How to Avoid Bad Board Management Decision Making
Board management decision-making can be a complicated and difficult process. It requires balancing executive’s responsibilities and responsibilities with the collective viewpoint needed to decide what strategies the firm should pursue and the oversight needed to oversee the development of strategic directions. The process of making decisions is susceptible to a number of factors that can result in bad decisions. Usually, these issues result from the combination of poor performance over a long period of time and the need to increase risk in order to make up for that shortfall. The result is that the board may make a series of flawed evaluations and unwise decisions, which compound to produce obvious negative consequences for the business.
The first step is to ensure that every member of the board have access and confidence to objective data upon which they can base their decisions. This requires a thorough method that involves the gradual creation by the board of an impression or mental model of the issue at hand and the investigation of that model to expose any inherent biases and assumptions that could influence subsequent decisions.
An important aspect is determining when an issue should be presented to the board for discussion. This is based on the governance framework overall and the board chair’s ability to facilitate the right discussions at the appropriate time. This will avoid any last-minute surprises, or decisions made based on gut instincts that are not supported by data. It also depends on the internal processes of the board, such as how they plan and review their agenda, identify what items require their attention, and determine whether a full-board or committee deliberation would be more appropriate.