Boards require a variety information to make informed decisions. This includes qualitative information (e.g. the impact a decision can have on the company’s culture or the stakeholders it will have an impact on) as well as quantitative data (e.g. legal due diligence or a return-on-investment analysis). Management is responsible to ensure that the appropriate individuals are collecting, strategically analyzing and packaging the data for board decision making.
To make strategic decisions, it is vital that the board has a thorough understanding of the current operations of the company. This will allow them to understand the risks and opportunities in the company’s future. This can be done through the use of an internal system for tracking the performance of the board or by conducting post-completion reviews of major initiatives and projects.
When making a major decision it is vital that the board has an awareness of its own limitations and is able to delegate certain decisions to committees. This is particularly crucial for issues like conflicts of interest, community benefit evaluation of CEOs and executive compensation.
The board should also be ready to be in a position of uncertainty. This will allow the board to utilize its collective knowledge, expertise and skills while remaining patient and active instead of reacting. This can be achieved through a variety of ways, like asking management to create a mental model or impression around the decision, creating the “red team/blue-team” process that involves an expert panel with different perspectives, or by committing time to discuss an intricate issue.