05 March 2019 by Chris Hodge
Recent research into the efficiency of board packs has produced some alarming findings
Regular readers of Governance + Compliance may remember that in late 2017 we published the results of some research into what ICSA members thought about the quality of their board packs and the way in which they were produced.
The research – undertaken jointly with Board Intelligence – had some alarming findings. Three-quarters of respondents said that their board packs were too long and took too long to prepare. Many of them also believed that the papers were not hitting the mark, with nearly 70% saying they were too focused on operational issues, for example. This was particularly concerning, as it suggested the papers were not facilitating the strategic and forward-looking discussions that boards need to have if they are to be effective. In summary, the research told us that not only did board papers require a lot of time and money to produce, but it was time and money that was not always well spent.
These findings prompted ICSA and Board Intelligence to develop some guidance highlighting some good practices for writing, compiling and distributing board packs. The guidance, called Effective Board Reporting: Transform decision making in the boardroom, was published in July 2018.
At the same time, we launched two online tools. The first being the ‘Board Reporting Calculator’ which enables organisations to calculate the time and money they spent on their board packs, and the second being the ‘Assess Your Board Pack’ tool which helps them identify where there might be room for improvement. Both tools have proved popular as over 1,500 individuals have used the cost calculator and over 300 have completed an online self-assessment (with many more downloading the tool).
Six months on, we thought it would be a good time to look at the data generated by online users to see whether anything had changed since we conducted the original research. It has, but not necessarily for the better.
The first thing that jumps out from the cost calculator data is that board packs are getting bigger. This is true for organisations of all sizes, as Table 1 shows below, but also for all sectors. While some allowance needs to be made for the differences in research methods, the upward trend is undeniable.
In some respects this is not surprising. Regulatory reporting and compliance continues to increase for many organisations, as do the expectations placed on boards – for example, that they should take more account of the impact of their decisions on stakeholders, or that they should understand the risks and opportunities associated with technological change.
The challenge of trying to ensure that the board has the information it needs to be able to exercise its responsibilities effectively, while keeping the board pack to a manageable length, is not going to go away any time soon.
The analysis of the cost calculator also shows that the resources that go into preparing, distributing and reading the board pack remain high – particularly the preparation stage which accounts for 70-80% of the costs and over 90% of the time.
Again, this is true for all organisations, even though the number of days and the amount of money varies considerably depending on the size and complexity of the organisation concerned. An average of 525 days a year devoted to the board pack by charities with a turnover of less than £10 million may seem small compared to the nearly 4,000 days needed by very large public sector bodies, but it amounts to a significant share of those charities’ resources.
As an aside, it seems that preparing the board pack is a particular challenge in the public sector. The average number of days spent writing and reviewing board papers is higher than in either the corporate or voluntary sectors, while there is less variation by size of organisation in the length of the board pack than in other sectors. This may be a reflection of the regulatory and due diligence requirements placed on public sector bodies of all sizes.
By contrast, the cost in financial terms is highest in the corporate sector, as is to be expected given the higher salaries in that sector. The average cost to companies is £3 million a year – compared to the still significant £375,000 for charities – rising to an average of £7.5 million for companies with a turnover above £500 million.
These are substantial amounts of money and time. Are they paying off in terms of the quality of the board papers and the enhanced effectiveness of boards? Judging by the data gathered from the ‘Assess Your Board Pack’ online tool, it would appear that for many organisations they are not.
It is important to bear in mind that those organisations using the tool are at the start of the process of self-improvement, and that the data therefore represents the ‘before’ rather than the ‘after’.
Nonetheless, it is striking that nearly two-thirds of those that have used the tool assessed their packs as being weak or poor.
The self-assessment tool asks a series of questions about the quality of board papers, and the processes for commissioning, writing and distributing the board pack.
Our analysis identifies two important common weaknesses in the distribution process. One concerns the security of the papers; nearly half of all organisations that have used the tool rely on emails, and nearly a third do not encrypt files. The other concerns timeliness. Just over half of the users said that they sometimes distributed the board pack less than five days before the meeting. Combined with lengthy board packs, this makes it impossible for board members to arrive at the meeting properly prepared. Both of these findings suggest that many organisations might benefit from a more secure and efficient system for managing their board packs.
However, as Table 2 shows, the most common weaknesses relate either to the quality of the board papers or to the process by which they are produced. This strongly reinforces the findings of our original research.
As the primary purpose of board papers is to enable boards to have an informed discussion about issues of importance to them and their organisations, it is very concerning that two-thirds of users felt that their own board papers are not currently meeting that purpose and that half felt that the key messages were unclear.
Equally concerning is the high percentage of organisations that believe management does not spend the right amount of time on the board pack. Further analysis shows that this figure includes those who think that management fails to pay enough attention to the quality of the papers, and those whose management spend so much time on detailed writing or reviewing papers that it has become an unproductive burden. Arguably there is no such thing as ‘the right amount of time’ – that will vary from organisation to organisation. What matters is that management time is deployed in the most effective way and at the right point in the process.
Fortunately, the other entries in our ‘bottom five’ list hint at ways this concern – and those around the quality of the papers – might be mitigated. There are two parts of the process of producing board packs to which organisations might want to pay particular attention.
The first is agenda planning and briefing. Providing feedback after board meetings on whether the agenda had focused the board on the right issues and the papers provided the relevant information and insight will help ensure that future board packs are more closely tailored to the board’s needs.
A clear briefing on what the board is looking for when commissioning papers will also increase the likelihood of the papers being clear and focused, and reduce the need for time-consuming rewriting, something that is often the cause of the board pack being sent out late. One-third of those who completed the self-assessment tool said they do not receive a proper brief. This seems one way in which management input could be used more effectively. A small amount of time spent at the beginning explaining what is required can potentially save a lot more time later on.
The second part of the process to which organisations might want to pay more attention to is training and support for authors. As the table shows, nearly 60% of organisations provide no formal training on how to write effective board papers. In addition, nearly 30% do not use templates that could guide authors through the paper and make sure that essential issues are covered.
In the absence of either training or feedback, authors of board papers are more likely to keep making the same mistakes, and board members are likely to remain dissatisfied. Again, this is an area where investment up front could pay significant dividends over time.
The ICSA/Board Intelligence guidance covers these and all other aspects of preparing and distributing board packs, and includes helpful tips from ICSA members on how they have dealt with them.
The guidance can be downloaded at icsa.org.uk/knowledge/effective-board-reporting, where you will also find the ‘Board Reporting Calculator’ and the ‘Assess Your Board Pack’ tool. If you have not done so already, I would encourage you to give them a go to see how you compare with others and to help you identify the strengths and weaknesses of your own organisation’s board packs.