The Resolution

I love concept testing in the boardroom

A healthy board/management relationship features ideas brought to the board's attention early in the development phase for discussion and development.

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It is a mistake for management to bring a fully-fledged multi-billion-dollar proposal to a board and expect them to rubber stamp it, without having first ensured that the board has had an adequate opportunity to consider the proposal as it is being developed. Boards should never be presented with a fully formed proposal of this magnitude that they’ve never heard of before. A board is much less likely to approve a proposal in such circumstances than if it has had prior opportunities to interrogate the rationale and details.

Large proposals should come to the board early and often.

The board needs time to consider an opportunity

From the outset, the initial concept should be brought to the board for their reaction.

Think of it like pre-feasibility - management should be able to explain in simple language how their proposal will contribute to the attainment of agreed strategic goals. The board will be interested to hear management’s reasoning, including the options being considered, the assumptions on which management’s analysis rests, and how management proposes to manage attendant risks. The primary issue is whether a project is a good one or not. If the proposal, at the concept stage, receives a favourable reaction from the board, management can go away and do more work and then bring back a more detailed iteration. If it doesn’t get a good reaction from the board, management can knock it on the head and thereby avoid wasting time.

Board and management need to agree an effective process

Bringing concepts  to the board is something that management can, but should not, struggle with – “we don’t want to take half-baked ideas to the board”.  

Bringing the same proposal to the board multiple times is about being effective. The board can actually help management work the proposal into an acceptable shape. This approach can save management a lot of time in the long run. No board wants their management team working furiously on a proposal for six months that will inevitably be rejected.

So process is important. The process should be designed by management with the help of the board to be as effective as possible. This often requires a dialogue between the chair and the chief executive about how a concept should be brought to the board and at what stages. This should also consider what are the key points that the board is likely to be interested in. These are all key elements of process management serving to reduce the risk that the board will embarrass management by rejecting a proposal put to it.

How many times a proposal should come to the board really depends on how complex it is, how many options need to be considered  and how many independent experts have been hired to opine on different aspects of it. A proposal could go before a board three, four or five (or more) times.

In the end, everyone in the process wants to feel as if they're doing things that are useful and that they get to the right result. Taking a stepped approach and bringing a proposal to the board multiple times makes it more likely that both management and the board will end up being satisfied with the decision.