Governance is indeed about how well an organization is being run and if set up right, it should adequately oversee the achievement of the vision, mission, and objectives.
Due to the “VUCA” characteristics - complexity, uncertainty, ambiguity, and velocity of the digital era, the directorship in any organization must have abilities for adapting to changes, being able to advise, inspire and motivate a group of people toward accomplishing shared visions and strategic goals. The fundamental dimensions of the corporate board’s responsibilities include, but not limited to strategy oversight, policy-making, performance monitoring, and executive advising. Here are five building blocks of the boardroom competency.
Strategic guidance competency: Fundamentally, leadership is about the future and direction - how to navigate their organization in the right direction. Top directorship roles such as board directors are supposed to be the guiding force in the enterprise, as the steering wheel, envisioning and leading the business in the right direction. The most important function of any board is the oversight of holistic strategy management through focused leadership. The BoDs guidance competency is based on their navigation capabilities such as metacognition, strategic reasoning, and adaptability, etc. The board’s strategic oversight is critical to identify and strengthen the weakest link in strategy management and ensure the business success for the long run. More specifically, the logical scenario of the boardroom guidance is to participate in strategy making and oversight, make good business policies, offer further constraint or guidance to the implementation of the strategy and then, monitor business performance across all domains of interest.
Risk governance competency: The risk is the uncertainty associated with doing business, and compliance is the process of protecting your business from that risk. Risk governance is the guiding force behind risk management, ensuring boundaries are appropriately set and adhered to. If a board is to fulfill its fiduciary responsibilities to its stakeholders, it needs to ensure that management has put in place an effective risk-management process, and the directors assess whether risks are undertaken and managed consistently with the established risk appetite. Technically, the business framework "rules of engagement" are set out by the members of the board, stakeholders, and investors that drive business strategy, business value, corporate responsibility, and managed risk - ensuring that business risks are identified, minimized and controlled effectively. Statistically, the organizations with greater governance discipline usually result in significantly better performance than their competitors, and they are doing better in well-embedding risk management into key business processes seamlessly.
Decision competency: Digital makes a significant impact on every aspect of the business from people, process to technology, both horizontally and vertically. But the digital dynamic creates many blind spots generates or even enlarge gaps of effective decision-making due to unprecedented uncertainty and high velocity. In order to make strategic decisions effectively, digital BoDs should accommodate the value of alternative perspectives, respect diverse opinions, assess and converge the diverse thoughts into sound judgments and making wise decisions. Maintaining the great board dynamic can help to transform the emotional board to an effective board via self-checking: Does this decision make sense? Can the person identify if there are insufficient "facts" to allow a conclusion to be formed? Are BoDs willing to change their mind when faced with new and relevant facts? Does the BoD have a track record of getting it right most of the time? Decision competency directly impacts problem-solving competency. Board directors should have sharp eyes to identify problems and unique insight to pinpoint the root causes.
Learning competency: With overwhelming growth of information and frequent changes, BoDs need to have sufficient knowledge to understand the digital business ecosystem, but also have the collective insight to present today and foresee the future. Collectively, boards are more effective with a mix of specialized generalists who can drill down in some areas and experts with the bandwidth and experience to see beyond their silos and all be able to communicate with each other seamlessly and complement each other’s expertise to avoid groupthink, and bridge the multitude of gaps in the boardroom. The board’s learning competency directly impacts its governance effectiveness as well as the company’s learning competency. A learning organization is one in which leaders encourage learning-doing as the iterative continuum; the majority of the employees at all levels are open to new ideas, experimenting with new ways of doing things. Digital boards should set the tone for talent development and workforce management. The board’s oversight about the workforce helps to make the invisible business forces more visible and fine-tune them to unlock business potential.
Governance is indeed about how well an organization is being run and if set up right, it should adequately oversee the achievement of the vision, mission, and objectives. Building these crucial blocks of the boardroom competency helps to improve the board governance effectiveness and achieve a high level of organizational maturity.
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