Key Considerations in Board Meeting Frequency
We are often asked how frequently a board should meet.
Our typical answer is that 'it depends!'
Traditionally, boards have met on a monthly basis. In an article on this subject back in 2001 we reported that there was a growing trend to holding fewer, but longer board meetings (1). Is that still true? The additional expectations legislators and the courts have placed on boards since then have grown noticeably. Additionally, there has been widespread governance training and the promulgation of 'best practice' thinking on board effectiveness. These seem to have made boards more aware of the 'quality time' they need to spend on the job. While boards generally have become better at their job (both more effective and more efficient) in last 8-9 years, it is probable that their workload has increased rather than reduced. It is timely, therefore, to review how often your board should meet.
1. What are the matters the board needs to get on top of?
There is increasing recognition of the need for a board to spend the greater part of its meeting time focusing on the future, addressing strategic issues, key decisions and matters of policy direction. 'Quality time' for discussion on these matters cannot easily be squeezed into traditional board meeting agendas.
Careful preparation of an annual agenda or board work plan will enable boards to identify the work needed. A board must discharge both its critical monitoring and control responsibilities and the important decisions and 'direction giving' topics. Careful scheduling and prioritisation is almost always needed to make the board's workload manageable. The process of prioritising will inevitably give a board a clear sense of whether or not it is committing enough time and thus whether it is meeting as frequently as it should.
No matter how careful a board's planning, a crisis changes things. When the need for board intervention is higher as, for example, when there is, a direct challenge to the organisation's survival, more frequent meetings will be inevitable.
2. What is the extent and scope of the board's delegation?
An important consideration is the extent to which a board feels able to delegate its authority to make decisions. Well thought through strategic and policy frameworks safely guide the decisions of others without the board needing to have a direct involvement. Such frameworks also provide an explicit and consistent basis for monitoring and evaluating the way such delegations are used.
When its delegation is limited a board is likely to find itself consuming an undue proportion of its meeting time in decision-making mode. It is arguable that the board should only make decisions in those circumstances where 'the feet are dangling'. This is another way of saying that boards should not be making routine decisions that can just as well be made by others within board policies. They should concentrate on situations where there is a great deal of uncertainty and novelty. This is where the collective wisdom (and collective responsibility) of the board comes into its own.
3. How often (or at what intervals) is it relevant (and useful) to check the organisation's performance?
Compared to what the organisation is trying to achieve, what quality and quantity of information does a given board need to satisfy itself that the organisation is on track? Because it is not 'operating' the business a board will seldom need as much information or as frequently as does its management team.
Financial reporting, in particular, is traditionally on a monthly cycle. In some organisational contexts, however, a monthly review is not particularly meaningful. Several months' performance data is needed to produce a true or realistic picture of the trends reflecting the organisation's performance. In that situation, therefore, it may be more relevant for a board to meet on, say, a quarterly basis. Alternatively, within an existing schedule, a thorough performance analysis could be conducted at every second or third board meeting. That would allow intervening meetings to be focused primarily on strategic and policy issues and key decisions.
This is not to suggest that board members should not receive monthly financial and performance reports. This gives the board the option, if performance was to deteriorate, to bring its next scheduled 'monitoring' discussion forward or to have a teleconference, for example, to address emergent issues at short notice.
4. Are there considerations of cost and convenience?
Board meetings are not inexpensive and board members are typically very busy people. Fewer meetings will save the organisation money and will increase the chance of having all board members present. This should be a valid concern in any organisation dedicated to making the best possible use of its resources. Provided that a board is functioning well, however, the time taken up by the board and the resources it consumes along the way should be thought of as an investment rather than a cost. If a board is not adding value it is a different story.
From a director's workload point of view, having fewer board meetings may increase the chance of attracting (and retaining) the type of directors you need on your board.
Chief executives may also be keen to reduce the frequency of board meetings. Chief executives often experience monthly board meetings as like being on a perpetual (and rather negative) treadmill. After preparing for, or following up, a board meeting they feel they have little time for anything else.
Supporting the board (and reporting to it) is a core component of any chief executive's job but there are costs involved. This includes not only the direct costs but the opportunity cost of the chief executive (and other senior executives) taking time away from directing the operational side of the business.
5. How much confidence does the board have in Management and the quality of reporting?
The frequency of board meetings also depends to some degree on the confidence that the board has in executive performance and executive reporting. A board needs to be confident that its executive team is up to the job. It also needs to be confident that it will receive monitoring information that is timely, accurate and delivered in an accessible form. A board needs proposals for its decision that are well thought out, based on thorough analysis and clearly presented. These require a significant management focus from chief executives and their teams. When a board does not have sufficient confidence in these aspects of executive competence it is likely that it will feel a compulsion to meet more frequently than might otherwise be necessary.
6. How well developed is board teamwork?
When, for example, a board has a number of new members, it needs time to form an effective new unit. In the first instance it should be about developing a shared sense of purpose and an agreed approach to its operation. Meeting less often is only likely to be a valid choice in an organisation that is stable, and in which executive (and board!) performance is already effective.
It would be nice to think that determining the frequency of board meetings could be formulaic. These six considerations mean, however, that the frequency of meetings is, unavoidably, a judgement call for each board to make. It should not mindlessly default to tradition, to whatever suits the executive team or fits best with the reporting cycle. A board should consciously review its meeting frequency from time to time - perhaps as part of an annual self-assessment process. It should resolve to meet as often as it needs to and for the appropriate duration guided by whatever is necessary to fulfil its responsibilities.
(1) 'How Often Should a Board Meet?' Good Governance #23 (September-October 2001)
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