From Good to Great: Three KPIs of Effective Board Leaders
Effective board leaders relentlessly focus board goals and processes to achieve corporate goals for the benefit of both stockholders and stakeholders. But what elevates a lead director from good to great are three key performance indicators (KPIs), namely the ability to lead, remain relevant, and foster the curiosity of all directors.
Being a Diplomatic Leader
Unlike the CEO, an effective director doesn’t need to be an inspirational leader. In fact, diplomacy and restraint are more important characteristics than vision and inspiration. A director shouldn’t compete for boardroom time but should exercise his or her input judiciously—for example, after diligent review of a pending corporate action or board decision.
Diplomacy, a disciplined study of the case, and a willingness to push back against the status quo embodies desired characteristics of a great group member and, more specifically, an effective director.
Staying Relevant Through a Commitment to Ongoing Education
Having deep knowledge of what goes on inside and outside the company is another essential KPI for all directors, and especially board leaders. This knowledge provides insight on external competitive issues and the changing needs of investors, customers, and external stakeholders. Equally important is knowledge around employee issues. As the roles of directors and board leaders have evolved, they now focus on and address the challenges facing both companies and society, including climate change, diversity, human capital management, and human rights.
Effective human capital management aligns with a company’s purpose and its broader environmental, social, and governance (ESG) initiatives. As ESG trends have emerged over the years, ongoing education around them is a key attribute of an engaged and curious director committed to staying relevant. When looking at the vantage point of employees, if they don't have a purpose that they want to achieve in life, then they’re going to go work for the company that can. This is becoming increasingly relevant in society today.
Fostering Curiosity and Continuous Improvement
Fostering curiosity translates to a culture of learning. A curious board leader is one who encourages this culture, diversity, and a “blank-slate mentality.”
In this ever-changing and highly disruptive world, companies and their boards are facing many pressures requiring on going learning of emerging issues including economic, political, human capital and talent, supply chain, cyber-attacks and cyber preparedness, climate events and issues, and regulatory initiatives.
Directors are attending both virtual and in-person learning forums to gain information that they can take back to the boardroom. That culture of learning then trickles down from the effective board leader to others, and that characteristic starts to triangulate and may lead others to attend similar forums in the future—and then share their learnings as well.
But curiosity is not just research and healthy skepticism, it is also about diversity: filling the room with diverse voices and perspectives that create a proactive back-and-forth dynamic that causes active listening that directly translates to active contributions by the various directors and executive leadership team members.
Key Takeaways
As you review or reflect on your position as a board leader, consider these points:
- Establish a leadership style that includes ongoing engagement with directors. Obtain candid feedback on board operations and assess and develop an annual action plan for improvement.
- Recognize the importance of being adaptable to change: feedback, problem solving, and ethical decision-making.
- Avoid groupthink; actively listen and exercise diplomacy.
- Keep up with emerging stakeholder issues—both inside and outside of the boardroom.
- Foster healthy board dynamics through a culture of respect, diversity, curiosity, and learning
“The good-to-great leaders never wanted to become larger-than-life heroes. They never aspired to be put on a pedestal or become unreachable icons. They were seemingly ordinary people quietly producing extraordinary results,” according to Jim Collins, author of "From Good to Great."
If you’re looking for additional learning opportunities, consider reading "From Good to Great" by Jim Collins and "How Boards Work" by Dr. Dambisa Moyo and watching the film "Twelve Angry Men."
For more leadership insights and resources, join the Nasdaq Center for Board Excellence, a community and collaboration environment in which board engagement is deepened and experiences are shared. Sign up today!
Other Topics
Corporate Governance Culture Leadership ESG
Joan Conley
Nasdaq
Joan C. Conley is currently a Senior Advisor on Corporate Governance and ESG Programs at Nasdaq, a role she assumed in January 2021, and a member of several boards.
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Byron Loflin
Nasdaq
Byron Loflin is Global Head of Board Advisory at Nasdaq, where he leads board assessments and boardroom training for Nasdaq Governance Solutions.
Read Byron 's Bio