Avoiding a board pack attack

Are you swamping your busy directors with irrelevant information? Domini Stuart investigates how management can provide quality information that fosters quality boardroom decision-making.

The quality of a board’s decision-making depends to a large extent on the quality of the information provided by management. But providing the right information in the most appropriate way may not be as easy as it sounds.

“I wrote board papers for 20 years,” says Trevor Bourne FAICD, a director of Caltex and Sydney Water. “Now I’ve found that one of the joys of being a director is that it is far, far easier to be a music critic than to write and sing the score.”

One challenge for executives who live and breathe the organisation is how best to convey detailed and possibly technical information to directors who spend just two or three days a month on company business and whose first exposure to the industry might well be sitting on that particular board.

“Of course it’s important to have a broad range of skills on a board, but it isn’t easy presenting to a group of people who may not be able to follow the technical detail,” says Bourne.

At the same time, directors are more conscious than ever of their responsibilities and the legal consequences of failing to meet them.

“I think directors are making much more effort to get to know the business, and management knows it’s in its interest to engage constructively with the board,” continues Bourne. “There’s still a clear delineation of duties, but directors want to be better informed these days and they need to be.”

That does not mean they need a greater volume of information.

“Good management teams rarely miss a serious issue,” says Bourne. “They’re more likely to be criticised for throwing in every issue, regardless of its significance, than leaving something out.”

What do you want the board to do?

The first thing directors want to know is what they are being asked to do. Do you want them to approve a proposal? To note an update? Or is the paper a warm-up to a new matter that they will be asked to approve at some point in the future?
 
If you are presenting a business case, they will expect to see the risks as well as the benefits of the proposal, and also the alternatives. They need to be able to test the assumptions and the thinking. 

Typically, a written paper will be circulated a week before the board meeting so that directors have time to digest the information and formulate any questions.

“Some directors say a board report should be no longer than four pages with appendices for those who wish to investigate more detail,” says Beth Laughton FAICD, a director of Australand Property Group, JB Hi-Fi and research and development company CRC CARE.

“Others prefer a longer and more comprehensive paper. Executives will generally be guided by the chairman.”

Digital technology has made it so easy to attach appendices that it might encourage a “mud on the wall” approach – throw as much as you have in the hope that some will stick.

“I think that’s quite a dangerous trend,” says Julie Garland McLellan FAICD (Twitter @JulieGarlandMcL), an experienced director and author of Presenting to Boards: Practical Skills for Corporate Presentations.

“As far as I’m aware, anything that’s given to the board in the meeting papers, even as an appendix, legally has to be read.

“I suggest referring to background information which is there for directors who want to know more while making it very clear that this is not part of the paper itself.”

Taking time to prepare

There is no shortcut to preparation.

“Before you start to write, you need to consider the report in the context of the board’s role — the development and monitoring of strategy; evaluation of senior management’s performance against key performance indicators (KPIs); and meeting its obligations to shareholders, employees and other stakeholders — as well as directors’ personal liability,” says Laughton.

“You should also seek guidance from the CEO or CFO and the company secretary as to the report’s relative importance on the board agenda, the content to be covered and the level of detail required.”

Garland McLellan suggests that all senior executives should read and agree to the board papers before they are distributed.

“If they don’t, the board will be basing its decisions on one person’s judgement,” she says.

Common mistakes include papers that are pitched at the wrong level, cobbled together from documents written for other purposes, too long or fail to provide the background and structure that facilitates decision-making.

“Many boards like management to spell out a recommendation,” says Garland McLellan. “And even those that don’t want to see that a thought process has been applied at an appropriate level.”

Some executives fail to establish the broad strategic context.

“As an example, someone seeking approval for a new customer relationship management solution might point to the one chosen for its value and features,” says Garland McLellan.

“But what the board really needs to know is what sort of information the company already has about its customers, what sort of information it needs, why it needs it, how will it be using it, whether this system provides what it needs, whether it’s scalable — in other words, how will it affect the business and its competitive advantage?”

It is also important to give thought to how you will present the information. For instance, some boards have gone so far as to ban PowerPoint completely, though most directors can see value in a well-designed visual presentation.

