Boards require a variety of information to make informed decisions. This includes both qualitative data (e.g. the impact that the decision will have on an organization’s culture or the stakeholders that are affected) and quantitative information (e.g. legal due diligence, return on investment analysis). It is the job of management to ensure that the proper people are collecting this data and strategically analyzing it, as well as packaging it to be used in board-level decision-making.
To make strategic decisions, it is crucial that the board has a thorough understanding of the current operations of the company. This will enable them to better understand the opportunities and risks of the company. This can be additional reading done with the use of an internal board performance tracking system or through the conduct of post-completion reviews on important initiatives and projects.
It is essential to ensure that, when making a strategic decision, the board is aware of its own limitations. It should also be prepared to delegate certain decisions to its committees. This is especially crucial in the context of conflicts of interest as well as community benefits, CEO evaluation, and executive compensation.
The board should be prepared to sit in a place of uncertainty. This will allow the board’s collective knowledge and expertise to be used while remaining active and patient instead of reacting. This can be accomplished through different ways, including asking management to develop an image or mental model about the decision, establishing the “red team/blue-team” process, which involves a panel of experts with different perspectives, or taking the time to discuss a complicated issue.
