A lot of emphasis and pressure has been placed on directors in the area of governance post-financial crisis. Responsibilities have grown exponentially, and the depth of knowledge needed can seem like a black hole some days. Directors can struggle. Are you paying attention?

There are many reasons why your board might be underperforming: They don’t have industry background, they have inadequate exposure to the information needed to govern fully, they have limited opportunities to strategize as the agenda is filled with regulator-driven items. But the most common reason a board underperforms is that they don’t know how.

Directorship is just like any other job: It requires guidelines, stated expectations, and concrete responsibilities and evaluation methods. How else will a director give the bank what is needed if we haven’t told them how? Directors need to know when to take charge, when to collaborate, and when to stay out of the way. For most, this is a developed skill, not an inborn talent. There is no school for directors (although I mean to change that), so it is our responsibility to provide the guidance and tools they need to excel at the job.

What is being taught? There is a difference between expected knowledge and reality. Are you gaining the information and skills needed to effectively govern for the future? Or are you just catching up with the concepts of the past? It is possible to effectively and productively govern an institution based on a fundamental understanding of the facets on the balance sheet. But if you cannot bridge the gap between strategic and tactical, you are learning the wrong things.

Directors are like bus drivers; they are responsible for getting you where you are supposed to be at the time you are supposed to be there, safe and sound. But as an industry, we lead from the back of the bus. The driver is often not given the destination, nor is clear on how to get there or in what timeframe. But regardless of what is done in the back of the bus, the driver is still ultimately responsible for the trip. How fair are we being to the institution when we don’t give our board what is needed to lead?

Board training begins before anyone even enters a board meeting. You have to have the right people in the right seats. A well-developed board succession plan should encompass the duties, responsibilities, and expectations for each director currently and in the future. Before a board is qualified to lead, they need to be clear on what is expected of them and willing to be evaluated and coached based on those expectations.

Board involvement is the key to long-term strategic success. Effective governance takes intellectual commitment, strategic preparation, active participation, and dedicated governance. Every one of these expectations is founded on information. You can’t govern effectively if you aren’t active in the board room. You can’t be active if you aren’t prepared. And you can’t be prepared without a commitment to gaining knowledge.

To gain the information and skills needed to effectively govern for the future, you need to move away from being educated on the concepts of the past. Focus on understanding the realities of today’s market and the tactics needed to continually move forward while building value.

Successful boards need to focus on the connection of the strategic and the tactical. This will identify any knowledge gaps that occur and provide a means to rectify them.

The Connections:

• Being able to cite and give the status on the identified strategic goals in the strategic plan. • Being able to make the connection between the current strategic plan and the long-term strategic goals of the organization. • Monitoring long-term strategic goals at the same time as short-term goals. • Maintaining the connection between the board agenda and the information needed to actively participate in each board meeting. • Connecting what information is needed and the format in which it needs to be delivered for maximum understanding. • Effectively holding management responsible without creating an erosion of that relationship. • Asking what management needs to achieve the tactical goals they have been charged with, and whether there is a strong understanding of the reason behind those needs. • Knowing what method will be used to continuously gain current information. • Connecting behavior in the board room to quality of decisions made and tactics executed.

Ultimately, the board is responsible for obtaining the strategic goals of the bank. They are responsible to ensure that a Board Succession Plan is written and that it includes concrete statement of expectations for their role. Finally, they are responsible for self and group evaluation and completely open to the coaching that should follow when shortcomings are uncovered.

Michelle Gula has been a board advocate for over 16 years and works tirelessly at creating structures for excellence in the board room. High-performing institutions have high performing governance. You can’t have one without the other. Discover how your board stacks up with the 19-Point High-Performance Board Evaluation — call (610) 737-2875.