Board Management Decision Making

The decision-making process for board management is among governance’s most difficult and crucial processes. Boards must determine what kind of risk they’ll accept and how much expertise is required to manage that risk. They must also consider the best way to communicate with each other and determine the best way to make decisions.

Effective boards steer clear of binary decision making and invest an enormous amount of time in the multiplicity of options, as well as challenging assumptions. They make sure that their decisions are documented in a way that permits them to evaluate and review the effectiveness of their decisions.

Leigh Weiss says that for high-consequence decisions or what I refer to as black elephants, it is important to involve a diverse group in framing the ultimate binary issue and in the discussion surrounding it. Weiss suggests hiring experts to help the board understand the ramifications and complicated nature of the decisions. It also involves the board taking part in the debate rather than just letting management make the decision and then approve it.

It is beneficial to have a system that indicates which committees executives and/or the whole board should make certain types of decisions. This is especially useful when the board has to weigh a decision that could have a significant impact on the future of the business. Boards should also consider establishing which type of voting process (simple majority, supermajority, or unanimous) to use in particular decisions.

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