Tuesday, June 12, 2018

The Digital Boardroom Guidance: The Three Legs of the Stool

High effective boards set digital principles, oversee strategic alignment, optimize risk management, accelerate business performance, and improve organizational maturity.

The key dimensions of corporate board’s responsibilities include, but not limited to strategy oversight, policy-making, performance monitoring, and executive advising - understanding accountability of business environment - regulatory, shareholder, etc. Highly effective boards can sense emergent opportunities and predict potential risks, prioritize and put significant efforts into governance and risk management, to steer the business ship in the right direction and achieve high-performance business results.

Ensure the strategic alignment of business goals, portfolio management, and performance measurement systems throughout the organization: Effective strategy oversight requires sincere commitment to be independent, insightful and timely. Nowadays, with the exponential growth of information, there is the insight underneath and there are a lot of things board directors need to catch, such as the interconnectivity between the business parts and the whole, new industry standard & regulation or the emerging technology trends, etc. Strategic partnership and alignment with business goals need to remain at the forefront of the board going forward. It means about business working as a whole to improve communication, harness partnership, demonstrate business value and engage employees. The board should ask the management questions such as: How do you actually align the organization to best carry out the vision? Are your people acting in a way that is consistent with the strategy? Are your processes functioning to deliver consistent results with the strategic intent? Are your processes, technology, and people integrated to ensure a consistent ability to deliver customer value as defined in the strategy? Etc. If they can answer those questions with "yes," the business achieves strategic alignment. The boardroom sponsorship, "executive management buy-in" or "executive management's unconditional collaboration" are all critical to achieving the seamless strategic alignment.

Evaluate and control risks, and conduct scenario planning when necessary: Risk oversight is the critical responsibility of the board. Scenario planning is an important technique for managing risks. One common practice is to identify measures that provide insight into whether an identified risk is becoming real and to meter any investment to deal with it based on the monitored results. What valuable about even quick high-level scenario planning is that you can often establish a set of What-if scenarios with agreed-to response plans in place. Considering each risk in terms of its immediacy, impact on the organization and the organization’s ability to absorb the shock and survive to repair itself in the worst case scenario. This will allow your organization to gain time to prepare, rather than relying on a reaction approach or waiting to develop a strategy after monitoring indicates the disruption is in progress. The board should ask the management: Is your market sector volatile or relative stable? Does it have many innovators who are also big and aggressive? Who plays the biggest part in the sector, competitor, customer or the policy maker? And then, the board and management can work on what strategies or small low-risk steps you might take now that can better position you to more quickly identify or turn the disruption into your advance. Through logical scenario planning, large investments could be avoided if they ultimately turn out to be unnecessary.

Establish policy, procedures, help to ensure understanding, ownership, and accountability by management and employees: Though the board needs to do their homework, they must specify the role in essential functions such as strategy management, finance/budgeting, IT management, talent management, etc. Setting good policies and procedures to improve business effectiveness is a judicious duty of the boardroom. The principles or policies as a compass will guide all levels of the organization to operate more like the human body operates with the cells (employees) and organs (functions) of the organization being able to make decisions cohesively in a very organic relationship with its environment, to achieve common goals. Digital organizations are flatter, with an “every individual as a stakeholder” culture. Behaving accountable is the result of a culture with values that need to be organized and nurtured. The leaders and managers should be more interested in finding "causes," not interested in assigning blame, in order to build a culture of accountability.

In a world of well-defined problems, directors are required to exercise leadership influence over volatility, manage uncertainty, simplify complexity, resolve ambiguity, high effective boards set the digital principles, oversee strategic alignment, optimize risk management, accelerate business performance, and improve organizational maturity.


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