Peeling Back Board Purpose
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In a world of ever-evolving organisational governance, where boards serve as the nerve center of decision-making and strategy, it is surprising how often the simple question of purpose remains unanswered. Boards of directors, entrusted with steering companies through complex waters, frequently grapple with their roles, often searching for their true north.
Earlier this year as I stood before a group of board members at an event hosted by the Australian Institute of Company Directors, I posed a question: "How many of you sit on a board with a stated and documented Purpose Statement?" To my astonishment, only a few hands in the audience were raised.
Let's be clear: I wasn't referring to the purpose of the company or the board's legal obligations. I was curious about the purpose of the board itself. This glaring gap in the room was indicative of a broader trend – boards often overlook the importance of having a clear, documented purpose statement. I'd even go as far as to say that the vast majority didn’t even know what I meant.
While most companies have their own mission statements, a guiding light that signifies their core purpose, boards mostly lack this essential element. And this void can be detrimental. Boards need a unifying force that guides them, in alignment with the company's values and long-term vision.
“Boards need a unifying force that guides them, in alignment with the company’s values and long-term vision.”
Consider, for instance, a startup with a straightforward Board Purpose of "Get us to exit" or a social enterprise that declares, "Amplify and ethically guide the mission of [enterprise name]." The simplicity of these statements highlights the fundamental nature of board purpose - clarity and being fit for purpose.
No token gestures here. Board Purpose shapes the decision-making culture. It reaches beyond the boardroom to influence how stakeholders view the board. Management, employees, funders, community, suppliers, and more. With a clear and well-defined purpose, boards can inspire a ripple effect of clear leadership and build trust.
“Board Purpose shapes the decision-making culture. It reaches beyond the boardroom to influence how stakeholders view the board. ”
It's time for boards to discover and embrace their "why" – their essential compass for a successful journey.
When boards operate without a clear purpose, the result is often ambiguity, decision avoidance, and relationship erosion with management and stakeholders. Boards may overstep their boundaries. They can forget the simple reason why they exist. And, in a time where trust is already in short supply, this erosion can have a severe impact on the board's reputation, and by extension, the company's.
What good is a board that doesn't really know why it exists?
This purpose doesn't replace legal responsibilities or the overarching company mission; it complements them. Boards aren't just about profit margins and risk management; they're about shaping organisations, stakeholders, and society as a whole.
“Boards aren’t just about profit margins and risk management; they’re about shaping organisations, stakeholders, and society as a whole. ”
A board with a defined purpose can cultivate trust, providing a transparent and consistent framework for decision-making and stakeholder engagement. A clear purpose serves to help boards navigate industry trends, crises, and opportunities. It enables them to make quick, informed decisions. Stay connected and true to their core.
When building new boards or advising boards seeking to scale their governance capabilities, I always start with purpose.
There is no formula for a Purpose Statement. In the same way that a company purpose statement describes the overarching reason that it exists, how it should conduct itself and the impact it has on who it's serving, a board purpose statement does the same thing.
It doesn't need to be about mission, cause, or ethics though; it can be a simple statement of intentionality that every single member can point towards, which in turn demonstrates to all stakeholders that your board is galvanised and aligned.
“it can be a simple statement of intentionality that every single member can point towards, which in turn demonstrates to all stakeholders that your board is galvanised and aligned.”
If your board lacks a clear, concise and connecting Purpose Statement, here's a list of 7 quick questions to kickstart your discussion. As your board answers these questions, its purpose will start to emerge.
1) How does the board contribute to the company's mission or purpose?
2) How could the board also contribute to the company's mission or purpose?
3) What specifically is the board aiming to achieve?
4) What do the people in your organisation expect of the board (and you)?
5) What should your people expect?
6) As a board, what's unique to you in relation to your company?
7) How can the board enhance its performance and effectiveness?
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