“What you don’t need is dozens of PowerPoint slides that simply regurgitate the paper,” says Bourne.

“But I think the biggest crime is to show slides which add new information. If something important comes to light after you’ve sent out the original paper, send it out separately. Directors should always have time to consider information before the meeting.”

Graphs, diagrams and even photographs can convey information more clearly than detailed tables, but these should be used only where they are relevant and never as decoration. And, as many directors now read their reports on a tablet, laptop or even a smartphone, it is important to consider how the paper will look on screen.

“A board pack can have 500 pages or more, so it must all be legible,” says Laughton.

“Excel spreadsheets in a six point font or A3 documents that have been resized to fit a tablet screen are almost impossible to read.”

An effective presentation

The boardroom can be an intimidating place, particularly for inexperienced presenters, but even the more experienced executives can benefit from the right kind of training.

“Presenting to the board is not the same as presenting at a conference or classroom,” says Garland McLellan.

“And it’s certainly not the same as a sales pitch, where you’re taught to downplay the risks in favour of the opportunities.”

Directors will often ask challenging questions, but this suggests they are engaged; it is not helpful if you become defensive.

Laughton advises presenters to answer succinctly, maintain a logical flow, stay on topic and stop as soon as they have answered the question.

“If you don’t know the answer, say so and offer to follow up,” she says. “Don’t bluff as you’re sure to be caught out.”

Some executives are determined to go through every word of their presentation because this is what they have prepared and practised. Training can help them to be more sensitive to what’s happening in the room and flexible enough to respond to any comments. It can also help with body language.

Focus on the facts

“Most of the boards I’m on operate in technical areas and, while the people presenting have deep knowledge of their discipline, they tend not to be natural-born presenters,” says Bourne.

“Inappropriate body language can certainly be distracting, but most directors are smart enough and have been around long enough to put a poor presentation aside and focus on the facts. After all, this isn’t an outside company trying to sell us something. It’s someone from the company we have responsibility for.” 

It is rare for a board to reject a paper outright; if the quality is poor or the subject matter is contentious, directors are more likely to ask for more information before reaching their decision.

In the early stages, Garland McLellan suggests that the executive consider the report as a process that directors can engage with.

“This way, it tends to get a much smoother ride, though it does mean that they need to work at a very high strategic level,” she says.

“I also love to see the board getting involved in site and customer visits, strategic planning and risk management so it is collaborating with management as well as overseeing it.”

Collaboration is not commonplace and there is a danger that it will blur the lines between the roles of the management and board. However, when the matter under consideration is complex, interaction can be critical.

“Closing the Kurnell refinery after 60 years of operation was a game-changing decision for the Caltex board to take,” says Bourne.

“Management presented five or six detailed papers over a period of nearly 18 months, a period when management and the board basically were essentially on a journey together. That’s quite unusual, but it reflected the momentous size and complexity of the decision.”

Improving the process

Many reports are routine, presented to the board every month.

“From time to time, the board will say this one isn’t serving its purpose any more, or this one needs more information in a particular section, so they tend to evolve and improve over time,” says Bourne.

The one-offs are generally driven by delegated capital approvals or a significant proposed change to strategy.

Garland McLellan suggests that these are part of the annual board performance review.

“A good review doesn’t just evaluate the effectiveness of the board, it looks at things that can help a board to be more effective,” she says.

“This should include the quality of written papers and presentations because they are at the heart of good decision making.”
Twitter @DominiStuart

10 ways to ensure your presentation goes smooth

1. Be upfront about what you would like the board to do and, if appropriate, the deadline.
2. Ensure that the board papers can be read easily on a smartphone or tablet.
3. Provide as much accurate information as the board needs to reach a sound decision in a clear and concise way.
4. Presume that all of the directors have read your paper thoroughly.
5. Focus on one or two key issues from the paper rather than reading out long passages.
6. Don’t oversell your proposal or attempt to impress the board.
7. Don’t include new information in your presentation.
8. Be judicious in your use of PowerPoint.
9. If you don’t know the answer to a question, say so immediately and offer to do the research.
10. Remember that directors are not necessarily experts on the subject matter or familiar with industry jargon or acronyms.