A Board is a Means to an End

Written by on December 15, 2015 in Governance with 0 Comments

Upland Consulting - A Board is a Means to an End - B&W photo of a suspension bridgeWhy Have a Board of Directors?

Here’s one fact we really should not lose sight of: a board is simply a means to an end.  This applies to a formal board (directors registered with ASIC, carrying the full director responsibilities), and equally to an advisory board.  A board that forgets this has lost the plot.

What’s a board’s end purpose?  The sole point of a board is to ensure better long-term business (or organisational) performance.  What that looks like differs for businesses, not-for-profits, and the hybrid or blended models emerging today.

Businesses evolve, for better or for worse.  If they are in capable hands, this means an increase in profit, the value of owners’ equity, and other measures of long-term success.  Note that size — sales, employees, market share — is not on this list.  Growth without profit is not success.  For a business, depending where it is on its path, the right way to improve long-term performance might be: a coach, mentor or trusted counsellor; a peer group like TEC; an advisory board; an actual board of directors; or some combination of these.  Wise business owners and executives make judicious use of a range of these means.

Similar measures of success for not-for-profits are hard to come by.  Simply serving more clients is meaningless if they are ill-served.  An operating surplus and a cash reserve, good in themselves, are wasted if they are not used to improve the capability and resilience of the organisation.  In the end, the stakeholders (typically members as represented by the board) have to decide what constitutes success for their organisation.  Whatever the objective, much the same means are available as for a business – except that due to the need to represent diverse interests, an actual board is practically essential.

Hybrids like social businesses, that exist to make a profit but apply all or part of that profit to social and community objectives, have long-term success measures derived from their founding purpose.  And in this field it’s always a case of “no margin, no mission”.  Again, the same means are available, and again the most effective means to the chosen end depends on a judicious use of the right mix for the current phase and the next.

Means to an End: What Means?

Despite their different end purposes, businesses, nonprofits and hybrids have this in common: the means of achieving success, at the level we’re considering, work in essentially the same way.  The benefits come from the helicopter perspective, a clear focus on strategy, judicious risk management, and sound but unobtrusive governance.  And we want the owner-manager or CEO to be held accountable for carrying out the strategy.  A coach, a peer group, an advisory board or a formal board should deliver this.

A board is a means to an end, indeed.  It’s one of several possible means to a variety of ends; choosing well is the first step.

 



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