60. Dr Sabine Dembkowski - Board reviews: how to make board effectiveness reviews effective
Mar 5, 2024
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Dr Sabine Dembkowski, a renowned board advisor, discusses the importance of board reviews, common misconceptions, key factors for board effectiveness, and the value of feedback in improving board performance. Topics include why private companies are hesitant to conduct reviews, capturing valuable data, defining board effectiveness, common pitfalls in reviews, and the role of external observers in enhancing board performance.
Board reviews drive governance and transparency in addressing critical issues.
Effective boards align goals, leverage strengths, and drive continuous improvement for optimal performance.
Deep dives
Importance of Board Reviews and Governance Codes
The rise in popularity of board reviews is linked to corporate governance codes that recommend fully facilitated external board evaluations every three years. The importance of governance, transparency, and the complexity of issues boards face drive the need for effective evaluations. Governance scandals worldwide have heightened the focus on board governance and transparency, underscoring the necessity for boards to be effective in addressing a wide array of critical topics.
Differences in Board Review Practices
Listed companies and regulated sectors commonly conduct board reviews due to governance code requirements, while private equity and family-owned businesses are slower to adopt this practice. The valuation of board effectiveness as a value creation lever is growing among private equity firms and large private companies seeking higher performance and efficiency. Progressive firms are investing in understanding and enhancing board effectiveness for improved governance.
Challenges in Board Evaluations
Many board evaluations fail to deliver value due to focusing on standard structures and processes without offering meaningful insights. Static assessments and subjective interpretations often dominate traditional evaluations, leading to minimal value creation. There is a need to shift towards providing actionable insights and driving real impact by combining qualitative and quantitative data effectively.
Effective Boards and Continuous Improvement
Effective boards engage in regular reflection, align around goals, maintain clear roles and responsibilities, leverage strengths, and manage conflicts efficiently. The correlation between leveraging individual strengths and fostering collaborative reflection stands out as key markers of board effectiveness. Continuous improvement through data-driven insights and structured action plans is vital for boards striving for optimal performance and impact.
Dr Dembkowski has led board reviews for firms across the FTSE 100 and DAX amongst others, and her academic work on the subject is internationally recognised and peer-reviewed. Tune in to her conversation with Nurole CEO Oliver Cummings to hear her thoughts on: Why do a board review? (1:38) Are private companies less inclined to board review, and if so, why? (4:29) What do you say to those who think board reviews are ineffective and overpriced? (6:29) Where do boards most commonly go wrong with reviews? (8:39) What is the most important data to capture in board reviews? (12:58) Given the impossibility of an A|B test, how do we know what “effective” looks like? (14:27) What are the key factors that go to your definition of board effectiveness (18:39) What characteristics do the worst boards have in common? (25:47) Should we review individuals or the board as a whole? (27:21) What can boards do to better implement feedback? (28:56) Should board reviews look at the board’s ability to undertake specific tasks like hiring and firing the CEO? (31:05) How valuable do you think observers are for making boards more effective? (33:35) What aspects of board reviews are you sceptical about? (36:03) and ⚡The Lightning Round ⚡(37:26)
Host: Oliver Cummings Producer: Will Felton Music: Kate Mac Audio: Nick Kold Email: podcast@nurole.com Web: https://www.nurole.com/nurole-podcast-enter-the-boardroom
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