Board Error #1: No Insiders/Outsiders on the Board

Do not allow tiers to develop within the board anywhere. The board must act as one all the time and in all aspects of policy leadership. One of the slippery slopes to organizational purgatory, if not doom, is the seductive peril of having specialized committees. Even the common use of an executive committee or a finance committee creates two levels of people at the board table: those "in the know" and "the rest of us". Those in the second tier do not feel the same responsibility for the organization since they are not in the "inner circle". Furthermore, the organization doesn't benefit from the heterogeneity of the full board if it allows that "inner circle" to preempt the full board in any way.

Routinely executive committees are used by the elected leadership (president, chairman) and the staff leadership (CEO, COO) to try out ideas, to generate support and to generally prepare for board meetings. This may sound efficient, but what it does is prevent the full range of ideas and information from coming to the full board. The board is thus prevented from acting as a whole because the executive had acted on their behalf by counseling staff on what should go to the board.

This preempting the board is sometimes framed as "acting on behalf of the board in-between board meetings". There are a number of thought errors here: the full board needs to convene frequently enough to meet its responsibilities to set policy for the organization. It is a badly managed organization that lurches from crisis to crisis requiring policy level (board level) decisions in-between board meetings.

Similarly, separate finance or audit committees are used by CFOs as a way to escape their responsibility to succinctly communicate the financial situation to the full board at every meeting and regarding every policy decision. Audit committee members often stay in their positions for a long time, develop significant expertise and not surprisingly, the relationship with the CFO gets quite cozy. Even the CEO and the board chair are cut out of this loop. Even ignoring the opportunities for malfeasance, this process narrows the financial input from the board, and removes growth opportunities both for the CFO to learn how to explain the financial picture competently and for other board members to become skilled in holding staff and fellow board members accountable for financial performance. Avoid this Organizational Doom Flag #1: no standing committees!

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