When Drucker talked about the boards’ role he would have reiterated his strong belief that large, complex institutions, private or public would need a “truly effective and independent outside” board:
“The need is not primarily rooted in the “public interest” or in the wish to make boards “democratic”. The need is, above all, a need of the institution itself. It cannot function well in all of it’s complexity unless it has an effective board”.
Putting together a board is a difficult task and the challenge lies with choosing the right people. What kind of knowledge and experience are we looking for ? What is the companies mission ? What about innovation ? What about the future, stakeholders. What should the company emphasize? These questions are all important and need to be taken seriously. First of all the board needs a strong and competent management.
Drucker defined the boards’ role in terms of six essential duties, where a strong and competent management is the first and most important one.
Second, he argued that complex organizations is in need of an independent organ to ask the “hard” questions and make sure the management thought about them.
An effective board is needed to make success for the whole organization.
The third essential function, is to consider the human and moral values. To do this Drucker emphasizes how important it is for the directors to regularly meet up with people other than the top management, both inside and outside of the organization. In todays boards’, it should be of great importance to value and interact with all employees, listen to their ideas and thoughts.
Advisory role is Druckers fourth board function. Because of more complexity in organizations more counsel is needed. “An effective board-one that understands the institution, its opportunities, and its problems.could fill this gap”.
In the fifth board function he saw an effective board as the organization’s “window to the outside world” or as he once put it its “channel of outside perception”. This as a result of another consequence of the growing complexity of the business environment.
Finally Drucker spoke about the importance of good communication and open dialogue on what goes on “on the fourteenth floor” to the organization.
Communication and dialogue is one of the most important key-elements to make a good culture in organizations.
“Corporate social responsibility” (CSR) is another important issue for the board to handle in todays complex world. Boards’ have to deal with a growing pressure to give stakeholders a role in corporate governance; disclose more and better information about their management, environmental and economic issues. Taking risks can be dangerous and the consequences are even worse.
Further on Drucker emphasize that corporations exist to satisfy human needs by providing useful goods and services and meaningful, fulfilling work-and to do so while adding to society’s wealth.
Now look at the following criteria which indicates a customer-focused purpose:
-“Provide the greatest focus on achieving competitive advantage”.
-“Create greater harmony among purpose, strategy, goals, and shared values”.
-“Raise employees’ moral aspirations by focusing their work on meaningful human ends”.
-“Motivate managers to create the optimal level of total value-not just value for one particular constituent”.
-“Heighten intrinsic motivation, subordinating narrow self-interest to corporate ends”.
-“Enhance the firm’s ability to create knowledge and, as Drucker admonishes us, to “make knowledge productive”.
-“Enable employees to see how their work is related to the firm’s ultimated end”.
-“Sustain its meaning and relevance across cultural and national boundaries”.
-“Increase the legitimacy of the corporation’s actions in society”.
Druckers word of wisdom inspired me to learn more about boards’ and to let me gain more insight in this challenging part of the organization.
Inger Lise E. Greger, MSc. Change Management