The hidden cost of board meetings

Is any meeting really worth $325,000 and over 100 days of preparation?

You would think not. But this is the typical cost of a single board meeting for a large listed company in a regulated sector like financial services.

While that may be an extreme example, the cost of preparing papers for board meetings is significant for all organizations, regardless of their size or sector. Even smaller charities will typically devote 20–25 days to the task of meeting preparation.

These are some of the findings of a new Board Reporting Calculator developed by Board Intelligence and ICSA: The Governance Institute. The calculator has been made available to help organizations quantify the time and effort they put into briefing the board.

Calculating your board meeting costs

The cost calculator is built around the common processes involved in producing and reading board packs: 

• Writing board and committee papers, including briefing writers and reviewing drafts.
• Compiling and distributing those papers.
• The time the board and committee members spend reading those papers.

Users of the calculator are asked to input some basic information about their organization:

• The number of boards and committees and how often they meet, which affects all three components.
• The number of members on the boards and committees, which affects the time and cost of distributing and reading papers.
• The size of the organization, which affects the length and complexity of the board pack and the time and costs associated with writing and reviewing the papers.
• Whether the organization is heavily regulated, which has a similar impact to its size.
• What sector the organization is in, which, together with its size, affects the salary and associated costs of the people involved in the process.
• The method by which the papers are distributed, which affects the costs of that part of the process.

With this information, the model makes a series of calculations and produces two figures: one showing the total number of days involved and the other the associated cost. Both are presented as ranges. (While the assumptions underlying the figures have been rigorously researched and tested, it would be misleading to say they are accurate down to the last minute or cent.)

What about large organizations?

When testing out the calculator with some ICSA members and other volunteers, we found that the time and costs of board preparation were much higher for larger or more heavily regulated organizations.

This is hardly surprising. Typically, these organizations have longer board packs containing more individual papers than smaller or more lightly regulated companies. A greater proportion of the papers are complex and take longer to prepare. Not only that, papers usually take longer to produce because there tend to be more people involved in the process and more review stages. The salary and related costs of involving senior management in writing and reviewing papers can also have a significant multiplier effect on the total costs, especially in large listed companies.

While the absolute numbers for large organizations might dwarf those for smaller companies, this is not just a big company issue. For example, spending 20–25 days and $5–6,000 per meeting can significantly drain the resources of a small charity reliant on volunteers and donors. 

You could argue that this time and money is well spent if it ensures that the board receives timely and relevant advice and information, enabling better-quality decisions that secure the organization's long-term future.

But too often, it seems, that isn’t what happens.

The challenge of board effectiveness

Research by ICSA and Board Intelligence into the effectiveness of board reporting has found that most organizations of all sizes and sectors believe that their board packs are too long, too backward-looking, too focused on operational rather than strategic issues, and too focused on internal rather than external developments.

Meanwhile, earlier research by Board Intelligence found that directors allocate between three and four hours to reading their board papers, regardless of the length of the board pack.

The data on the quantity and quality of board packs suggests that many organizations are spending too long and too much on something that doesn’t add the value it should.

By highlighting the hidden costs of preparing board papers, we hope the evidence provided by the cost calculator can help create a mandate for change where necessary. Later in the year, we will follow this with some guidance and a self-assessment tool that will help organizations implement that change.

Curious to see what the hidden cost of board reporting is at your organization? Use the link below.