THOUGHTS ON LEADERSHIP: ON BOARDS

This week my travels found me first in Minneapolis for a HomeServices of America, Inc. board meeting. I also sat in on a strategic repositioning presentation with Tom Hutchins, Berkshire Hathaway Energy vice president of Strategic Repositioning. Next, I visited Mendota Heights, Minnesota for Berkshire Hathaway HomeServices North Properties’ Midyear Meeting. At North Properties, I met with Peggy Lovejoy, president of North Properties and her fantastic team, delivering a presentation on the mindset and routine necessary for success.

I’d like to focus this week on the HomeServices of America board meeting, specifically because there tends to be an elusive, almost mystical quality to boards we should dispel. The question is often asked: What is a board? And that question is usually followed up by others, like: How should a board function in the overall operation of an organization? Why is a board important?

Today, in the length of this blog post, we’ll answer those questions.

Generally, a board of directors provides ultimate oversight for the activities and affairs of its organization. In corporations, a board of directors is a composition of people appointed as representatives of shareholders, able to make decisions on their behalf. Every director is responsible for acting in good faith, and in a manner deemed to be in the best interest of the organization, its employees and the consumers the organization serves. A board is an incredible business example of accountability at work; members rely on what others say they’ll accomplish, and any goals set forth by a member must be met … or else explained in exacting detail why the goal mark was missed.

Also adding to board accountability is the idea that members must attend each meeting. Failure to attend a board meeting reflects an unwillingness to meet the director’s fiduciary duties to the organization and to its mission and vision for success.

But let’s step back for a minute and take a look at the big picture of boards. In general, there are five major benefits a board of directors provides to a corporation:

Skills and knowledge. While executive management leaders focus on the day-to-day operations and growth strategy of a business, board members supply a well-rounded source of knowledge that might not otherwise be at company leaders’ disposal. A board member can view aspects of a business from a wholistic and objective perspective, offering insights based on experience and analysis.

Accountability. Not only are board members responsible for the action items they declare they’ll accomplish but they’re also responsible one another, either collectively or individually depending on the board structure, for the organization’s overall compliance, performance, profitability and risk alleviation strategies. Therefore, board members have accountability to one another and to the organization at large.

Corporate authority. A board of directors operates by governance, defined by online legal marketplace UpCounsel as “a set of rules, principles and procedures that directs and controls a company as to the way it can operate efficiently and increase its value.” In a way, this governance is like a structured system of execution the board members must follow to uphold their fiduciary duty.

Strategic management. Though leaders at various companies within the organization determine strategy, a board of directors is often the final word on the approval or amendment of these strategies. Board involvement in the creation and modification of the strategy often depends on the size of the organization, but in most cases this strategic management provides greater clarity, efficiency and effectiveness to ensure the strategy outlined best aligns with the organization’s wildly important goals.

Trust. HomeServices is guided by the very same four fundamental values of Berkshire Hathaway Inc. – trust, integrity, stability and longevity. The very first value, trust, is reinforced by a strong board of directors, who provide ethical decision-making standards, reliable counsel and objective advice that reduces risk while increasing success. This safeguards the interest of all those within the organization and all those serviced by the organization.

So, what’s the message? There are parallels between the way an efficient board of directors operates and the way any business of any size should operate. If a board meeting is the decisive example of organization and responsibility, we can extrapolate its fundamental assets and apply them to all types of organizations, from a two-person real estate team to a large-scale brokerage. A system of execution should always be designed to ensure the positive outcome of leaders’ activities. Trust should forever inform every decision an organization makes. Skills and knowledge should be applied to all strategic initiatives and following the tenets of a board, everyone within a company should be held accountable for the goals they set out to make.