A Systematic Board

Building a high-effective board is not an easy task because the board plays a crucial role to direct the business in the right direction via dealing with a lot of uncertainty and unknowns.

The Board provides an “outside-in” view of businesses and multi-dimensional lenses to oversee and advise business strategy management and steer the business in the right direction. The important board activities include advising, monitoring, deliberation, moving the enterprise forward, ensuring the organization makes sense and on the right track to achieve business goals and fulfill the vision. How to run a systematic board and manage so many crucial activities in a structural way?

The systematic thinking about the board composition: The board as the top leadership team sets the sound digital leadership team for the entire business or even across the business ecosystem. The best fit for the board depends on the Board’s current makeup, culture, and which “gap” needs to be filled. A systematic board building, in fact, needs to have a heterogeneous team setting, to ensure an appropriate mix of skills, knowledge, and experience are present or available for it to fulfill its function. So the Board composition needs to embrace both cognitive differences, functional differences, and other experience/capability differences. The BoDs need to be diverse by industry background, mindsets, skill, experience level, and perspective for helping them close blind spots and practice the board duty in a systematic way. This diversity along with deep knowledge of the business will allow them to be real "thought partners" with senior management as they consider the long term goals beyond quarterly earnings. Statistically, the forward-thinking businesses with heterogeneous boards outperform organizations with homogeneous boards due to the unique insight and differentiated skills/capabilities they can bring in to improve decision maturity and leadership influence.

The systematic way to focus on performance without ignorance of compliance: Boards need to perform and conform at the same time, and they have to achieve both in a structural way. Because conformance without performance adds very little to the firm value, and performance without conformance is not sustainable. Conformance is about the bottom line of “Keep the Lights On,” and performance is about business growth and achievement. It is an almost universal finding that the Board spends too much time on compliance or operational issues at the expense of the future. Some suggest the Board should spend 20% of their time in the past (compliance), 20% in the present (operational and tactical) and 60% in the future. The real BoDs dilemma is that driving the business forward is extremely difficult. This means looking into an unknown future and attempting to define the landscape with its risks and opportunities. It also means taking control of the softer issues such as setting policy, strategic thinking, setting risk appetite, etc., and dealing with both hard matters and softer issues systematically. The Board needs to be engaged at the most senior levels to help influence and shape the business of the future.

The systematic way to monitor multifaceted business performance: The Board has to have a good understanding of the organization’s strategic direction and its strategic alternatives, as well as taking the systematic approach to keep track of the business performance. The business KPIs can be taken into general categories, such as business /stakeholder, operational industry.

While developing and implementing the KPIs, businesses always wanted a roll-up model around Finance (Top line to Bottom line across all segmented verticals). Customer (Customer satisfaction, loyalty). Operations (Strategies focused largely on IT, HR, Productive processes, GRC, etc.) Within each of these areas of accountability, there should be a considered set of KPIs that are identified as business orientated and outcome focused. The strategic scorecards can also provide a systematic view of covering capability building, a performance-based culture, organizational integration, and leadership development.

Building a high-effective board is not an easy task because the board plays a crucial role to direct the business in the right direction by dealing with a lot of uncertainty and unknowns. Hence, a digital-ready board has the advantage of pulling enough resources and pushing the business model of technology, trustworthiness, prepare and launch change, innovation, and mastering with digital fluency systematically.

Posted in: Board Room,Systems Wisdom