Does this describe your Board?
1
March 2007
Does This Describe Your Board?
Diagnosing the Effectiveness of Your Board
From the Desk of the Editor
Last issue we looked at what is sometimes called “the board’s missing link.” That is, the board’s role in ensuring
transparent disclosure and reporting to the membership of the co-operative or credit union. We shared some
challenges in this area, often neglected by boards, as well as some practical suggestions in the areas of training,
materiality and communications. If you haven’t already seen that issue, I suggest you take some time to have a read!
Thank you to all of you who responded to the readers’ survey. You gave us good marks for relevance, content and
writing, and gave us some very helpful suggestions to enhance the newsletter’s format, links, and printing options.
And the most popular topics for future newsletters, on which we are already working, are:
• Competency indicators for directors
• Red flags for the board
• Financial literacy for directors
• Behavioural governance
• Drawing the “bright line” between the board and management
In this issue of Governance Matters we are focusing on how to diagnose problem areas of board effectiveness. We
discuss board leadership and board functioning, including the role of the chair, meeting dynamics, board behaviour
and board relationships.
We have also included some practical tips and ideas that you can implement to address the various problems you may
diagnose.
As always, we hope you find this issue of Governance Matters of value to you and your board, and we welcome your
feedback!
Debra L. Brown ([email protected])
Editor
© 2007 Canadian Co-operative Association
www.Governance.coop
March 2007
Does this describe your Board?
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Does This Describe Your Board?
Diagnosing the Effectiveness of Your Board
How do you know whether the conflict or dysfunction you may be experiencing within your board is creative tension,
or whether it has gone too far? This is the purpose of board diagnostics: knowing how effective you are at behaving in
the boardroom and functioning as a cohesive team.
At one time or another, all boards experience difficult times and/or tensions between people. These can be triggered
by differences of opinions about future directions, resource allocation, and economic strategies. This is normal —
some would even say necessary. It is difficult to have effective direction and control — the two pillars of governance
— without the kind of creative tension between board members and between the board and management, necessary
to ensure that optimal strategies emerge from strategic discussions.
But there are limits to creative tension. In some cases, the board finds itself in constant internal conflict between
individual board members; between board members and the chair; or more generally between the board and
management. At some point, creative tension becomes conflict and conflict can quickly degenerate into a
dysfunctional board — a board that becomes thoroughly ineffective at the task of governing.
Realizing that something is wrong is often self-evident. Often, individual members will realize that something has
gone astray, either in the way meetings are being structured or in the way the meeting is being run.
Figuring out and dealing with the underlying cause is usually the challenge. Conflict is usually resolved by meeting on
the grounds of estrangement, i.e. by exposing the issue to the light and talking about it. By understanding the
leadership of the board, the behaviours of individuals, the dynamics of discussion, and the relationship between the
board and management, one can effectively determine where the board is functioning as well as it could be, or
whether it needs to rethink the way in which it conducts its business.
We talked to respected leaders of the co-operative system across Canada, and based on these interviews, we have
identified areas where board effectiveness may be impaired, sharing diagnostics and remedies in each area.
Board Leadership: Does this describe the Leadership of your Board?
“The Chair prefaces every discussion by supporting management’s only recommendation,
presenting his opinion, or suggesting the best course of action. Then, we wonder why we
are here since the decision has already been made.”
“The meeting agenda might as well be a carbon copy of the last meeting every time.”
The chair is not simply a leading director, or someone who casts a vote in the case of a tie; the #1 job of the chair is
to ensure board effectiveness. The role of chair requires a systematic approach to addressing issues before the board.
It starts with sending an agenda that contains sufficient time to effectively address issues based on their complexity
and contentiousness.
However, chairing board meetings is not normally what board chairs do in their life outside of the co-operative or
credit union.1 Indeed, while many chairs come to the boardroom table with extensive skills and experience, chairing
meetings is not always one of those skills or experiences.
In the co-operative sector, a full 88 per cent of co-op board chairs are part-time, according to the Towards Excellence: National
Report on Credit Union and Co-operative Governance Practice survey
(www.CoopsCanada.coop/coopgovernance/resources/surveysreports).
1
© 2007 Canadian Co-operative Association
www.Governance.coop
March 2007
Does this describe your Board?
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Chairs need to be keenly aware of the importance of good chairmanship to the success of each and every meeting.
The chair has to be prepared for the discussion. He or she ought to have had a discussion with management about
what is required from the board, and to understand each issue sufficiently in order to determine what process is most
likely to lead to the optimal outcome.
How many times are make-or-break decisions made based on a simple majority vote (e.g. 5 vote yes – 4 vote no),
when there was no emerging consensus and more discussion was required? When the issue is particularly important
for the co-op, the chair should structure the discussion to ensure a full and complete airing of the issue. It is the
Chair’s role to be explicit and clear about the approach being adopted to reaching consensus and a decision, so that
conflicts don’t arise over misunderstandings of expectations.
