The “Acid Test” in Corporate Boardroom

The corporate board helps to oversee a performance management system that encourages responsible communication, enhances open door listening, enforces accountability, improves decision-making effectiveness, and harnesses process transparency.

The increasing speed of change and ever-evolving digital dynamic brought much-needed oversight and additional rigor to the leadership effectiveness in the boardroom at many forward-looking companies across the industrial sectors.

The corporate board as one of the top leadership pillars plays a significant role in steering the business in the right direction. Digital leadership is the adventure to explore unknown, and have confidence and insight for taking the right path of reaching the destination. Here is a set of “acid tests” to assess the corporate board leadership maturity.

Decision effectiveness: The corporate board's role, in large part, is to make sound judgments and good decisions that enhance the value creation for the organization. "Group-thinking" and lack of courage to ask tough or strategic questions is the chief weakness on Boards today. The common mistakes made by corporate boards or executives include making business assumptions, lack of communication around assumptions, expectations, knowledge, and speculation. If everyone thinks the same, you do not need board governance.

To close blind spots in decision making, the corporate board needs diversity, or even more crucially, cognitive differences, to provide a perspective that goes beyond the gaps in board discussion and close gaps in decision-making. If Boards of Directors do not ask the unaskable in time to prevent a crisis, who will? Having different views and opinions does not mean a lack of teamwork. It is how the differences are conducted that are the real test of the board. As a corporate brand, reputation, culture, knowledge, and risk management are all boardroom concerns, and it is the responsibility of the board to steer the business in the right direction.

Transparency: Business transparency is to transform the organization into the system approach, not through the command-control hierarchy only. Transparency is operating in such a way that it is easy for others to see what actions are performed. At the big table, nothing should be personal, it's all about how to monitor the business performance, drive changes, optimize business processes, improve knowledge worker productivity, verify strategic plan effectiveness, and approach GRC in a holistic way.

The higher the complexity of the organization and the complexity of the environment in which it is operated, the higher the requirement for connectivity and transparency in order to meet performance baselines and generate value. Corporate governance has a great impact on corporate performance, not through governance structure directly, but through good governance behavior.

Accountability: Accountability is to be wise and brave enough as a leader to remove and change in time before the problem becomes overwhelming. The corporate board plays a significant role in taking ultimate accountability to shareholders and the account for the performance and conformance of the organization, for the effectiveness of the business direction, the oversight provided, and for the timeliness and caliber of actions taken by the governing body.

The corporate board sets the tone to enforce accountability. Teams of any kind will follow only if the leader is accountable. Leadership and accountability must go hand in hand. To step further, accountability is not only to accept the responsibility for what you do, the actions or behaviors, but also what you say, the knowledge sharing or feedback giving. Digital leaders with accountability have the right dose of risk appetite and a good attitude to manage risks in a structural way and make a shift from risk avoidance to risk mitigation to risk intelligence.

The corporate board sets digital principles and policies, shapes advanced mindsets, focuses on what the needs to look like, alongside the impetus and sense of urgency, and promote certain activities and behaviors toward the destination steadfastly.

The corporate board helps to oversee a performance management system that encourages responsible communication, enhances open door listening, enforces accountability, improves decision-making effectiveness, and harnesses process transparency. They have to keep evolving and gaining new and wider views, discovering unexpected connections between the business and its rich environment, and shape the future together for reaching the next level of organizational maturity.

Posted in: Board Room,Digital Fit