Small and medium-sized boards often face governance challenges. This post identifies the key gaps we have observed through our board governance assessments and offers practical steps to improve governance practices ensuring boards are positioned for long-term success.
Small and medium-sized boards play a crucial role in guiding their organizations towards success, but they often encounter distinctive governance challenges that can hinder their ability to fulfill their oversight responsibilities as well as the organization’s long-term success. Through our extensive work with various boards, we’ve identified recurring gaps that, if addressed, can significantly enhance a board’s performance and its ability to support the organization. By highlighting these key observations, we aim to provide actionable insights that can help boards navigate these challenges and strengthen their governance practices.
A recurring issue in many boards is a lack of clarity around governance structures. Roles and responsibilities between board members and management are often unclear, which can lead to confusion and operational inefficiencies. This is especially prevalent in smaller organizations where boards and management may have overlapping responsibilities.
Additionally, a Gartner survey indicates that only 45% of boards are effective when it comes to overseeing the execution of strategic initiatives. This gap between governance and execution suggests that boards must actively revisit their governance frameworks to align their oversight responsibilities with organizational strategy
What you can do: Conduct a comprehensive review of bylaws and governance structures to delineate responsibilities clearly and eliminate these ambiguities. Ensuring everyone understands their specific duties will create a more streamlined decision-making process.
Diversity in board composition remains a critical area for improvement. Small and medium-sized boards often lack diverse experiences and expertise, which limits their ability to make well-rounded decisions. Research consistently shows that more diverse boards perform better; for instance, a McKinsey study found that boards with varied backgrounds are 43% more likely to generate stronger financial returns than less diverse boards.
What you can do: To address this gap, boards should develop a skills matrix aligned with their strategic goals and nascent areas of development. Use this tool to identify gaps in expertise and recruit members with complementary skills and perspectives, providing a balanced approach to decision-making.
3. Focus on Long-Term Strategy and Board OperationsA lack of focus on long-term strategy is another key issue. Boards often find themselves bogged down in day-to-day operational matters and oversight functions, leaving little time for broader strategic discussions and emerging risks and opportunities. According to PwC’s Annual Corporate Directors Survey, 44% of directors believe that their peers are not sufficiently invested and lack a deep understanding of the company's strategy, which limits their ability to engage in meaningful discussions on long-term goals. Time management within board meetings also poses challenges. Many boards struggle to allocate adequate time for strategic discussions, with meetings frequently getting sidetracked by operational issues. What you can do: Prioritize strategic discussions in your meeting agendas. Distribute materials in advance and allocate time for discussions on long-term goals and initiatives. This shift will help align board efforts with the organization’s overall vision. 4. Proactively Plan for Leadership TransitionsSuccession planning is critical, yet many boards approach it reactively. In small and medium-sized organizations, there is often a lack of transparency in leadership transitions, particularly around CEO succession planning. The 2023 Spencer Stuart Director Pulse Survey revealed that only 26% of boards had established a formal CEO succession plan in the previous 12 months, leaving organizations vulnerable during leadership transitions. What you can do: Establish a clear and proactive succession plan, regularly updated to reflect evolving organizational needs. This helps mitigate risks and ensures leadership continuity. |
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For Boards that represent membership organizations, declining membership can result from a failure to deliver value. This decline can result from a misalignment between the organization’s offerings and the evolving needs, expectations, or priorities of its members. Factors such as outdated programs, lack of engagement opportunities, poor communication, or insufficient advocacy on behalf of members can exacerbate the issue. Without proactive measures to understand and address these concerns, boards risk eroding trust and loyalty, ultimately jeopardizing the organization’s sustainability and relevance.
What you can do: To address declining membership and foster long-term engagement and loyalty, boards can implement strategies that deliver clear, tangible benefits to members. These may include offering enhanced programs, personalized services, and meaningful opportunities for involvement.
A key step is to periodically conduct independent "value for money" assessments to gauge member sentiment and satisfaction. These assessments can help identify gaps between the organization’s offerings and member expectations, uncover areas for improvement, and highlight what members value most. Armed with these insights, boards can adapt their strategies to ensure members consistently perceive the organization as a valuable and indispensable part of their professional or personal lives.
Lastly, as organizations face rapidly changing market conditions, there’s an increasing need for boards to focus on financial sustainability and risk oversight. Many boards acknowledge the need need to improve their oversight of emerging risks, particularly around financial instability and cybersecurity. As these threats continue to evolve, proactive risk management has become increasingly critical for ensuring organizational resilience.
What you can do: Be proactive in reviewing key performance indicators (KPIs) to ensure they are aligned with long-term strategy. Equip the board with tools and training to evaluate risks effectively and adapt to market changes.
Despite these gaps, many small and medium-sized boards display strong cultures that promote open conversations, with committee structures operating effectively. However, opportunities for enhanced education, improved meeting practices, and a stronger focus on financial oversight remain crucial for ongoing success.
By addressing these governance gaps, boards can strengthen their role and ensure their organizations are well-positioned for future success.
Looking to strengthen your board’s governance practices? Schedule a complimentary consultation with Colleen Kelley here or reach out to info@stratford.group to learn more.
| Colleen Kelley is President of Stratford Management Consulting. She is a seasoned executive with over 25 years of experience in both high-tech OEM and contract manufacturing sectors. She is an engaging leader with substantive skill in profit and loss management, customer orientation, program management and supply chain management. Colleen also brings significant experience in merger and acquisition activities, as well as leading organizations through substantial transition. |