How Boards Can Strengthen Decision-Making During Periods of Rapid Growth
It is especially important to involve the board of directors during such a critical period to ensure that the company’s interests are protected. The board usually has the responsibility of serving as a guide for the firm, safeguarding the company’s best interests, and assisting management in decision-making.
However, traditional board processes are rarely optimized for fast-growing companies. The following five practices are suggested in order to enable the board to make the most relevant and timely decisions when the company grows.
1. Focus on the Key Data and Metrics
As the company grows exponentially, it will begin to see a tremendous number of reports. Management floods meetings with materials, resulting in reports that are hundreds of pages long. All this just seems to confuse things and lead to the formation of irrelevant conclusions.
First of all, it is necessary to optimize and establish the leading indicators that will provide the board with insight into the main processes. In addition, it is essential to move from past performance to future projections. Cash-burn rate, customer retention, Talent acquisition, and other critical areas are examples of such indicators. This way, the board can detect and solve potential problems in a timely manner.
2. Enhance Communication With Executives Outside of the Board
Without proper communication with executive management, the board cannot operate efficiently. Quarterly reviews are simply not applicable in the context of rapid organizational growth. In addition, it is quite difficult to discuss problems arising during the year at year-end meetings. As a result, the board focuses on daily operational problems instead of long-term strategy.
It is necessary to organize communication with the management of the company so that the directors have timely and relevant information for decision-making. Monthly director meetings are appropriate. It would also be helpful to organize regular informal meetings to discuss pressing issues or for directors to ask for additional information.
3. Balance Speed and Risk
While directors must ensure that the company grows as quickly as possible, it is essential to ensure that it does so without taking on too many obligations. In addition, it is vital to understand that while rapid expansion is required, the board still needs to perform its control and supervisory functions.
To do this, it is helpful to set specific limits within which management can make decisions without waiting for the board’s approval. These limits could relate to budgets or other critical areas of the business. Thus, the directors will have the opportunity to ensure that the management is operating within acceptable parameters.
4. Diversify the Skill Sets of Directors
The skills necessary for the initial development and financing of the company may be insufficient for its rapid expansion. In addition, when the company begins to develop in new directions, the experience of the directors may be inadequate as well. For example, when the firm decides to expand into the Middle East, the board must understand the nuances of doing business in this region. Getting an RHQ license in Saudi Arabia is a relatively complex process, so it will benefit the directors if they fully understand the intricacies of this procedure.
It is essential for the board to ensure that its members have the necessary skills and experience. When faced with a new situation, it is essential to look for experts who understand what needs to be done.
5. Provide Guidance to Executives in the Decision-Making Process
During periods of explosive growth, executive management is under the greatest pressure. While department heads and executive leaders focus on daily challenges, the board must provide them with wise advice and monitoring. It is the board of directors that should ensure that the firm continues to grow without taking on additional liabilities beyond acceptable limits. It is especially important not to fall out with the management, for example, by criticizing too many internal processes. It is the board of directors that should serve as the executive’s support and guide them.
At the same time, it is necessary to avoid micromanagement and allow the management to make all relevant decisions. This reduces the board's operational distraction while providing the executive with the autonomy and decision-making ability they need.
6. Ensure That the Company’s Long-Term Objectives Are Met
When the company begins to grow rapidly, it is challenging to resist the temptation to sacrifice long-term objectives for short-term gains. A sharp increase in sales makes it easy to overlook internal characteristics: for example, a decrease in the quality of goods or services. In addition, the desire to develop and expand can provoke the board to ignore legal and ethical norms. Thus, the company runs the risk of failing to achieve all the benefits of rapid growth.
The board of directors acts as a safeguard for the interests of the company. Therefore, its role in maintaining long-term objectives is essential.
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Frequently Asked Questions (FAQ)
Why is the decision-making process of the board complicated during the time of rapid growth?
The board has to deal with increased risks and accelerated processes, so the traditional quarterly meeting pace is unsuitable for decision-making.
How often should the board meet when the company grows?
In addition to regular meetings, it is useful to organize monthly meetings with management to discuss any urgent issues.
What is an RHQ license in Saudi Arabia, and how is it related to the board of directors’ strategy?
An RHQ license is required to establish a regional office in Saudi Arabia. A company that possesses this license can enjoy many benefits, as well as have the opportunity to participate in government tenders.
How Can the Board Help the Executives in Their Rapid Growth?
The board can set limits on expenses and management decisions for executives in order to have control without disturbing them.
Who Should the Board Bring In As Outside Directors?
If the company begins to develop in new directions or begins to enter new markets, the board should look for directors with experience in these areas.
