Board Management Decision Making

The process of making decisions for board management is among governance’s most intricate and critical processes. Boards must determine what kind of risk they are willing to accept and how much knowledge is required to manage the risk. They also have to decide on the best method for communicating and make decisions.

Effective boards steer clear of binary decision making and invest an enormous amount of time in the multiplicity of possibilities, and challenging assumptions. They make sure that their decisions are recorded in a manner that allows them to review and evaluate the effectiveness.

Leigh Weiss: For high-consequence decisions, also known as black elephant decisions, the most important aspect is to involve many different people in the framing of the ultimate binary decision and in the discussion surrounding it. Weiss: This includes inviting outside experts to assist the board in understanding the complexities and implications of the decisions. The board must be actively engaging in the debate rather than waiting for management to make a pre-made decision and then allow the board to vote on it.

To ensure that the correct person is in charge of making a decision, it is beneficial to create a matrix identifying which executive directors, committees and/or the entire board should make specific decisions. This is particularly helpful when the board is considering an important and significant decision that could impact the future of the company. Boards should also determine which voting process to use (supermajority or simple majority, or unanimous) for specific decisions.

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