Wednesday, August 25, 2021

Variety of Criteria

BoD’s efforts on setting criteria to assess ideas, investment, as well as decisions help the management optimize processes, build an intelligent workforce, update methodology and practices to improve business agility and performance.

The corporate board as one of the most important governance bodies of the company involves the alignment of interests among the stakeholders, take the oversight of assessment - gauging conditions and choices, setting and reviewing criteria to evaluate ideas, assess decision effectiveness, and the overall investment portfolio potential/performance, to direct management towards good outcomes consistently.


Decision criteria oversight:
Businesses become over-complex, hyper-connected, extremely uncertain and ambiguous than ever, poor decision making at the strategic level sometimes cause varying serious issues from many perspectives. Thus, effective governance practices at the boardroom, such as decision oversight, including co-setting and reviewing decision-making criteria helps to improve decision competency of the corporation. There is fuzziness in the decision because there is fuzziness in conflicting criteria. The effectiveness of strategic decision making has to weigh in multiple factors and needs to search for profound business insight. Decision making becomes important and essential when there are multiple criteria; as in multi-objective optimization, and the decision changes according to which criteria have priority. Thus, board directors as decision assessors require a strong commitment to being knowledgeable, independent, and forward-thinking.

Improving decision quality is about reducing the uncertainties of the most variable elements; and estimates of future consequences of choosing various alternatives. The corporate board’s decision oversight verifies the integrity of the system prior to trusting decisions emanating from it, leverages variables and judges tradeoffs between choice criteria. Finding acceptable tradeoffs between these competing objectives; which at the very least is a sensitivity analysis of the optimization parameters. Improving decision cohesiveness at the varying layer of organizational hierarchy is about the boards setting good principles and recommending the right methodologies to enable different people to make information-based decisions effectively. Generally speaking, the corporate board’s decision oversight helps to optimize decision support processes and improve decision maturity of the organizations.

Idea evaluation criteria: Good idea evaluation is a critical part of successful new business development. The corporate board oversees the strategy, sets the priority to stay focused, identifies promising big ideas for investment that will accelerate bold change, and continues to adjust the strategy, to leverage growth potential. The BoDs can set good criteria for idea evaluation based on the clarified vision of their organization, the culture they would like to cultivate, as well as the new markets the companies intend to explore. The basic goal of idea evaluation should be to quickly and thoughtfully weed out potential projects that are not a good fit for your particular business, and then you can focus on the good and big enough ideas to make significant differences.

The idea evaluation questions at the boardroom may include: Who are potential customers? What’s the commercial feasibility of ideas such as business model, channel to marketplace, business case and value forecast, safety, environmental, and regulatory, competitive technologies, etc? What’s the technical feasibility? What’s the performance targets? Can you move ideas through their life cycle to achieve first to market? Etc. The constructive feedback to the above questions enables the leaders to set objective criteria to idea assessment. If all those feedbacks are optimistic with quality data support and bring great perspective on high return on investment, then, senior leadership can make more effective decisions to implement them. Businesses can create an environment that brings together the people from inside and outside the walls of the company in a collaborative way, the various "innovation activities" they perform, and the information that they need to accelerate idea implementation.

Investment portfolios evaluation criteria
: Corporate boards oversee business strategies, and the strategy is implemented by a balanced portfolio of programs to deliver products, services, or solutions to customers. All business investments and meaningful business activities should strive to build tangible business capabilities to achieve ultimate business goals. There are both opportunities and risks for every investment. Boards should be long-term oriented, the perspective of a board must encompass the past, present, and future when assessing aggregate investments in terms of value, risk, and reward. Visibility into each investment is established to provide ongoing reliable investment information as well as enable understanding overall portfolio health and effectiveness.

The corporate board co-set or evaluate portfolio criteria in terms of value, risks, and reward from interdisciplinary len, by making insightful inquiries: Is the portfolio well reflect the vision of the top leadership team and capturing the emerging trends, and is it aligned with the strategic goal of the company from long term, intermediate, or short term perspective? Are they diversified? What is the relative health (risk, value, strategic importance) of each of the portfolios? What investments, or even portfolios, should we direct more assets to? What investments, or even portfolios, should be diminished? What, and where, are there resource or talent gaps? Can we achieve portfolio agility to anticipate and respond to changing market conditions? Can we  attract talent with entrepreneurial talent, technical skills, and business savvy? Can you leverage new or variations of existing processes and methods to

Effective governance practice should sustain the transformative change in business. So the BoDs need to review important capital allocation and monitor the important investment performance, and ensure the business is on the right track to reach well-defined business goals. Their efforts on setting criteria to assess ideas, investment, as well as decisions help the management optimize processes, build an intelligent workforce, update methodology and practices to improve business agility and performance.


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