Board management decisions are based on a variety of data, whether it’s financial, HR, governance or even strategic. This is particularly applicable to the more complicated problems that boards confront with, like M&A and strategy-related decisions.
In order to understand the dangers and to form an opinion about the risks, these kinds of issues require a large amount of qualitative input. It is essential that this level of detail is carefully controlled to ensure that the decision-making process does not get bogged down or excessively lengthy. These decisions are often discussed in more specific meetings of the board, or in a dedicated workshop. This will save time and energy in other discussions of strategic importance.
The right people should be present when the board is discussing the subject. The emergence of groupthink as well as the tendency of boards to accept whatever decisions are presented to them could lead to grave consequences. It is best to have boards make it a habit to scrutinize every formal decision they receive to determine whether the decision is appropriate for the particular situation.
It is important that boards think about the many models of decision-making available. They differ in their complexity, but all have strengths and weaknesses. A helpful exercise for a board is to discuss the pros and pros of these frameworks with their management teams to decide which one is best for a particular decision.