Best Boards and Beyond: Understanding Your Role as an Executive

As an executive at a top-performing company, you likely understand that being part of an effective board of directors requires more than just meeting fiduciary responsibilities. McKinsey Global Surveys have consistently shown that the best boards go beyond mere compliance to actively engage in constructively challenging and providing input on a wide range of matters.

However, finding the fine line between governance and management is no easy task – especially when some executive duties may overlap with those traditionally considered within the board's purview. In this article, we'll explore what sets truly exceptional boards apart from their less effective counterparts, and provide practical tips for senior executives looking to strike that delicate balance.

The McKinsey Factor

According to recent research by global management consulting firm McKinsey & Company (McKinsey), successful companies tend to have boards of directors who take a more proactive approach. Rather than simply rubber-stamping executive decisions or focusing solely on financial matters, these best-in-class board members actively engage with senior executives in areas such as strategy development, talent acquisition and succession planning.

In fact, McKinsey's global surveys indicate that only about 25% of companies have boards that meet the firm's criteria for excellence. So what sets them apart? Here are some key differences to consider:

1. Strategic Focus: The best boards don't just focus on short-term financials; instead, they take a long-term view and engage in strategic discussions around issues like market trends, competitor dynamics, and future growth opportunities.

2. Talent Acquisition & Retention: Top-performing companies recognize the importance of attracting and retaining top talent – both within their executive ranks and beyond. Boards play an essential role here by providing input on key hires, succession planning, and performance management strategies.

3. Active Engagement: Unlike passive boards who simply rubber-stamp decisions made elsewhere in the organization, best-in-class board members roll up their sleeves to actively engage with senior executives around critical issues facing the business – from M&A activity to major organizational changes.

Beyond Governance

So what does it mean for a director or executive to 'go beyond' traditional governance duties? Here are some key areas where boards can add value:

1. Risk Management: While fiduciary responsibilities remain paramount, today's complex operating environment demands that boards also play an active role in identifying and mitigating various types of risk – from operational and reputational risks through to cyber threats.

2. Innovation & Disruption: As disruptors like Uber or Airbnb continue to shake up established industries worldwide, companies must now prioritize innovation as much as cost-cutting if they hope to stay ahead of the curve. Boards have a vital role here in encouraging experimentation while also providing guidance on how new ideas can be scaled up successfully.

3. Culture & Diversity: Finally, boards today recognize that building an inclusive culture where everyone feels valued and heard is essential for driving business performance long-term – not just because it's the right thing to do from an ESG perspective but also due diligence by investors increasingly factoring these factors into their investment decisions.

In conclusion, being part only a passive observer on your company's board of directors simply isn't enough anymore. To truly add value and help guide your organization towards success in today's fast-changing world, you need to be willing to 'go beyond' traditional governance duties – whether that means taking an active role in strategy development or helping shape the future direction of talent acquisition & retention strategies.

As McKinsey astutely puts it: 'Finding the right place to draw the line between governance and management is as important for senior executives as it is for directors.' So what are you waiting for? Take ownership today – your company will thank you tomorrow.

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