The decision-making process of board management is among governance’s most complicated and crucial processes. Boards have to decide on the type of risk they will accept and how much expertise is required to manage the risk. They also have to decide on the best method to communicate and make decisions.
Effective boards steer clear of the use of binary decision-making and invest an enormous amount of time in the multiplicity of possibilities, and challenging assumptions. They also ensure that their decisions are recorded in a manner that allows them to evaluate and review the effectiveness of their decisions.
Leigh Weiss says that for high-consequence decisions or what I call black elephants, it is crucial to include a diverse group in defining the ultimate binary issue and in the discussions surrounding it. Weiss suggests inviting outside experts to help the board understand the complexity and ramifications of the decisions. The board must be actively engaging in the debate instead of waiting for management to make a pre-made decision and then vote on it.
It is helpful to have a chart that defines which committees, executives and/or the board should make certain types of decisions. This is especially useful when the board is considering an important and crucial decision that could impact the organization’s future. Boards should also think about determining the type of voting procedure (simple majority, supermajority or unanimous) to use in particular decisions.
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