Wednesday, March 24, 2021

Governance on Governance of BoD

Digital board directors not only need to be forward-thinking, but they also have to be further looking, think longer term, guide the executive team in the right direction. 

A corporate board of directors' duty to shareholders encompasses the need to effectively manage stakeholder issues and values so they do not become a risk to shareholder values. And shareholder values do not begin and end with financial profit. Smart corporations and shareholders know that focusing only on short-term economics can lead to negative values that may outweigh finances in the long-term. 

Corporate boards as the governance body need to oversee significant issues of the business. Governance is a sophisticated process that if well executed, will lead the business to reach the next level of business maturity.

Innovation-on-innovation: Corporate boards oversee business strategies which includes innovation strategy as an integral component. A comprehensive innovation strategy is a requirement to value-driven innovation by creating a clear line of sight between the enterprise vision and how to build a balanced portfolio with mixed breakthrough innovation and incremental innovation, hard innovation and soft innovation. A good innovation strategy allows you a number of things such as identifying interconnections and interdependencies, understanding flows or the lack of them, spotting business opportunities or risks, prioritizing and making choices, taking actions or formulating creative or unconventional solutions to solve problems. So the corporate board’s strategic oversight directly impacts on the innovation effectiveness and maturity.

Their “innovation on innovation” efforts include such as scrutinizing the principles & practices of innovation management, reviewing business investment scenarios which can dramatically and positively distinguish the success of the organization for decades to come, etc. What should the innovation effort focus on - defending the core, penetrating the adjacencies, or entering the white space and how the resources will be balanced across these domains? How can the company make it work - through internal development or organic growth? Etc.

The innovation-driven organization with the strategic corporate board oversight can open up opportunities and identify risks, hold all innovation initiatives and deploy a range of different management methodologies and technologies and tailor their own circumstances for developing the fitting innovation models. It also continues to develop the best and next innovation practices involving streamlining idea flow, providing anchors to explore possibilities, making good policies to encourage idea-sharing, developing sourcing practices, and scale up.

Information on information:
In the digital age with exponential growth of information, any business can be at risk for survival at any minute due to continuous digital disruptions and “VUCA” digital new normal. Information and decision-making are intimately connected and interdependent. In fact, information quality directly decides the quality of decision as well as the maturity of the organizational management. Better information allows leaders at all levels to understand where they stand and what is required as a team to enhance business operations in lieu of the remaining status quo. Instead of being fed by management with certain information of their work, BoDs need to feel more comfortable swimming in the information ocean and capturing unique insight to guide their organization through a change journey.

Also, to improve the governance maturity, corporate boards need to oversee information strategy and evaluate the effectiveness of information management. The corporate board’s information capital oversight helps business shareholders feel more comfortable with continually investing in these “soft assets” by enforcing information integrity, availability, and confidentiality. A good information strategy is important to help prioritize based on the business needs, communicate extensively, set guidelines, enable executives to make information-based decisions and build up an analytics-driven culture to improve organizational decision maturity.

Governance on governance: The corporate board oversees risk/governance. Corporate governance helps to manage collaborative business results and best practices that view the organizational objectives holistically with the correct strategy lenses/focus. A good governance standard provides a common corporate "language" and work instructions to decide and take actions for either grasping opportunities or managing risks. The rule of thumb is that: Good governance must create excellent performance, especially for long-term business growth. Without effective GRC discipline, the business will face significant risk for surviving, and opportunities which it creates cannot be properly transferred into multidimensional business value. Every organization has a set of governance rules, processes, and practices. With increasing pace of changes, some of them are perhaps outdated and stifle innovation. Thus, governance on the board level involves updating rules, optimizing processes, or developing/scaling new governance practices, etc.

Fundamentally a board has two responsibilities: Deciding what the expectations of management are and deciding whether management is achieving expectations. Good governance must create excellent performance, especially for long-term business growth. For all companies, the definition of the roles, and drivers to the corporate boards and committees are essential to lead and to maintain a productive relationship with the executives. The point is how to effectively influence, not command & control. Different organizations have their own leadership structures and strengths. The effective corporate board needs to assess practicality via skiing a set of questions: What is the vision & mission we intend to accomplish? What would be the most effective leadership structure for accomplishing that? What structure would ensure the organization's leaders are actively ensuring the organization is walking the talk of its values? What structures would ensure the leaders can actively connect with others who are seeking to accomplish the same goals? What structures would ensure active leadership in developing and monitoring programs to accomplish the mission? Etc.

Digital board directors not only need to be forward-thinking, but they also have to be further looking, think longer term, guide the executive team in the right direction. The classic linear management practices based on reductionist logic are simply not sufficient to manage the nonlinear digital businesses decision-making optimization. The effective governance disciplines should complement business management practice in order to navigate transformation confidently and drive changes effortlessly. The directorship in any organization must be able to make influence from mindset to behavior and evolve to what is needed next for radical changes, and steer the organization in the right direction. 


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