The Ten Best Board Members Are Not Enough

The Ten Best Board Members Are Not Enough on Their Own

NHH Professor Inger G. Stensaker has researched strategic change for two decades. In recent years, she has followed boards more closely—and sees a clear shift: from a supervisory body to a strategic partner. But old habits die hard!

It's actually quite logical: in turbulent times, the board falls back on what is familiar. On 'the way we've always done it.' The result? They end up looking in the rearview mirror instead of utilizing the board's expertise to chart a course for the future.

Professor Inger G. Stensaker is one of Norway's leading experts on strategic change. When NHH established a program for board members, she agreed to participate on one condition.

– Yes, I said that if I were to be involved, the program must be about change. What does the board do in strategic changes?

Previously, research has primarily focused on the board as a legal and regulatory necessity for a company. Now, an increasing number of strategy researchers are looking at a completely different aspect of board work: the underestimated importance a board has for strategy development.

'Aha' Moments for Board Program Participants

To participate in NHH's original board program, it was a requirement that participants had served or were currently serving on a board. In other words: they had to have some tangible experience from board work.

Following the success of the first program, NHH has established another board program. Here, there is no requirement for board experience.

But regardless of which board program it is, participants are placed as board members on a fictional board. For example, for the newspaper VG.

– That probably promises a few 'aha' moments?

– They are surprised by how different their approaches and perspectives are on the issues we present them with. They suddenly no longer have the option to rely on their experience alone. Some come from strategy, some from finance, some from law. No one is on the VG board in reality, so the context is new, and they have to convince each other about the decision. That exercise is educational.

Stensaker confirms that research shows a clear trend: The board spends too much time on historical control. This is a problem Norwegian companies should take very seriously.

– If you're only looking in the rearview mirror, the traditional control function will fill the boardroom. Then the board doesn't get to contribute to what needs to be done going forward. It becomes a missed opportunity.

– But why does it end up like that?

– Well, there are many reasons. But it's probably easier to drill down into numbers and look back than to look forward. That is more demanding and difficult. It's just that the turbulent world we live in right now makes it even more important to have your gaze fixed on the future. If a board has already worked with future scenarios, they are in a stronger position when a crisis emerges.

– It's probably easier said than done to break such an ingrained habit?

– Yes, it is. What we say is that it's about being conscious when setting the agenda. Place strategy items early, not as a leftover at the end. Have good, short pre-reads with the right information.

What constitutes the right information probably depends on who you ask. Add to that the classic challenges of managing the chaos of modern board work, where the meeting notice is often sent by email, while the agenda is hidden in some Dropbox, and a rather challenging picture emerges of how to facilitate what Professor Stensaker points to.

– Having the information that is to be used available to those who need it is simply a hygiene factor. Systems, tidy board papers, version control. Things like that.

– What is NOT the right information?

– Sending 400-500 pages of documents to be read is not good board preparation. The point is that board meetings should be facilitated for good discussions. You shouldn't drown people! Some boards—this often applies to larger companies—schedule separate strategy sessions outside of board meetings. Others use subcommittees for deep dives, so that the entire board doesn't have to spend all its time on detailed control.

Fact Box: Inger G. Stensaker Debunks Two Myths About Board Work

• Myth 1: 'Competence is enough.' — No, that's not correct. Competence is step 1. Step two is getting the board to collaborate properly.
• Myth 2: 'Board work only happens at board meetings.' — Research shows that very important conversations, meetings, and discussions often take place outside the boardroom.

The Gap Between the Board and the CEO

Stensaker highlights research that looks at the board as a support partner. This is where it gets interesting: 43 percent of Norwegian board members believe they provide good support to the CEO. At the same time, only 22 percent of CEOs say the same!

– Is this gap a communication problem—or is there something deeper at play?

– It goes deeper than that. Much of the thinking about boards is based on the principal-agent theory. In short, this means the board is supposed to keep management in line. But what the CEO is looking for is something else; it's the board as a sparring partner. If the board is actually to be involved in strategy work, they need to get off their high horse—and take part in the discussion.

Stensaker points out that there are a few pitfalls here. Let's first take the classic situation, where the board is primarily a supervisory body. What is lost then is the opportunity for the CEO to come to the board with challenges and concerns. Why? Because you don't bring such things to a board that you feel is only there to control you.

– And the other pitfall?

– That is if the board actually becomes more involved in the strategy work. This challenges the principle that the board should maintain an arm's length distance from management. At the same time, I think we can safely say that it creates more value in an uncertain world. We'll just have to accept the cost of no longer having that arm's length distance.

– But isn't the very real control role weakened then?

– I would rather say that it is exercised differently. Through participation, discussion, and co-responsibility for the direction the company is taking, rather than them sitting on their high horse and conducting after-the-fact checks.

Mythbusting: The Smartest People Alone Are Not Enough

Few people have greater insight into the inner workings of board governance than Inger G. Stensaker. This makes it natural to ask her to point out the biggest myths about board work. If any exist, that is.

– It's a myth that the right mix of skills alone makes a good board. That's not how it works. You can fill the table with the ten most skilled board members you can find, but without good dynamics and collaboration, you are far from guaranteed value.

– It's a bit like a football team that can suddenly afford to buy all the most expensive players?

– Exactly. It's not a given that they will play as a team for that reason! Sometimes you have to choose to leave out the most highly skilled person if they can't collaborate with the rest of the board, says Inger G. Stensaker.

– Are there more myths?

– Yes, that board work only happens at board meetings. Many important and difficult discussions take place elsewhere. In the public sector, board meetings are often open to ensure transparency, which has many positive aspects, but also some disadvantages. Because how easy is it to have the difficult discussions if they take place in public? Acknowledging that much happens outside of board meetings is part of the professionalization of Norwegian boards.

Norway Is Not Great at Innovation

It's no secret (although some might wish it were): Norwegian boards are not terribly good at innovation. Inger G. Stensaker can confirm this.

– Yes, we have a way to go. When you ask if Norwegian boards are an engine for transformation or a brake, the answer is probably neither. Let me put it this way, the potential to become a co-driver of innovation is great.

– Is this a question that can be solved with technology, or is it more about culture?

– I don't think it's ever wrong to think that we could be doing more when it comes to innovation. It's a bit like with technology as it has been with sustainability: You don't solve an innovation crisis by adding a technology expert to the board. The entire board must understand technology at a strategic level.

– What quality do you think will become more important for board members in the years to come?

Stensaker thinks for a moment.

– I believe the ability to sense and pick up on what's coming, even from outside one's own industry, will be important. To have your antennas out, simply put. That, combined with increasing the ability to collaborate in a room full of strong minds—that is the way forward.