Insiders vs. Outsiders: Striking the Perfect Boardroom Balance
Since the 20th century, the dominance of inside directors on boards has declined. However, a recent Harvard Business Review article highlights the crucial insights insiders can bring to the table. While selecting board members is never an easy decision, here are three tips to guide you:
Balance is Key: While independent directors offer valuable external oversight, too many outsiders can create information gaps. Including a few inside directors ensures a deeper understanding of the company’s day-to-day operations and long-term strategy. Even so, relying too heavily on insiders can lead to potential biases and reduce the board's objectivity in critical decision-making.
Strengthen Crisis Management: During times of crisis, HBR found that companies with more inside directors often outperform those without. Insiders bring firsthand knowledge that can be vital for navigating complex risks and making better decisions in high stakes situations.
Enhance Performance Assessments: Insiders, with their day-to-day involvement, provide valuable context for evaluating CEO and company performance, offering insights that independent directors might miss. This helps set more appropriate strategy and executive compensation.
