Thursday, July 15, 2021

Boardroom Next Practices

At the board level, creating trends is about steering direction and anticipating changes.

Due to the “VUCA” characteristics -complexity, uncertainty, ambiguity and velocity of the digital era, the directorship in any organization becomes more critical and challenging. Governance involves the alignment of interests among the stakeholders and steers the organization in the right direction. 

Effective governance practices in the boardroom require a strong commitment to being forward-thinking, innovative, knowledgeable, and independent.

Practice systematic analysis and create more updated processes to smoothen the decision-making scenario: Corporate board’s role, in large part, is to make sound judgment and strategic decisions that enhance the value creation for their organization. Top leaders like BoDs look into an unknown future and attempt to define the landscape with its risks and opportunities. Decisions are necessary as a result of limited resources in time, knowledge, capital, and people, ineffective decisions in the boardroom perhaps cause the chain of issues top-down from management confusion to employee disengagement. Traditional corporate boards are compliance driven; contemporary boards need to spread their time scientifically on the breadth of critical issues to unlock business performance & potential. Therefore, it’s a good practice for them to do systematic analysis, reengineering the board’s governance disciplines by updating processes, rejuvenating fresh energy, and breaking down varying bottlenecks to smoothen decision-making scenarios.

Hard issues such as out of date information, process, procedure, practice or soft ones like silo, culture, or leadership style, etc, are all barriers to decision-effectiveness. As to judgement, virtually nothing is certain in business, so judgement must be based on the best information available, well processed and interpreted accurately. In reality though, often the current governance models can't enable board directors to get enough quality information to hear the whole story. To improve the board leadership maturity, the important business processes need to be reviewed or refined regularly, so the dysfunctional symbols of processes are detected and optimized on time. The entire decision-making processes include understanding the core issues, engaging key stakeholders, ensuring effective data-based communication, assessing alternatives, developing consensus, advising, and following up periodically.

Practice the balanced leadership style by “listening & telling,” “pushing & pulling,” “performance & compliance,” “art and science”: Compared to the previous eras, the fast-paced changes and overwhelming growth of information bring both significant opportunities for business growth and unprecedented risks businesses have to face. It presents a very real risk that governance as a discipline will begin to lose focus of its prime purpose if it does not address strategically important emerging issues. To improve leadership effectiveness, it’s about harmony. To achieve harmony, it’s all about balance. Corporate boards advocate open leadership, listen to diverse viewpoints, provide constructive feedback to the management and each other and set the tone for building the culture of learning and continuous improvement.

Governance is both art and science. Vision and communication are dual forces to make board directors “round global ambassadors,” who can share their perspectives of business growth, appreciate, facilitate, and orchestrate the multitude of differences in global context, connect interdisciplinary dots, inspire and nurture the evolution of businesses, walk the talk when it comes to innovation as well as fosters the global-scope digital transformation. Besides compliance, the "performance” responsibility of BoDs should be setting principles for “pulling,” and “pushing” the right button on management for improving performance management effectiveness, focused on the maximization of the business capital allocation and improvement of the shareholder’s multidimensional value, to ensure the best fit between (short term) profitability (shareholders) and long-term sustainability (stakeholders: employees, government, society).

The corporate board works closely with management to set good policies for enabling changes and encouraging innovation: Governance sets constraints for innovation and improves its effectiveness. Do not see the Board as interfering, but as supporting and encouraging, and holding the company accountable for sustained innovation performance. Corporate boards take control of the softer issues such as setting policy and culture tones, strategic thinking, setting risk appetite, etc. So what could be seen as a fair determinant is to view innovation as risk and to assess the risk based on projections of success and to approve/disapprove based on the board's comfort level; and to guide the senior management for improving innovation success rate.

The contemporary corporate boards can inspire, innovate, improve, interact, interpret, influence, exemplify, and orchestrate change. No longer are boards sitting in a room and just voting on various policies, it is one of the requirements of the Board members to participate, or even lead, in constantly suggesting areas of change or innovation. Cultural change in an organization begins with the involvement of the top leadership and their commitment to change. Tie innovations and the innovative culture to the organization's strategy. This ensures that innovations will be supported by management and by all stakeholders. The board needs to review executive level innovation scoreboard with important KPIs, to keep track of innovation progress and provide invaluable feedback, to justify the investment and amplify innovation effect.

At the board level, creating trends is about steering direction and anticipating changes. The corporate board directors need to keep improving their own leadership quality, show learning plasticity, continuously seek new knowledge, solicit direct feedback and constructive criticism to improve their leadership maturity.


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