If you want to have an effective governance structure, it is vital to ensure that the number and makeup of committees are right for the size of the organization, but establishing a number that strikes the right balance between doing everything that needs to be done and not being too structurally complex is not always easy.
If you’re not sure where to begin to figure this out, ask yourself these questions and tweak until you get it just right.
1. Which committee functions will you need the most?
In general, and to ensure compliance with increasingly complex regulatory frameworks, you should start with the basic four: the audit committee, the remuneration committee, the nominations committee, and the risk committee.
Take that as a starting point and consider the needs of your organizations to see if the functions of one of them could be included in one of the others, or if you need a brand new one. A good first step would be to outline just how much use you would get out of each committee and to create a structure that’s flexible enough to allow for new committees down the road if your focus on one issue eventually increases.
2. How big is your organization?
If a large company does not have a sufficient number of committees, it is likely that bottlenecks will occur when it comes to decisions concerning regulatory as well as strategic matters. If a small one has too many, they may be underused and become a waste of resources.
Establish enough committees to cover the entire company structure, thinking of how simple or complex it is, how many branches it has, in how many countries it operates, etcetera, to ensure efficiency in issues that need oversight.
3. How many committees can you maintain a clear vision of?
For large organizations that have implemented a wide array of committees, it is important that the board of directors is able to maintain a clear vision of their status to ensure the smooth running of the organization as a whole.
This where technology can be of assistance, through the implementation of board management software, as the leadership of a company are able to quickly identify the types of tasks being handled by each committee, as well where bottlenecks may be occurring. It also assists in the streamlining collaboration between multiple committees, guaranteeing that the chain of command and status of each issue remains visible at all times.