In the wake of the Covid-19 pandemic, many boards were forced to shift from a passive, backseat approach to one of active engagement. This change was necessary to navigate the crisis effectively, prompting boards to collaborate closely with management. According to research published online by Timothy Rowley and Laurence Capron at INSEAD [CLICK TO READ], boards typically engage with management in four distinct ways: passive, mentor, partner, and control.
A passive board gives management complete freedom to make decisions, while a control board exerts absolute control over decision-making. Between these extremes lie mentor and partner boards. Mentor boards actively participate in discussions, providing feedback and expert advice. Partner boards, while also offering expertise, are more involved in decision-making, treating it as a negotiation and closely monitoring implementation.
The research found that most boards default to a single engagement style, which limits their effectiveness. For instance, a passive board might defer too much to the CEO’s judgment, avoiding challenging decisions. This lack of oversight can lead to negative consequences, as seen in the case of Enron, where the board’s passivity allowed fraudulent practices to go unchecked.
To optimize board performance, a flexible approach is crucial. Boards should adapt their engagement style to the specific situation. The data revealed that 46 percent of boards primarily operate in passive mode, compared to 14 percent that use a mentor approach, 12 percent that play a partner role, and 19 percent that stick to control mode. Only 9 percent of boards used multiple approaches.
For not-for-profit leaders and managers, this research underscores the importance of a dynamic and adaptable board. By shifting between different engagement styles, boards can better support their organizations, especially during times of crisis. Embracing a flexible approach can lead to more effective governance and ultimately, greater organizational success.