Thursday, June 23, 2016

A Reflective Board

An effective and efficient board can reflect, identify and mind the gaps on their own boardroom turf.

Digital means change. The changes are touching every industry and activity, they have yet to produce a wave of response at board level as well. The contemporary corporate board as top leadership team plays a significant role in overseeing business strategy, making appropriate policies and exemplifying leadership effectiveness. Although the majority of BoDs are senior leaders with the industrial expertise and knowledge, in order to adapt to changes, they have to be in a continuous self-reflective mode to make an objective assessment of board competency, effectiveness, and performance.

Board competency: The board competency will directly impact business competency. The composition of Boards should reflect approximately the profile of the company' stakeholders: shareholders, employees, customers, and suppliers. The digital Board is responsible for ensuring an appropriate mix of skills, knowledge and experience are present or available for it to fulfill its function. High-competitive boards should look for people who have cognitive differences or unique strength as part of the mix of Board skills, for business growth and embrace business trends such as digitalization and globalization. There is a need for both Generalists and Specialists to be BoDs - the generalists can give an overview while the specialist can "drill down" into specific topics. It's all a matter of teamwork. There is much to be done in terms of having appropriate competencies around the board table to deal with all aspects of governance responsibility, including IT.

Board effectiveness: An effective and efficient Board can reflect, identify and mind the gaps on their own Board room turf: Such as purpose, culture, leadership, information, advice, debate, and self-renewal. The non-executive members should be selected for their ability and willingness to constructively challenge management and this is less likely to happen if they are related to, or are close pals of, the executive members. Self-reflection also helps the board to improve leadership effectiveness. Boards must set an example of leadership which permeates through the entire organization. How they do it or rather how each member of the board does it, depends on only one thing- individualism or collectivism nature. It is combining a range of value creating, motivating, value protecting and monitoring strategies rather than following best practice heuristics. A reflective board can leverage its own strength, tailor its own specific needs, and develop the next practices to digitize board room.

Board Learning agility: A reflective board can encourage each BoD to learn, contribute, and fulfill the purpose of participation. Board members should be joining the boards because they have the strong intent and learning agility to contribute to the maximization of the company's full potential and are unwilling to settle for anything less. They have a learning mind to absorb all necessary knowledge, abstract it into insight and capture the wisdom. Directors of the Board with insight have a responsibility and be more skillful to ask ‘right’ questions. They need to go beyond "understanding the strategy" to a deep dive into the businesses to further understanding the culture, business capability, and competency, etc. Only by doing this, can the board genuinely understand the value creation opportunities and risks available to the company which will then enable the board to engage with management in the development of a value maximization plan. A reflective board with learning agility then can guide the business, not to take the shortcut, but to steer in the right direction.

Governance is a sophisticated process that if well executed, will lead to better decisions. It will allow not only to keep the existing value but also to create new value for its shareholders. Therefore, a reflective board can examine the board composition, competency, and performance periodically, better adapt to changes, make a profound influence on business culture, exemplify leadership effectiveness, make continuous improvement, and experiment the next practices for digital transformation at the boardroom and beyond.


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