Effective board meetings

1.1 To agree a strategy and assess its effectiveness. To do this, the board must understand:

• The key 'drivers' for the business.

  For example, the key driver for a manufacturing business might be product innovation. In a more mature market, it might be cost efficiency.

• The strengths, weaknesses, opportunities and threats relevant to the business.
• The changes occurring in the industry and marketplace.

The management should present strategy proposals at an early stage in the planning process. The board can then provide first reactions and direction.

1.2 To make sure that company operations are in line with strategy.

For example, a consultancy business may be taking on many small projects, despite its agreed strategy of concentrating on fewer, larger projects.

1.3 To monitor financial performance against the budget.

1.4 To make sure procedural and compliance issues are properly dealt with.

These include:

• Legislation, such as the Companies Acts and health and safety law.
• Declaration by directors of possible conflicts of interest.
• Codes of conduct (eg the rules set up by your trade association).
• Compliance with customer requirements.

1.5 To use non-executive directors as sounding boards for new ideas.

• Take full advantage of non-executives as a source of alternative approaches to problems and opportunities. (See 3.)

2.1 The choice of chairperson is crucial. While the managing director runs the company, it is the chairperson who runs the board. All boards need strong leadership.

Appoint a chairperson who can:

• Create a good team.
• Command respect from fellow board members, shareholders and employees.
• Understand the business.
• Listen to all opinions and speak honestly.

2.2 Experienced non-executive directors can have a major positive impact (see 3).

2.3 A team with complementary skills contributes to sound decision-making.

• For example, if you plan to expand, find someone who understands the financial implications.

  Similarly, blend optimism with pessimism, and experience with youth.

2.4 Board members should be selected on merit. They need to be able to:

• Think strategically, with a long-term view and a level-headed, realistic approach.
• Work well with the rest of the board.
• Contribute to discussions outside their main area of expertise.
• Put the company's best interests ahead of their personal best interests.

2.5 To be effective, the board should agree on the objectives and scope of the board meetings.

• Ask each board member to write down his or her views.

  Opinions will vary considerably, but you can then come to a workable agreement. This is the first step in getting the board to work as a team.

3.1 Consider the role non-execs could play in your business.

For example, they can be particularly effective in:

• Providing an independent overview of the business strategy.
• Bringing in outside experience from other companies and industries.
• Counteracting board weakness in a particular area.
• Planning the succession of executive management for a business.

3.2 Recruit non-execs who have the right characters.

• The stronger the other personalities on the board, the stronger the non-execs' characters need to be.
• Non-execs should have no axe to grind and no fear of upsetting their board colleagues. They should give their honest opinion of new ideas.

3.3 Use non-execs as agents of change.

• Without non-execs, there is a tendency to carry on doing the same things the same way, without looking at alternatives.

3.4 Draw on non-execs' experience and objectivity to help take tough decisions.

For example:

• Closing down loss-making activities.
• Laying off employees or asking a fellow director to resign.
• Deciding emotional subjects like directors' pay, share options, the company car policy, and general payment issues.
• Managing the business through unexpected crises.
• Appointing new auditors or directors.
• Deciding whether to take legal proceedings on a particular issue.

4.1 The agenda. A full agenda should:

• Fit the agreed objectives of the board meetings (see 1).
• Not be too long.
• Have specific items to discuss, rather than just a list of general areas.
• Include cross references to the relevant items in the board papers.

4.2Minutes of the previous meeting.

4.3Management accounts.

• The board should invest considerable time in deciding which pieces of information are the most useful.

4.4 Papers relating to specific agenda items.

• For example, a major equipment purchase.

  A good summarising note helps the board to decide swiftly.

5.1 The chairperson has the most influence on the meeting.

The chairperson's role is to:

• Decide on the final content of the agenda, together with the managing director.
• Brief non-execs (and others) in advance on any sensitive issues.
• Allocate time to agenda items according to their importance.
• Create open discussions by introducing each item in a balanced, positive way.
• Encourage the quieter directors to state their opinion and prevent anyone dominating the discussion.
• Give views on each issue after the others have given theirs.
• Summarise what has been decided, to check there are no misunderstandings.
• Be firm in allocating responsibilities and making sure that they are carried out.
• Check at the next meeting that all decisions have been put into practice.

5.2 A good location for the meeting is important.

• An off-site venue can help you focus more on strategic issues and less on operational ones.
• A good seating plan helps to draw everyone into the discussion.

5.3 The date of future meetings should be agreed in good time.

• Larger companies generally have monthly meetings.
• Smaller companies may find quarterly meetings more effective.

  The effect of board meetings will be weakened if there are too many.

• Limited companies must hold a board meeting if any director requests one or if more than 10 per cent of members request one (this is reduced to 5 per cent of members if it has been more than one year since the last board meeting).

  This meeting is used to sign off the annual accounts and to approve any key decisions made by directors during the year.

• At times of rapid change, increase the number of meetings.
• Board members should receive monthly management accounts, even when there is no board meeting.

6.1 Keep the minutes of the meeting brief.

• Minutes cover decisions made, actions agreed and responsibilities given.

  They also include any statements which were specifically requested to be minuted.

6.2 Distribute the minutes promptly.

6.3 If appropriate, let employees (or others) know about any decisions made.

• This is part of the action plan agreed in the meeting.

7.1 Individual training needs analysis will reveal what is required.

• Which directors understand the general duties and liabilities of a director?
• Which directors carry out their role to the required standard?
• Which directors lack experience?

One way to learn is to talk to the equivalent director in another company. Find out what lessons have been learnt by this person, both individually and as a board.

7.2 Being a good chairperson demands skill.

• The shortcomings of the chairperson are often overlooked, particularly if he or she is also the major shareholder.
• The chairperson should receive regular feedback on what could be improved.

  Consider using a non-exec to carry out a regular appraisal. The non-exec can gather feedback from the whole board.

7.3Non-execs should receive induction training.

• Put together an information pack about the company's operations. Set up meetings with the key management.