Board management decisions are based on a variety of information, be it financial, HR, governance or even strategic. This is particularly relevant for the more complicated issues that boards have to deal including M&A and strategic decisions.
These kinds of issues typically require significant qualitative input from the management team and external experts in order to formulate an opinion and fully comprehend the dangers involved. It is crucial that this amount of detail is properly controlled so that the decision-making process does’t get bogged down or excessively demanding. Most of the time, these decisions can be addressed in more specific board meetings, or perhaps in a dedicated workshop, which could help reduce time and energy spent on other strategic-level discussions that a board must engage in.
The right people must be present at the table when the board considers an issue. Groupthink and the tendency of boards to rely on rubber stamps for decisions can have serious consequences. The best way to avoid this is for boards to develop a habit of analyzing every decision that is formally brought to them in order to determine if it truly should be considered a decision at that level.
It is important that boards consider the various methods of decision-making that are available. They differ in their complexity, however, they each has strengths and weaknesses. A helpful exercise for a board of directors is to discuss the pros and pros of these frameworks with their management teams to determine which one is most suitable for a specific task.