From ritual to real work: the board as a team.

• Author: Nadler, David A.
• Position: Board of directors

What does it take for a largely ceremonial aggregation of powerful individuals who spend relatively little time with each other to somehow transform themselves into a high-performance team that adds real value to the organization?

Ever since the boardroom bloodletting of the early 1990s, the people who run America's businesses - and the shareholders who own them - seem to have rediscovered their interest in that venerable vestige of corporate governance, the board of directors. Sadly, too much of the discussion has been shaped by the blame-and-body-count mentality that pervades the business press. More often than not, what we get are finger-pointing and recriminations aimed at directors who waited just a little too long before forcing their CEO to walk the plank.

Those simplistic stories do a disservice to a truly important issue. Without question, removing and replacing an inadequate CEO ranks among any board's top responsibilities. But the obsession with that dramatic denoument obscures the broader question that companies ought to be asking themselves, which is this: Given its unique role, how can the board, on a continuing basis, provide significant and sustainable value to the enterprise, to its leaders, and, ultimately, to its shareholders?

That question involves two very different issues. The first deals with content. In other words, in what areas can the board - and only the board - make a real difference? There's an emerging consensus on that issue, and many boards are devoting greater chunks of time to management oversight, strategy review, succession planning, and the other topics that rightfully should occupy their attention.

The more difficult question addresses not the what, but the how: How does the board transform its structure, processes, and internal dynamics in ways that will propel it from ritual to real work? What does it take for a largely ceremonial aggregation of powerful individuals who spend relatively little time with each other to somehow transform themselves into a high-performance team that adds real value to the organization?

As consultants on strategic change to the senior leaders of more than 100 public and private enterprises, we're well aware that the higher you go in the organization, the more difficult teaming becomes; that's just the nature of the beast. Yet, the goal of turning the board into an effective, productive team is not only possible - it's essential.

Unique positioning

Let's start with the first question we posed: What are the areas in which the board is uniquely positioned to add value to the organization? The Business Roundtable, in its Statement on Corporate Governance published in 1997, offered a succinct list:

* Selecting, regularly evaluating, and, if necessary, replacing the chief executive officer; determining management compensation; and reviewing succession planning.

* Reviewing and, where appropriate, approving the major strategies, financial objectives, and other plans of the corporation.

* Advising management on significant issues facing the corporation.

* Overseeing processes for evaluating the adequacy of internal controls, risk management...