What are the decision making challenges faced by directors?

Directors face many challenges in making decisions.

#1 Have the directors agreed upon what decision are most critical and what are the criteria?

Is the criterion – what has the greatest impact on long term value creation and preservation?

Are the critical decisions: setting the strategy; hiring/terminating CEO; Approving CEOs strategic implementation plan; monitoring results of executing the CEOs plan?

#2 Do the directors have the business knowledge to make the decisions?

A McKinsey survey of directors revealed:

  • 34% agreed their board fully comprehended strategies.
  • 22% said boards completely aware of how firms created value.
  • 16% said boards had strong understanding of industry dynamics.

#3 Does each individual director have the qualification to make each decision?

#4 Is there an effective board decision making process?

A McKinsey survey of executives revealed:

  • 28% of executives thought good strategic decisions were frequent.
  • 53% of the benefits of the strategic decisions were due to the quality of the process.
  • Only 8% of benefit due to quality and detail of analysis.

#5 Key decisions are complex emotional, social and political processes. Do the directors understand the typical flaws, and take mitigating actions?

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What are director decision making challenges?