Board management decision making is one of the most important, complex processes of governance. Boards need to make decisions about the type of risk they’ll accept, as well as the level of expertise required to manage it. They must also determine the best method to communicate and make decisions.
Effective boards avoid binary decisions and devote a significant amount of time to the myriad of options and challenging assumptions. They make sure that their decisions are recorded in a way that allows them to evaluate and review the effectiveness of their decisions.
Leigh Weiss says that for high-consequence decision making, or what I refer to as black elephants, it is essential to involve a diverse group in defining the most fundamental binary question as well as in the discussion around it. Weiss is referring to having outside experts assist the board in understanding the complexity and ramifications of the decisions. This also requires the board actually engaging in the debate, rather than simply leaving management to make a decision and then let the board vote on it.
To ensure that the right person is in charge of making a decision, it is beneficial to have a list of which executive directors, committees, and/or the entire board should make specific decisions. This can be especially helpful when the board is weighing an important and crucial decision that could impact the future of the organization. Boards should also decide the kind of voting process (simple majority, supermajority or unanimous) to use in particular decisions.
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