Wednesday, September 30, 2020

Performance Checkpoints in the Boardroom

Corporate governance at the board level indicates relationships with the management and the variety of stakeholders. If all these parties would perform to the vision and mission of the organization, it would increase the multithread performance significantly. 

With the high velocity and fierce competition, there is no doubt that the board only fulfills its role to shareholders and the management team when it is focused on performance. At the board level, it is transformational to “step outside” of the business system for having different perspectives to gain an in-depth understanding of the business dynamics, monitor the multitude of performance, and guide business transformation smoothly.

Investment Performance: The corporate boards oversee strategies, the strategy is nothing but the answer to the question where the capital and resources should be allocated to get the max leverage for the advancement. So the BoDs need to review important capital allocation and monitor the important investment performance. In the board meetings, the focus point should shift to assess whether the business improvement is the right investment to be done in the first place, which business investment should provide the greatest return; and which should be invested in the future. Applying the right investment procedures and policies allows the company to create a realistic budget with few surprises, and keep developing the best practices to adapt to “continuous changes.” They should also continue to review the ROIs of existing investment, make the evaluation based on financial metrics, and project future revenue, customer satisfaction, or employee engagement.

Return on Investment should be expanded into a broader perspective. The value proposition needs to be an overall measurement based on the combination of cost, schedule, quality, performance, and satisfaction of the customer, users, and stakeholders. Business management is able to convey a data-based presentation to the boards in looking and appreciating the strategic value of the investment; they are also able to make a calculated estimation of the loss if the investment fails to achieve the strategy. Or even more specifically, identify specific measurable results from the investment, the delivery timeline, and the specific methodology to be used to measure the results. Without well-defined measurement, it’s hard to tell whether attempted improvements make the situation better or worse. The corporate board’s oversight and scrutiny of business investment help to ensure the expected return on investment.

Business performance: Corporate boards need to make a fair assessment and get objective perspectives on business performance, and gain an in-depth understanding of what’s blocking achievements, targets. Corporate management is more interested in the business’s overall performance. The top metrics which are of interest to top executives and BoDs are ROI, ROE, RONA or business growth, etc. The measurements need to be an accurate reflection of the behavior the firm is looking to exhibit. Performance of the management team; and, that performance is not limited to financial performance, but also to the firm's creating value for employees and customers.

To enforce strategic decision effectiveness at the board level, it's important to analyze total cost, total value, and total impact in order to improve the success rate of strategy management. Valuation based on financial metrics and projections for future revenues, cash flows, and income. Make sure the executive team first understands what it needs to drive future business growth and improve cash flow and the overall success rate of strategy management. Business performance should be judged at the enterprise level considering the overall satisfaction over each combination of cost, schedule, people (customers, employees, and other stakeholders) satisfaction.

Board performance: The corporate board's role, in large part, is to make good decisions that enhance the value creation for the organization. They need to focus on their own performance in the boardroom. In reality, most Boards perhaps find it hard to focus on performance, because it deals with a lot of uncertainty and unknown. They have to spread their time and resources very thin. Ideally, some suggest Boards should spend 80% on the performance-related activities, appromixitally, 20% the present (Operational and tactical), and 60% in the future (performance and potential)

Corporate boards need to evaluate their performance at both the collective and individual levels. For the majority of the time, the board agenda should be focused on the performance progress toward the goals, targets, schedules, etc., of the value maximization planning. Much of the boarding process or deep boardroom discussions around the business progress is the process that facilitates high-level management accountability and performance improvement.

Governance involves the alignment of interests among the stakeholders. Effective performance monitoring and governance practices require a strong commitment to being knowledgeable, independent, and forward-thinking. Corporate governance at the board level indicates relationships with the management and the variety of stakeholders. If all these parties would perform to the vision and mission of the organization, it would increase the multithread performance significantly.


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