Decision papers are central to an organisation’s success. Why? Because, in the words of Wharton Professor Michael Useem, they help boards and committees to understand, shape, and make “the choices that shape, for good or ill, a company’s future.”
In this guide, we explore what good looks like and how to achieve it.
What powers good decision-making at board level?
“Contrary to what one might assume, good analysis in the hands of managers who have good judgment won’t naturally yield good decisions. The third ingredient—the process—is also crucial.”
This was the conclusion of a McKinsey study that found that it’s not the volume of research we do, or how much time we spend on it, that determines if a decision will be a good or bad one. Instead, what matters is the quality of the process we follow to reach the decision. And by a huge margin: according to the research, “process mattered more than analysis—by a factor of six.”
The process around decision-making is just as important as the information that goes into making the decision.”
Dame Fiona Reynolds, Master, Emmanuel College, Cambridge
And yet, our experience reviewing thousands of board packs — supported by what we’ve heard from hundreds of board and committee members — indicates that few of the decision papers that come up to leaders demonstrate a robust decision-making process. Are these reports detailed and well-researched? Yes. But do they give enough insight into the process behind them to instil the confidence required by directors? Rarely.
The good news is that fixing this is simple and it’s one of the easiest ways to improve your organisation’s decision-making — as long as you use the right structure.
As non-executive, you’re never going to have as good an understanding of the topic at hand as the management team. But you need the confidence that they’ve done their work thoroughly — and a decision paper should give you that confidence.”
Roger Goodchild, Head of Corporate Development, Schroders
What do good decision papers look like?
So, how do you take your readers through your decision-making process, demonstrate its cogency, and build the board’s confidence in your proposal — all without drowning them in detail? We recommend answering the following questions:
1. What am I asking of you?
Decisions rarely happen in the span of one single conversation — they usually get discussed several times and at several stages, which makes it easy to lose your readers. So, be explicit about what you need back, and state what purpose you’re sharing the information for. Is this:
- A “visibility” paper — you’re sharing information to prepare your board or committee for a future discussion or decision?
- An “input” paper — you want them to have a discussion?
- Or a “decision” paper — you want them to make a decision?
Slides are useful in the appendix, but they don’t amount to a report. If you cannot put into words what’s in your presentation, then you haven’t really thought it through.”
Carole Piwnica, NED, Sanofi
2. What is the need or opportunity, and why now?
Start by explaining to your audience why this decision is required in the first place — and why it should be approved now and not in six months’ time.
To put this in context, explain how the decision fits within the organisation’s overall strategy. This will help your readers — especially the nonexecutive directors — understand the importance of your proposal, while also demonstrating that you all are on the same page.
Many decision papers go wrong at the outset, because there’s no clarity — for the writer and, sometimes, even for the board — of what the organisation’s strategy is. And if you don’t know that, then your recommendations are guesses at best.”
Nigel Payne, Chair, Gateley
3. What do we propose to do and why?
Next, lay out your proposal. Be sure to demonstrate that you’ve followed a logical and consistent rationale, outline the key aspects of the business case (forecast costs and benefits), and be open about the risks and mitigations. You must also show that you’ve considered the impact of the decision on all relevant stakeholders and over the long term.
Here, a few essential things that board members expect to see tend to go missing, so check that your papers account for the following:
Assumptions
Where are your forecasts coming from, and what makes them credible? Don’t go too deep into the details but share your reasoning so that your readers can see if they reach the same conclusions.
Esmond Kensington, head of strategy and chief of staff at HSBC UK, sums it up this way: “As a board member, you’re not here to challenge the numbers; you’re here to challenge the drivers behind these numbers. I want to know and discuss the underlying assumptions behind a proposal — not dive into a spreadsheet.”
Risks
No decision is risk-free, so what should board members be worried about? And what can be done about it?
According to Schroders’ Head of Corporate Development Roger Goodchild, you’ll be helping your proposal by addressing potential struggles from the start: “Nothing happens without risk in the business world, so present: risk; mitigation; likely outcome; potential upside and downside. It’s about giving the board a good balance.”
People
If the board decides to go ahead, who’ll be responsible for making it happen, and why should directors trust them to deliver?
Even good decisions will lead to failure if the team you give the job to isn’t the right one for that task. Yet, few papers cover the human capital side of things — the culture and the people dynamics that may make or break your plans,” notes Gateley Chair Nigel Payne.
Competition
And lastly, what are others in your industry doing, and how does it influence the choices being made?
For Sanofi Non-Executive Director Carole Piwnica, “Too few papers address the key question of ‘What are our competitors doing?’ Organisations have a natural tendency to focus on themselves, but good decisions can’t be made in a vacuum.”
