, for example – enhance the efficiency of information flow. Committee reports are also fundamental in shaping the effective architecture of information. Adequate reports, nevertheless, encompass analysis of specific issues rather than just recommendations. A key checkmark is whether the board is actively involved in designing the information and whether that information design changes with the firm, its environment, and its strategy.

Informal channels of information are key as well and should be well developed; for example, meetings with employees and informal meetings of board members, all need both structuring, to give them potential, and some freedom, to give them creativity without infringing on management’s rights. In short, sophisticated (but not necessarily complex) information architecture is key to successful boards.

Here is a first checklist to reflect on the information pillar:

• Do I know and closely track the business and its key value drivers?
• Am I well-informed of competitive trends, customer evolution, regulatory changes, technological changes, and stakeholder evolution?
• Do I have sufficient information that is independent of management available for my judgment?
• What informal processes of information do I have?
• How involved was I in designing the information architecture? How involved were my fellow board members?

The third pillar: Structures and processes

As governance becomes more sophisticated, its structures and processes are evolving significantly. Board effectiveness is heavily influenced by the quality of the structures and processes organised by the board secretariat and steered by the chair.

Structures such as committees deserve regular reflection. Boards should examine not only whether the committees exist, but also whether they are suited to the organization’s current context and strategic challenges. For example, an increasing number of companies, such as Procter & Gamble, have established Innovation & Technology Committees to strengthen strategic oversight of technological innovation and digital transformation. Similarly, boards across industries are now forming geopolitical and issue-specific committees to address complex global challenges and align governance with rapidly evolving strategic priorities.

In terms of processes, there are many processes beyond day-to-day board operations: evaluation processes, the strategy process, the risk process, the board education process, the CEO and key managers’ succession processes, the regulatory process, the materiality process, the performance review process, etc.

The board strategy process plays a significant role in increasing effectiveness. The board’s strategic involvement occurs along three dimensions: co-creation, supervision, and support (for more details, see our MIT Sloan Management Review article “How Strategic Is Your Board?”). Good processes will enrich the three dimensions. Typically, regular meetings will complement retreats. External presentations will complete internal ones, and focused, decision-oriented meetings will complement long-term strategic understanding of the industry and business. This process elaborates on various aspects. It strengthens the firm’s strategy by contributing to its definition, aligning it with objectives, and ensuring commitment. The process also enhances the strategic reflection of the board and reinforces the interactions between management and the board. The process creates a stronger basis for communicating the company’s strategy, internally and externally.

Board evaluation is another critical process. A poor evaluation process contributes to governance failure; therefore, thriving boards engage in self-assessment or external assessment, in terms of their roles, dynamics, and their members’ performance. A good practice is to utilize the available technology, such as using short mobile feedback polls for real-time board evaluations during meetings, which provides instantaneous feedback and offers an opportunity for careful and dynamic scrutiny beyond the one-year evaluations.

CEO succession is also a critical process. Successful succession planning, whether based on ‘horse race’ or search, internal or external, aims at the transparency of selection, the quality of the onboarding process, and the smoothness of the transition. The case of Credit Suisse also illustrates the risks of inadequate succession planning: within three years, the bank went through three CEOs. This reflected instability at the top and raised questions about the board’s ability to identify and support leadership aligned with the firm’s strategic and risk management priorities.

Here is a self-assessment checklist on our pillar of structures and processes:

• What is the list of processes that are particularly important to my organization?
  1. Strategy
  2. Nomination
  3. Evaluation
  4. Performance review
  5. CEO succession
  6. Risk
  7. Board education
  8. Audit
  9. Regulatory compliance
  10. Onboarding/outboarding
• How do I feel about each of these processes? Do I have a clear view of each? Is each complete and detailed enough?
• Do we have the right committees? Are the right people on them?
• Are our reporting lines robust and reliable?

The fourth pillar: Group dynamics and board culture

Group dynamics are fundamentally linked to board culture. In this context, it is important to consider the various board pathologies that exist in governance practice: routine boards, fragmented boards, disrupted boards, conflicted boards, consensual boards, and love boards. Groupthink, for example, can undermine effectiveness, as can disruptive or dominating members of the board. A low energy level on the board, the sleepy board, can also emerge. In some cases, dysfunctional dynamics are deliberately tolerated to set the board up for governance failure. Late distribution of information and not making relevant information available are examples of practices that hinder governance and arise from deeper issues, such as a lack of trust, role overlap, etc.

Effective governance is strengthened by diverse perspectives and constructive dissent. To support this, boards must foster psychological safety –the ability to raise concerns without fear – and act as a secure base for the organization. Being a secure base means showing ongoing dedication to helping the organization navigate whatever lies ahead. Together, these elements are essential to cultivating a board culture that is open, thoughtful, decisive, and agile. For example, critically examining underlying assumptions contributes to a more effective strategy. Yet, despite the importance of these elements, some firms appoint directors closely tied to a founder or CEO. While these individuals may be prominent in their fields, their contributions are often constrained by their loyalty to a dominant figure.

Interactions between the board and senior management also play a vital role. Board effectiveness improves when rivalries and disputes are minimised while discussions remain rich and challenging. This requires clear rules of engagement, equal participation of its members, and a culture of mutual respect that fosters meaningful debate.

Functional board dynamics also help prevent conflicts of interest. A board culture grounded in openness, accountability to stakeholders, and constructive dissent reduces the risk of overconfidence and disconnect from reality. The chair’s role is key in developing a successful board culture and ensuring that the one-voice principle central to governance remains solid: no board member has a voice outside the board; the only voice is the board’s, as expressed (but not owned) by the chair. An effective culture can be partly formalised in writing so it can be easily shared and understood. Awareness of dysfunctional discussion styles (e.g., fast thinking, influencing, false yes, etc.) and decision styles (e.g., autocratic, consensual, indecisive, etc.) is key to developing group dynamics.

More fundamentally, boards are increasingly discussing their common values and the level of stewardship they want to provide to the organization. Deeper discussions around personal and organizational values, as well as long-term, intergenerational perspectives, help anchor board culture in a meaningful context. These shared reflections can form the foundation for genuine dialogue and constructive disagreement.

A preliminary checklist on this fourth and last pillar can include these self-assessment questions:

• How energetic is my board?
• How do I feel about the contribution of the different board members? Why?
• Does the culture of my board provide for well-managed meetings and ‘equal participation’ in discussions?
• Do I listen to the opinions of others? Do I challenge others, respectfully but without conceding, while keeping the relationship personal?
• Are my contributions short and to the point? Do I make them when I have knowledge or judgment?
• How regularly do we share our values and our long-term perspectives on our organization?
• Am I able to talk to the chair about something that we do not address well, possibly even his or her own role?

Conclusion

Boards continue to refine their practices in pursuit of greater effectiveness. Our four-pillar framework is a proven methodology that we have used to help support many boards transform towards greater success. With rising societal expectations for better governance, systematic and continuous improvement across these four pillars represents a powerful asset for any organization.

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