In the case of complex or contentious issues, the chair may want to set the stage for the discussion by formally
assigning special roles and responsibilities to individual directors — the role of devil’s advocate, for example, and
structuring the discussion in such a way as to provide leadership and ensure a successful outcome to the meeting.
Discussions need not always end with a consensus, or a vote, and the chair can be most helpful by describing the
desired outcome of the discussion.
Each director also has a role in ensuring effective leadership. Problems can arise from the structure of the agenda and
the processes used rather than behaviour. One example diagnostic would be a board that routinely accepts items for
decision that are tabled at the meeting without much effective discussion, instead of demanding the material be
distributed beforehand in order to encourage a thorough discussion of the issues. Does your board encourage a
proper discussion of issues or is it walk-in and vote on every item?
“A board chair who understands the issue, who has discussed the desired scenarios and outcomes with management,
and who sets an agenda with enough time to achieve the desired outcome, really helps the board be effective at
reaching a consensus, if that is what the situation requires,” says Claude Gauthier, Vice President, GROWMARK,
Inc.
The role of the chair in an effective board is deliberate and structured. For significant issues in front of the board, one
remedy is the chair ensuring that all four stages of board decision-making are included, working through effective
forming, storming, norming and performing.2
1. Forming: During the forming stage, directors learn about the opportunity and its challenges, agree on goals,
and set the rules and expectations around the issue.
2. Storming: During the storming stage, different ideas compete for consideration. The board members are
open to each other and engage with each other’s ideas and perspectives. The storming stage is necessary but
can be contentious, unpleasant and even painful to those who are averse to conflict. Here, the Board seeks to
be divergent in its thinking, and representative of all stakeholders in order to inform discussion. A critical
component of storming is deferral of judgment — taking the time necessary to explore other ways before
deciding.
3. Norming: At some point, it’s time to make a decision, or reach a norm, the single best idea in front of the
board. During this phase, the chair and CEO tend to be more participative and the discussion results in
convergence, followed by a vote to confirm this convergence. Directors adjust their behavior to agree on
values, professional behavior, shared methods, working tools and even sacred cows.
2 “Tuckman’s Catalytic Model” was formulated by Bruce Tuckman in 1965 for the management of work teams, which we have
adapted here for boards – the ultimate work team! For more information, see en.wikipedia.org/wiki/Forming-storming-normingperforming.
© 2007 Canadian Co-operative Association
www.Governance.coop
March 2007
Does this describe your Board?
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4. Performing: By this time, the board is motivated and knowledgeable, has reached a consensus, and decisions
have been made. During the performance stage, the board needs to demonstrate solidarity for the decisions
that were made, unanimously supporting the decision even if an individual initially spoke or even voted
against it.
Boards work by reaching a common understanding of the issues, dealing with the options, choosing one, and
supporting the decision even if an individual initially voted against it. Unity on the final decision is essential; if it does
not exist, some people will take advantage of the discord and disunity will follow. Team players are needed, people
who join the board because they support the co-op’s mission and values. Board members must not participate in
order to implement their individual agendas or the special interests of a slice of the membership; rather, their fiduciary
duty is to serve in the best interests of the co-operative or credit union, and of the membership as a whole.
While this should be an exceptional occurrence, it is becoming accepted practice in the corporate sector for core
committees to have the ability, and for individual directors to have a way to request outside advice if needed (with the
board’s or Audit Committee’s concurrence.) “Yet, only 28 per cent of co-ops have a system in place to enable
individual directors to engage an outside professional advisor,” according to the Towards Excellence research. Because
individual co-op directors are rarely able to engage outside experts themselves, the board chair needs to also be on the
lookout for those discussions requiring an outside expert — in order to suggest the board bring one in when required.
Here’s a summary then, of some remedies or techniques that work in the area of board leadership and chairmanship:
• Meeting with management (CEO and corporate secretary) ahead of each board meeting to ensure the board will
have sufficient information and time to deliberate substantive matters.
• Determining in advance whether the issue requires a consensus, a simple majority vote or a clear majority vote.
• Assigning each member the role of “critical evaluator,” making it acceptable for each member to freely air
objections and doubts.
• Making sure not to express an opinion too early in board deliberations.
• Structuring the discussion so that all effective alternatives are examined.
• Giving at least one director the role of devil’s advocate. This should be a different person for each meeting.
• Welcoming outside experts into meetings when they add external, informed and independent perspectives to the
discussions, as well as to validate and add to the information presented by management.
• Not calling a vote too early, before sufficient divergence and then convergence has occurred.
• Leading and guiding the board towards convergence, including focusing the board’s attention on “the single best
idea” (norm), and calling for a vote when this is reached.
• Encouraging and even coaching directors towards board unity, solidarity and confidentiality after the board has
reached decisions.
