Is There a Correlation Between Board Engagement and High Performance?

As a Board member, am I highly engaged in my bank’s activities or am I focused on the basic requirements? As the overall banking environment continues to evolve and as regulations remain high, board members can offer insight that is very impactful.

High performing boards go beyond handling the ‘basics’ to counsel and challenge management on the bank’s vision, strategic plan, operational best practices and changes in market behavior. Boards bring the opportunity of infusing a wealth of diversity in backgrounds, experiences and leadership that can significantly enhance the growth and profitability prospects of their institution. As a Board member, am I engaging with management to add additional value to help the bank move forward and grow?

Recent research indicates that there are three fundamental characteristics of high impact boards. They address the range of issues the directors are relied upon to address, and the time those directors are dedicating to solving those issues:

1) Directors who have a higher relative level of impact on their company tend to provide strategic level insights, in addition to satisfying the normal activities required of a board member. These more involved boards go beyond analyzing trends and historical information. These boards are forward-looking to assess what adds value, debate strategies and evaluate the allocation of resources.

2) High impact directors also dedicate more of their time serving the company. Most directors spend an equal amount of time performing assigned functions, but those directors who perceive that they have a higher impact on the company put in more time on strategies, performance metrics and financials, risk management, organizational health and merger and acquisition activities. For example, all boards review the financial health of the company, but the directors who perceive that they have the highest possible impact on a company regularly spend extra time discussing performance management concerns with the CEO and reviewing non-financial metrics.

3) High impact directors also understand that time doesn't necessarily equal productivity. Those directors who feel that they have a high impact on their company do not spend the extra time micromanaging executives. They commit that time to improving their understanding of the company and industry, helping senior management stress-test strategies, and assisting management with resource allocation. This board leadership approach does not constrain the strategic vision for the company; rather, it serves to help the CEO achieve the company vision. Additionally, directors who didn’t micromanage their executive teams are more effective and more satisfied.

Board members are vital to the leadership of a bank, acting as a reliable resource for maximizing strategy and opportunities. A high performing board will ask the tough questions and troubleshoot ideas from management without micromanaging. They add value to management by making optimal use of time and dedicating insights from diverse personal experiences and continually pursuing information useful to the organization.