The Importance of Board Analysis
Board analysis is a study of the structure, composition, and operations of a board. Its purpose is to determine if a board is equipped with the right balance of inside and outside expertise, experience and impartiality to provide management with advice and oversight and formulate a strategy. It also aims at understanding how a board operates as a collective and if the board is effective in supporting the CEO and helping drive the company’s success.
The best boards have an environment of openness, trust and collaboration. They are aware of the company’s ecosystem, and they ask management the most important questions. They are focused on the long-term health of the company and are able to identify risks and opportunities. They collaborate with stakeholders so that the board can understand their stake in the company, make changes in corporate behaviour and make a positive impact.
According to McKinsey’s 2021 global survey of more than 800 directors and executives the most effective boards comprise an experienced mix of non-executives (NEDs) and executives with a deep understanding of the business. They have clearly defined structures and a set of policies to determine their decisions, and they are determined to improve the efficiency of the board and its committees.
A board review can be an effective tool for a board’s ability to assess its performance and give feedback to the CEO or Chair. However it is not the case that all boards have made it a priority. Through conducting an objective third-party assessment Board members can become more aware of potential pitfalls.
