Most boards, even of smaller organisations, use board committees to support and streamline the work of the board. The board delegates to committees important oversight matters that would otherwise need to be carried out by the board. This allows the board to focus more time and effort on the more strategic and bigger picture issues, including how it will add greater value to the organisation.
Here are 11 questions you should be asking at least once a year in relation to your board committees. Many of the questions are inter-related.
1. Is the structure of our committees appropriate?
During some of our board reviews, we advise boards to consider whether they need all their current committees and/or whether one or more of their board committees should be combined. Occasionally we advise a board that they should consider reconstituting a board committee as a management committee.
Having the right committee structure is important to support the board to effectively fulfil its responsibilities. And the structure of committees that might have been right in the past won’t necessarily be right for the future, which is why the current structure should be assessed having regard to the changing strategic needs and priorities of the organisation.
The structure and Terms of Reference for committees are inextricably linked.
2. Are the Terms of Reference for each committee regularly reviewed?
We recommend that the Terms of Reference for each committee be reviewed and updated annually. This is often done by the Committee itself with the review being overseen by a Nominations and Governance Committee or similar, prior to proposed changes being recommended to the board.
A good board evaluation will identify if there are any major gaps in the activities of the board’s committees and whether something done by one committee might be better being carried out by an alternative committee.
3. Is the board sufficiently cognisant of the management effort required to support its committees?
Most CEOs and senior executives are well aware of the significant burden that is placed on key executives in servicing the board’s committees but many directors seem less aware.
Whilst it is important that all boards are cognisant of the time, effort and focus that executives spend in servicing board committees, it is particularly important for directors of smaller organisations that have limited resources.
We advised a board some time ago, to their surprise, that the equivalent of the time of almost one and a half of its seven full-time staff was taken up preparing reports for and attending to the board’s other requirements. Once the board recognised this, they worked with the executive to find a much more efficient way of achieving the organisation’s aims as well as the board’s requirements.
4. Does the timing of committee meetings fit well with that of board meetings?
Most boards prepare their annual schedule of board meetings and then design their schedule of committee meetings to fit. Meetings are often scheduled to suit the desired dates for signing off on the organisation’s accounts and for its AGM.
Some boards like their committees to have met and minutes of committee meetings to be included in the relevant board pack for the upcoming meeting. Others have their committee meetings one or two days prior to their board meeting to enable directors to meet in person for committee meetings and board meetings without having to travel as often as would be required if committee meetings were held a couple of weeks prior to a board meeting.
Taking into account the desires and needs of directors, executives servicing the committees and the answers to some of the other questions in this article will help the board work out what is right for their organisation.
5. Does each committee comprise all the requisite skills and experiences?
Just as it is critical for a board to have the right composition of skills and experience to meet the current and future strategic needs of the organisation, it is important for committees to have the right composition of skills and experiences to fulfil their obligations.
Committees that conclude they don’t have the requisite skills and experiences to effectively carry out their duties often ask an appropriate independent expert to attend the relevant committee meetings. It is quite common, for example, for an independent investment expert to attend an investment committee where the board considers their organisation would benefit from that extra expertise.
Many boards change the composition of their committees either on an ad hoc basis or at regular intervals to ensure the ongoing renewal of important skills and experiences. This is also a good way of giving directors a broader understanding of the organisation’s activities. These sorts of changes make it all the more important to regularly ask the question: does each committee comprise all the requisite skills and experiences?
6. Is there an appropriate overlap of members across committees?
Occasionally we advise boards to have a greater overlap of directors across important committees. For example, organisations with an audit committee and a separate risk committee may want to consider having an overlap of one or two directors across those committees. This helps ensure that important risk and/or audit issues don’t slip through the cracks and get missed by both committees. It will also help minimise overlap and duplication of effort.
7. Are the priorities of each committee aligned with the board’s priorities?
We recommend that boards go through the process of determining their three to five main priorities for the coming year, including in those areas where they think they can make the biggest difference and add the most value to their organisation. Some boards do a post mortem of their year to reflect on the bigger differences they have made and where they have added the most value. Setting priorities for the board is like a pre mortem where boards determine in advance where they think their collective efforts and focus can make the biggest difference and where they think they can add the most value for the organisation.
We recommend a similar process for committees, with each committee engaging the board in its priorities and ensuring that their committee’s priorities are aligned with the board’s priorities. Each committee, as well as the board, should do a post mortem at the end of the year to determine whether it achieved the objectives in relation to its priorities that were set at the beginning of the year.
8. Is the board sufficiently connected with the work of each committee?
A common complaint of directors is that they are not sufficiently connected or engaged with the work of each committee. Many directors tell us that the board is good at pushing issues down to committees but are rarely as good at hearing back from the relevant committees.
Some directors also tell us that the work of some committees seems a bit siloed and disconnected from the work of the board.
If directors ask this Question 8 and get a less than acceptable response, they should consider how to better connect directors and the board with the work of committees. This might include each committee engaging the board in its key priorities as per Question 7 and ensuring a more forward-looking report back from each committee to the board as per Question 9.
We also like the practice of each committee Chair preparing a one page summary of the key recommendations and main matters discussed and resolved at the committee to be added to the front of the relevant committee minutes in the board pack. The Committee Chair’s one page summary should also include appropriate forward-looking elements as per Question 9.
9. Is the work of committees sufficiently forward-looking?
Another common complaint by directors is that their committees necessarily deal with lots of historical information and issues without sufficiently considering how the implication of those historical issues impact the future. Committees should also be considering the emerging issues, opportunities and risks within the committees’ domain and should be addressing those in advance. This will include engaging the board in some of those more important emerging issues.
10. Could the board make better use of fixed term or ad hoc committees?
We often recommend to boards that they consider convening a fixed term or an ad hoc committee to deal with and/or oversee an important project or matter. This could include setting up a fixed term committee to oversee the choice and/or implementation of a new technology system or an ad hoc committee to oversee the preparation of a new strategic plan or a major organisational initiative.
11. Are committees the subject of an effective annual review?
Many boards have a policy of conducting an externally facilitated board evaluation every two or three years and most of these board reviews will include a review of the performance and effectiveness of individual directors and of board committees. Those same boards will normally do a light touch review in the years between the externally facilitated board review and those reviews should include a light touch review of committees.
Board Benchmarking’s Committee Effectiveness Survey Module is a simple and cost-effective optional extra (between $550 and $1,470) that you can add to the end of your full or light tough board survey.
Because the effectiveness of the committee chair is so fundamental to the effectiveness of the committee, we recommend that committees include in their annual calendar a five to 10 minute segment where the Committee Chair steps out of the room and the next most senior committee member facilitates a discussion with the rest of the committee about the committee chair’s biggest areas of value add and any suggestions they have for improvement. The person who facilitates that discussion should provide the committee chair with appropriate feedback after the committee meeting.