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?
To enable discussion with your board and management, download the following one-page PDF.