Board Functioning: Does this describe the Meeting Dynamics of your
board?
“The meeting agenda always has more than 10 items, and we never get past item
number five. The remaining items are either brought forward to future meetings, or are
discussed very quickly prior to adjournment.”
“You received the agenda last week, along with a package of information and have
prepared for the board meeting. At the beginning of the meeting, an item is added to the
agenda for immediate decision, supported by a new 10 page report and
recommendation!”
© 2007 Canadian Co-operative Association
www.Governance.coop
March 2007
Does this describe your Board?
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“The minutes of the last meeting were not sent out ahead of the meeting and you are
now being asked to approve them. Someone decides that meeting time should be spent
reading the minutes before they are approved.”
Since the board’s deliberations are determined by the agenda, that one document directly affects the board’s
effectiveness. Agenda creation and management is an extremely important role, usually assigned to the chair with the
assistance of the corporate secretary and/or CEO. The agenda needs to distinguish between the more important and
the less important matters. The board has limited time, and if it spends hours and hours on trivial matters, it won’t be
able to address significant and strategic matters.
To address this issue, both the board package/binder, and the board agenda can be organized into three categories:
1. items for strategic discussion,
2. items for decision and action, and
3. items for information or input.
This agenda organization helps board members know what is expected of them and eliminates anxiety, for example,
about having to vote on an item that is just for information.
The board ought to ensure that its committee structures and task forces are appropriately established and charged, so
that the board can trust their efforts and avoid rehashing what happened at a committee meeting. Committee
suggestions and other smaller, noncontroversial action items can be
grouped into a “consent agenda,”
requiring only one motion and one
vote. Background information on items
in the consent agenda must be provided
in the board package sent out before
the meeting. Use of a consent agenda
saves time and allows the board to
focus on the most significant issues.
The Towards Excellence research suggests that credit union and co-op boards meet more frequently, yet for less time
at each meeting, than corporate comparators (see table). Over two-thirds of co-op and credit union boards meet
monthly (or 10 times a year, which is essentially
monthly since many boards do not meet regularly
Figure 1 Determinants of Meeting Success
over the summer or holiday season). A majority of
corporate boards have moved to a bi-monthly or
quarterly cycle while only one-in-eight co-op boards
meet four, five, or six times a year.
Expectation
Management
Agenda
Management
Meeting
Frequency
Time Management
Committee
Structure and
Reporting
© 2007 Canadian Co-operative Association
www.Governance.coop
More frequent board meetings may need to be
structured more carefully than infrequent meetings
to avoid the “haven’t we just discussed this” or the
“micro management” traps.
Another element is time. A chair that is overly
concerned with finishing meetings on time, but
unwilling to reorganize or schedule more strategic
discussions over several meetings as required, can
cause important discussions to be truncated; with the
last items on the agenda discussed in haste as
directors close their briefcases and head for the door.
March 2007
Does this describe your Board?
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This type of meeting dynamic is extremely disruptive and may even increase the liability of directors who are faced
with having to make decisions without due diligence, after having only glanced over important strategic items brought
before the board.
“We all benefit when the board is able to thoroughly understand the issues before trying to reach a consensus or vote.
Important decisions cannot be rushed,” says Mike Barrett, Vice President, Member Relations, Logistics & Corporate
Secretary at Gay Lea Foods Co-operative Ltd. “An effective board relies on a focused chair, a properly constructed
agenda and prepared directors.”
This final comment touches on the expectations placed upon board members or, more specifically, board members’
knowledge of what is expected of them and what they can expect from others. One way to make sure expectations are
clear is to have new board members sign a letter that outlines those expectations, and confirms that they have read
and understood the bylaws, mandates and responsibilities of the board and committees on which they sit. Such a
document also makes it easier to remove a board member if, for example, his or her attendance has been poor. It also
serves to clarify the requirements of board membership when approaching a potential volunteer.
The most effective boards set aside time on every agenda to discuss strategy and issues of the day that have the
potential to affect the organization. A very encouraging development is the way many boards routinely discuss the
general business environment and trends as part of regular meetings.
“Understanding how the environment is changing, and how the organization has to keep ahead of those changes at
the board level, is an ongoing responsibility, not one delegated to the yearly or bi-yearly strategic planning sessions,”
advises Carmel Bellamy, Director, Corporate Governance and Co-operative Relations, The Co-operators Group.
“Timely discussions about what is on the horizon serve to raise the level of understanding of board members about
the environment in which the co-op operates, and greatly increases effectiveness across the board.”
Contact Us
We encourage you to submit articles, case studies, links or other resources for future newsletters. Please contact
Quintin Fox ([email protected]), CCA’s Manager of Member Services, (613) 238-6711 ext 234.
© 2007 Canadian Co-operative Association
www.Governance.coop
March 2007