Process versus crisis: what those supporting the NHS did when Covid-19 hit
In a crisis, when time is of the essence and boards and committees are meeting more frequently, it’s easy to start overlooking these points in decision papers. But many boards ultimately discover that this is “a false economy”, according to NHS Providers CEO Chris Hopson, who led the membership organisation through the Covid-19 pandemic.
Instead, he recommends staying the course: “The role of the board in major decisions becomes even more important at points when executive teams are moving at high speed and have less time to consider the full implications of decisions or the full range of options available. Sticking to the discipline of paper authors setting out their decision-making process feels particularly important in that context.”
“It’s not usually the data analysis or option evaluation that need challenging. It’s often the mental paradigm or strategic framework that the paper author is adopting where challenge is most needed.”
Chris Hopson, CEO, NHS Providers
4. What options did we consider?
It can be tempting to only share your recommendation. But, to fulfil their duties, board and committee members need to understand what other options have been considered and the reasons for their rejection.
Mentioning the possibilities of doing nothing, rejecting the proposal, or pushing it down the road might feel risky — but if you don’t confront these options head-on, your directors won’t fully understand the implications.
That said, don’t dedicate the bulk of your report to alternatives. You just need to set the scene. As Dame Fiona Reynolds, master of Emmanuel College in Cambridge, puts it, “Options exist to clarify the argument, not to give the board a free choice. It’s about understanding the different routes available to achieve an agreed goal.”
Directors who have been on both sides of the executive/non-executive fence know the tricks that some board papers can pull. Omissions and gaps are usually a big giveaway.”
Roger Goodchild, Head of Corporate Development, Schroders
5. What do we need to do next to make progress?
Finally, because making a decision is quite a different thing from making the decision happen, list the steps involved and what financial and human resources are required to implement them.
How long should a board decision paper be?
Remember: you want to demonstrate to your readers the quality of your thinking (that is, how you reached your proposed option), not the quantity of research and data that support it — so keep it brief! Add to this that your report will be one of many in a pack, and an effective decision paper should be no more than four-pages long — plus a one-page executive summary.
My rule of thumb: two pages of words. Four is acceptable in some cases, eight is definitely too much. Supporting exhibits may go up to 20 pages — but only on the condition that they aren’t a necessary read to understand the actual paper.”
Esmond Kensington, Head of Strategy and Chief of Staff, HSBC UK
Decision paper checklist
To build the board’s confidence in your decision-making process, remember to consider the following:
In your decision paper
- What stage of the decision-making lifecycle does your proposal live at (visibility, input, decision)?
- How does the option put forward support your overall strategy?
- What are the high-level drivers behind your forecasts?
- What “bad” could come alongside the “good” if your recommendations are followed?
- Who will carry out the plans and what makes them the right people for the task?
- What are your competitors doing?
- What would be the consequences of doing nothing or delaying making the decision?
In your appendix
- What numbers, trends, or developments support the assumptions made in your decision paper?
- Is there anything your readers need to know that shouldn’t be hidden in the appendix?
How do you write an effective decision paper?
When it comes to decision papers, there’s no one-size-fits-all all. Nonetheless, using a consistent framework is key to providing a sound starting point and will encourage your organisation’s leaders to think more deeply about the choices they’re asking their board and committees to shape and make.
Want to see how our technology and advisory services can help you do just that — and ensure that all decision papers, as well as every other paper, hit the mark? Here’s how to supercharge your board with Board Intelligence.
Contributors
Graham Donoghue
Graham is CEO of Sykes Cottages and a founding member of PEPtalks. Previously, he held senior roles at Moneysupermarket.com and served as a non-executive director at Brightside Insurance.
Roger Goodchild
Roger is head of corporate development at Schroders, where he heads M&A globally. He also serves as a NED of Benchmark Capital.
Chris Hopson
Chris is chief executive of NHS Providers. Previously, he held senior positions at HMRC and worked in the private sector with Granada Media Group as corporate affairs director and latterly managing director for e-learning business Result.
Esmond Kensington
Esmond serves as chief of staff, head of strategy & planning of HSBC UK and is a board member for the Financial Services Skills Commission. Previously, he held senior positions at RBS, and has also worked in early-stage venture capital and consulting.
Nigel Payne
Nigel currently serves as chair of Gateley, Braemar Shipping Services, and Green Man Gaming Holdings, and is a NED of Ascot Racecourse Betting & Gaming, Sun international, and BlueBet. Previously, he was CEO of Sportingbet.
Carole Piwnica
Carole is a NED and a member of the remunerations committee of Sanofi, and serves on both the supervisory board and the compensations and nominations committee of Rothschild & Co. Prior to this, Carole sat on the boards of Eutelsat, Amyris, Dairy Crest, and Aviva.
Dame Fiona Reynolds
Dame Fiona is a trustee of Grosvenor Estate and chair of the National Audit Office. Previously, she served as director of the Council for the Protection of Rural England, director-general of The National Trust, and as master of Emmanuel College, Cambridge.