The role of the board of directors includes setting up strategy, overseeing management, and protecting the interests of the various key stakeholders.
To fulfil its roles, the board creates various committees and tasks them with the responsibility of providing the board with insight, information, and expert advice to enable it to fulfil its oversight responsibilities to the various stakeholders.
With advice from the committees, the board can make well-informed decisions. Therefore, the effectiveness of the board depends on effective committees.
Deliberate effort to create effective committees
Having effective committees is a deliberate effort by the company. It starts with designing the terms of reference for the committee and specifying the necessary experience, skillset, and talents required of the members to be on the committee.
Therefore, the board should have a diverse range of skills that will enable it to assign competent members to the committees. This will ensure all aspects of company governance are effectively handled at committee levels.
The board should deliberately attract members who have the necessary talents and skills as specified in the skills set. The committees as set by the board should therefore have clear terms of reference and competent members to handle the delegated area of responsibility.
What makes committees effective?
The committees will be effective in achieving the desired results if they are operating in a conducive environment. The conducive environment that promotes effective committees includes the following among others;
Strong governance structures
The committees should be guided by the company’s strong governance structures that specify the distribution of rights and responsibilities among the key stakeholders in the company.
They should have a strategic focus on supporting the committees in the areas of delegated responsibilities. The aim should be to enable the committees to deliver on their delegated oversight responsibilities.
The committees should concentrate on strategic, policy, and oversight issues and avoid being involved in company operational issues.
Healthy company culture
The committees will be effective if they are operating in an environment that promotes open communication, professional approach, positive experience, shared goals, effective teamwork, collaboration, and living company values.
The aim is to reduce the stress at the committee level to enable the members to effectively discuss and make the right recommendations on the papers tabled by management.
Clear terms of reference
Each committee should have clear terms of reference (TOR) that provide guidelines and direction to the committee in the area of its delegated responsibility.
The TOR helps the committees to hold themselves accountable to the main board. The committees use the TOR to fix agendas for their committee meetings.
Effective chairperson
Each committee should have an effective chairperson who is quite knowledgeable in the area of delegated responsibility. The chairperson should have good planning and leadership skills that will enable the members of the committee to freely contribute to the discussion and decision-making processes within the committee.
Effective secretary
Each committee should have an effective secretary with skills to organize, coordinate, and correctly take minutes of the deliberations of the committee. A secretary is part of the team responsible for assisting members to ensure they effectively perform their responsibilities.
Communication channels
There are currently several mediums through which a committee member can send and receive information. The key challenge some of these mediums or channels are not secure enough for conveying confidential information. The board has therefore to evaluate the risk involved before deciding on the right channel to use. The following are the common channels used in the corporate world among others;
- Emails;
- Phone calls;
- WhatsApp calls;
- Text messages;
- Video conferencing;
- Phone calls and
- Organization intranet.
Capacity building and professional development
To remain effective and up-to-date the committee should have a training program to address each member’s training needs as identified during the board evaluation exercise. The members should certainly have the determination to acquire the necessary skills that will enable them to deliver on their agenda.
The training programs have become very necessary given the volatile, uncertain, complex, ambiguous, and ever-changing environment the companies are operating. The changing environment is bringing up new ways of doing business and new challenges which necessitates a change in the ways of doing things at the both committee and board level. The training program will help the committee members to remain competent in the area of delegated responsibility.
It is also recommended for management to organize joint training programs with management as this creates an environment that promotes open discussions. Members who belong to professional organizations or associations should be encouraged to achieve the mandatory continuous professional development.
Preparedness of members
The chairperson should encourage the members to read and digest the board papers before the committee meetings to avoid wasting the time of those who are prepared. This is why the board papers are sent early enough to enable the members time to read them. I have found it useful in practice if the secretary follows up with members to confirm receipt of the board papers and to inquire if they need clarification on any board papers.
Cultivating qualities of high-performing
A high degree of excellence should be promoted in each committee to enhance performance. The qualities to be cultivated in each committee should include the following among others;
- The committee should be guided by clear terms of reference that specify the purpose of the committee;
- The focus of the committee should be on strategic direction and development of strong leadership;
- Promoting effective teamwork;
- Promoting creativity and innovative abilities;
- Continuous capacity building;
- Promoting collaboration;
- Enhancing the positive attitude of the members;
- Promoting clear communication and
- Developing the capacity of the members to confront and overcome challenges.
Overcoming challenges faced by the committees
Challenges are roadblocks along the way that require effort and determination of the members to confront and overcome them. They cannot be avoided but with a positive attitude can be managed. The challenges at the committee level include the following among others;
- Overlapping areas in terms of reference of committees may occur because of the ever-changing business environment. This can be easily overcome if collaboration arrangements with the other committees are in existence. This is normally handled by amending the terms of reference so that the overlapping area can be fully handled in one committee.
- There is also a danger of overlooking the risk angle because of the lack of specialized risk expertise in a given committee. This can be solved by co-opting a risk expert on the committee to guide and advise the committee in the area of risks. Training members in the area of risk is a long-term solution.
- There are situations where bottlenecks in information flow arise that result in the committees arriving at sub-optimal decisions because of inadequate information. The roles of the secretary and the chairperson of the committee include helping the members to get the right and adequate information for decision-making.
- Managing expectations may be difficult if the expectations are not spelled out at the very beginning. The expectations are well thought out at the time of developing the terms of reference and the agenda for the committee.
- Succession planning at the committee level can be quite difficult but still there is room for the committee members to identify and forward the names of potential candidates to the secretary to update the board succession pipeline.
- Adapting to the fast and unpredictable information technology changes is a nightmare for most board committee members. The stress can be reduced through IT training and awareness programs.
Conclusion
Building high-performing board committees is a deliberate effort by the key stakeholders in the company. There are no quick fixes and therefore enhancing the capacity of the committees should be included in the long-term strategy of the company.