Boardroom Basics: Communication is Key

Despite their importance, some of the simplest communication best practices are checked at the boardroom door, leading to miscommunication, misunderstanding and misinterpretation. Following our last post, Boardroom Basics: Follow the Leader, we will continue to look at some fundamental concepts that are essential to board success. By exploring common communication issues board members face, we can develop a strategy to maximize the effectiveness of board communication.

Research suggests that, when it comes to communication, there is a wide range of issues plaguing corporate boards. Of 628 directors surveyed by the Swedish Institute for Financial Research, a few primary themes appeared, including:

  • Directors view their roles in different ways, and their individual views often influence the level of importance they place on communication;
  • Directors who see their primary responsibility as monitoring upper management believe they contribute less to strategic discussions than directors who view their primary role as offering advice;
  • Directors with stronger relationships with management perceive their advisory role to be more important;
  • Directors on larger boards think they contribute less to boardroom discussions than directors on smaller boards.

The question then becomes: how can directors with such differing views and perceptions come together to form a cohesive, efficient unit? The aforementioned survey notes three actionable items:

  • The role and expectations of a board should be defined as clearly as possible.
  • Directors should be encouraged to operate in an advisory capacity, including fostering positive working relationships with management (within fiduciary boundaries).
  • Whenever possible, the number of directors on a board should be large enough to provide a diverse set of skills and experiences, but small enough to avoid communication dilution.

By clearly defining the expectations and duties of directors, board members can remove the guesswork from their overall board experience. As a part of onboarding, the board should position new directors as advisors to company management who should be sought after for objective, even-handed advice. Recruiting board members who have advisory or board experience, as well as educating directors on communication best practices inside—and outside—the boardroom, can help ensure a solid foundation.

In our next post, we’ll take a more in-depth look at how board members can improve communication with management and investors, and foster better working relationships with various stakeholder groups.