Board Management Decision Making

Decision making by the Board is among the most critical, complex procedures in governance. Boards have to make decisions regarding the kind of risk they’ll accept, as well as the level of expertise required to manage it. They also have to decide on the best way to communicate and make decisions.

Effective boards steer clear of binary decision making and put in an enormous amount of time in the multiplicity of options, and in challenging assumptions. They also make sure that their decisions are documented in a manner that allows them to revisit their decisions and evaluate the effectiveness of implementation.

Leigh Weiss: For high-consequence or what I call black elephant decisions, the most crucial factor is to engage many different people in the formulation of the ultimate binary issue and in the discussion that surrounds it. Weiss says this involves the involvement of experts to help the board understand the ramifications and magnitude of the decisions. The board must be actually engaging in the debate, rather than simply waiting for management to make a pre-made decision and then allow the board to vote on it.

It is helpful to have a matrix that defines which committees, executives and/or the whole board should take certain kinds of decisions. This can be especially helpful when the board is considering an important and significant decision that could have a significant impact on the future of the organization. Boards should also consider which voting process to use (supermajority, simple majority or unanimous) for specific decisions.