Since the dawn of time, size has been used as a demonstration of power and success. Whether you’re considering the Great Pyramids to display personal worth and status, significant European castles to demonstrate wealth and power or high-rise sky scrapers to show success in business, size always mattered. But does increased size now just equal decreased potential? Evidence would appear to suggest so, especially when it comes to the size of your board.
Research published in 2016 by corporate governance expert Pascal Nguyen studied a large sample of Australian firms for ten years, between 2001 and 2011, finding strong evidence of a negative relationship between board size and firm value.
“Our results indicate that small groups had increased individual contributions and better group outcomes compared to their larger counterparts”, summarised Nguyen.
The ability to make decisions quickly is key to the success of any board. Restricting the amount of time it takes to reach a conclusion is vital to driving an organisation forward, and also to ensuring that key compliance deadlines and business critical decisions are not missed.
Larger boards tend to become information-receiving groups, weighed down by their inability to make conclusive and decisive decisions, often resulting in rifts and cliques between small groups of like-minded directors.
The role of the board dictates that important decisions are discussed and agreed upon by those ultimately responsible for the success and future of the organisation. The need for agility is paramount in the current economic and geo-political landscape.
The importance placed upon these decisions often encourages boards to believe that more board members will equal better decisions, however so long as the key skill sets and experience levels are met, smaller boards could well be the way forward as it forces directors to be better prepared with less hiding room.
“No matter what the size of your organisation’s board, the need for every director to be fully prepared is imperative,” commented eShare CEO, Alister Esam. “Having access to the right information at the right time is how better decisions are made and, in my experience, dramatically increases the chances of success for any business.”
Most directors who have ever sat on very large boards I think would agree with the sentiment above, however implementing this change is not always straight forward, with directors often keen to see the number reduced, but only after they have retired!
If you’re aiming for your board members to make decisions more efficiently, then all processes around the board need to be more efficient and effective also. Utilising technology to store and distribute board packs is a commonplace practice for many organisations, however some are still struggling on with either a mixture of pdf creation and emails, or even physical paper packs.
“Our board portal solution, BoardPacks, focuses on improving your boards governance and decision making potential, not just digitising your meetings,” concluded Alister. “Our clients across private, public and third sectors are all seeing the benefits of better and more engaged board members.”
If you would like more information and a free demonstration of BoardPacks to see the benefits it would bring to your board, please contact info@eshare.net
