A board not in step with its organisation’s lifecycle can become a major impediment to business growth, a leading finance industry forum in Adelaide was told.
William Buck Managing Director Jamie McKeough said all Boards must adapt and evolve throughout their own lifecycle to remain ahead of the game otherwise they will rapidly become redundant to the business and shareholders they serve.
Mr McKeough was speaking at the William Buck CFO Symposium held in the William Magarey Ballroom at the Adelaide Oval on April 11.
The gathering of 250 Chief Financial Officers and finance professionals heard how the composition, skillset and strategic direction of a Board can drastically impact its performance.
The right fit for the times
“Boards are vitally important to organisations of varying size,” Mr McKeough said.
“In an ever changing environment a Board can help management both operationally and strategically by creating and overseeing corporate governance and providing independence, direction, accountability and credibility.”
All businesses have a lifecycle typically incorporating start-up, growth, maturity, possible stagnation or decline but preferably a resurgence. Just as all businesses have a lifecycle, so do Boards.
The common Board evolution consists of the following stages:
- Entrepreneur and business owner
- Advisory Board (flexible group of advisors)
- Formal Board (including owners)
- Fully mandated Formal Board (Chairman, Executive Directors, Non-Executive Directors and Shareholder Representatives)
“For example an Advisory Board may be more appropriate during the early growth stage of a business while a Formal or Traditional Board may become relevant during sustained growth and the mature stage,” Mr McKeough said
“A Board, like a business can also stagnate or go into decline without appropriate safeguards in place. These safeguards include performance reviews, periodic evaluation and succession plans.
“Whatever the type, style and size of a Board, it must stay ahead of where the business is currently operating and be constantly thinking about what is needed a couple of years in advance.
“If it lags behind, it’s the wrong Board for that organisation.”
Mr McKeough said this evolution was not necessarily about simply bringing in different people to the Board over time but instead having directors who can grow and develop ahead of the business.
“Boards are also not mutually exclusive. For example in the case of a private business a Formal Board can be effectively complemented by a separate Advisory or Family Board at a shareholder level,” he said.
What makes for an effective Board?
Mr McKeough said there are common traits found among the most successful Boards including:
- A good chairperson
- Strong understanding of the business model
- Clear KPIs and quality reporting
- Excellent policies
- Management present periodically
- Strategic involvement
- Appropriate meeting duration
“Getting the Board composition right is critical,” he said.
“Complementary stills are important and it’s wise to have at least one Board member with relevant industry expertise – a ‘been there, done that’ person.
“A suitable mix of retired and active business people is preferable as well as a composition that embraces strength of character, diversity and independence.”
As well as leading the 160-strong South Australian office of accounting and advisory firm William Buck for 12 years, Jamie McKeough has served on numerous Boards and Advisory Boards for organisations including William Buck International, Osmoflo, Redarc Electronics, large family groups, emerging businesses and not-for-profits.
Jamie can be contacted on firstname.lastname@example.org