Sports Direct is facing heavy criticism at the moment after its board was labelled “dysfunctional” by the Institute of Directors.

It was criticised for seemingly failing to provide a sufficient check on the powers of founder and executive director Mike Ashley.

Whether it is major decisions being made without board level consultation until the very last minute, an atypical board structure or other unusual governance aspects, there is much that makes observers dubious about what is really going on.

While the Sports Direct board may be an extreme example, there are a frightening number of cases of board dysfunction happening right now.

The effectiveness of a board and its members can make or break a business, so is it time to ask how functional your own board is in making good decisions?

Here are six aspects to consider.

Do you have the right people on your Board?

Make sure you have the right experience in key places. Recruit the best people for each role, whether executive and non-executive. Quality people with experience will significantly enhance a board’s ability to make good decisions.

Don’t just recruit from within because it’s the easiest thing to do. And don’t leave the wrong people in post just because it’s hard to deal with the issue. 

Do you have access to good information?

The board needs to understand what’s really going on in the business. Quality information - in the form of business data, but also gained through conversation - enables insight to be built your insight. That enables you to clearly identify issues early and to play your part in making better decisions.

Do you have a clear strategy?

Aligning on a vision and strategy is fundamental. It provides a compass for the board’s meetings but, if done well, it also provides motivation and direction to everyone in the business.

Is your board dynamic effective?

Often the dynamic in a board significantly affects how decisions are made. The key is to develop openness - openness to speak up and openness to challenge.

In groups, it’s often easy not to be truly open with your thinking. You may worry about rocking the boat, offending others, speaking too much, saying something nonsensical, or being alone in your view. As a result, you could be weak in standing up for what you believe.

This is particularly common where there is a strong character as a chief executive or chair, who has significant power and authority.

But without challenge, there is a lack of debate, which reduces the effectiveness of decisions made.

Are you transparent?

Trust is a vital value in today’s society. When people trust an organisation they buy from it, they recommend it, they work hard for it and buy its shares.

Transparency is a key element in the journey of creating trust. Be transparent with shareholders, with board members, with employees.

Be transparent about motives, plans and feelings.

And when you can’t be transparent, be transparent about the fact you can’t be transparent.

Are you balancing ambition with prudence?

Being ambitious is good and growing fast is great. But make sure you understand the level of capability and how much resource you have to deliver on your boldness. Challenge people to strive hard, but don’t break them.

The real conundrum for a board is how to deliver on this fine balance – meeting the needs of shareholders in a manner that is sustainable and also good for employees, customers and society. 

  • Martin Palethorpe is a senior executive coach specialising in retail at The Pragma Group. You can follow him on Twitter @mpalethorpe