What Makes a Good Director?

Written by on April 1, 2014 in Board Composition with 5 Comments

Upland Consulting - B&W Image - Navy Cat BalanceWhat Makes a Good Director?

Recently I had 60 seconds to tell my audience about what I do.  I decided to focus on one topic, and I chose director qualities.  I came up with 4.5.  What would be your list?  Here’s mine.

It strikes me that the common ground is balance.  All board work calls for dynamic balance: not a static stable point, but equilibrium in a shifting environment.  A bit like riding a bike; I guess you found as I did that having achieved a point of balance so you and the bike stay upright, you immediately have to adjust again.  So good director qualities involve a balance, but always a dynamic one.

1. Business Knowledge — but Leave Your Profession at the Door

A good director understands the business environment, the risks, the regulations, the jargon and the rest.  Business judgement, reading the play, scanning the horizon, getting the essentials of the financial statements quickly.  But experts in law, finance, HR, project management, technology or other specialities must leave that specific expertise at the door.  The board is not a technical forum: your expertise may be vast and valuable, but you have to be able to step outside it to be a good director.

However expert you are at your profession, it may very well be the best use of the board’s time to engage someone else in your field as an advisor, and have you lead the review or chair the sub-committee.  This can be terribly difficult, often because people have got where they are precisely by being expert in their profession.  But the balance that makes a good director calls for using what you know in a new way.

2. Big Picture/Long Term Thinking — but not Too Much

The board’s job is to step back from the day-to-day of the business, from the management decisions and conundrums, and view the business in its context, from the outside.  The board is the custodian of strategy and enterprise-level risk management.  A good director is comfortable analysing and planning for the long term.

But again, it can go too far.  Some years ago I was speaking with the regional MD of an international IT services company about their strategic horizon.  They were very good at strategy.  One year out, he told me, they know what their industry will look like with high precision.  There will be disruptions, but nearly all the major features of the landscape will  remain.  Two years out, there are going to be more changes, mostly to the players and their priorities, but the general picture is sufficiently predictable.  And so on.  “But if you think you can plan five years out in this industry”, he said, “you’re smoking dope!”

3. Independent Thinker — but Collective Decision-Maker

Directors are hired for their independent judgement and perspective.  A good director questions, tests, probes and asks for proof.  However, at the end of the day, it’s the board’s collective job to make and communicate a decision.  A board decision is a decision of the whole board, and binding on each and every member.

It is a fine art of balance and judgement to make your individual contribution (not just noise) in a board meeting, and also to join the whole group on the journey to a collective decision.

4. Respect Boundaries — but Push the Green Line when Necessary

It is management’s job to manage, not the board’s.  A board that spends its time second-guessing management, or trying to be a management committee, is not using its precious time well.  The Board’s job is governance, strategy, risk management and overseeing the CEO.  The boundary between board and management is often called the “green line”, and both sides need to respect it.

But sometimes things go bad, and a board must temporarily step over the green line to avert disaster.  This will probably break the relationship between the CEO and the board, unless the CEO has been wise enough to call for help.  The cost in trust, within the company and without, is likely to be high, and the longer the intervention the higher this cost.  How is the bank going to view it, for example, or that key client?

On the other hand, a laissez-faire board can be as harmful as an interventionist one.  Too many companies have been brought undone by boards acquiescing too easily.  Too many have been robbed of horsepower by boards crossing the green line unnecessarily.

This balance can be particularly hard to achieve in a family company, where so many key people are wearing multiple hats, and interpersonal dynamics are often more intense.

4.5. The Journey is Lifelong — but Decisions are Needed

Learning to be a good director is never finished.  And there is always a hunger more information, more insight, more assurance than is available for a given decision.  Some decisions should be postponed until more can be learned.  Some must be made here and now, under conditions of uncertainty and doubt.  Postponing a decision can be worse than choosing a course and working with it.  At some point, diligence must yield to decisiveness.

Achieving Balance

This is hard, isn’t it?  Really hard.  There are judgement calls to be made all the time about where the best point of balance is right now.  The only way to get good at this is to monitor our own performance, be mindful of our biases and decision processes, and try constantly to achieve a more clear and objective view.

Welcome to the world of directorship!

Further Resources

Here’s a quick 60 seconds on The 5.5 Core Tasks of a Board.  There’s a flipside of sorts in How Boards Annoy Management.  You may also enjoy The Seven Habits of Highly Effective Directors, and 11 Board Derailers.

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