Board Effectiveness in a Disruptive Market

The disruption that is occurring in our business world is demanding changes in processes and structures, the creation of new departments and roles, the reskilling and upskilling of existing employees, among others.

These changes, however, are not enough to achieve value creation for stockholders and effectively compete in today’s market. Evolution and change must cut across the whole organization in order to generate the expected results, including in back-office and support areas, as well as in the boardroom.

I was asked some months back to analyze the key features that characterize a progressive and active Board. My conclusion was that in order for a Board to maintain strong governance practices, discharge its responsibilities and add value in this disruptive environment, it needs to reshape and evolve as follows:

1. Increased Diversity

Incorporating greater diversity among Board members brings palpable benefits, including greater diversity of ideas, stronger discussions and more thoughtful challenge.

It is important to increase diversity based not only in gender, but other criterion, such as age, industry background, experience, geography, nationality, ethnicity and skill sets.

It is also advisable to seek:

  • Targeted specialization based on the Company’s business strategy and senior management’s needs. For example, most companies are incorporating NextGen members with digital and data management experience and/or tech savvy (including cybersecurity and cybercrime knowledge). Also, it has become a developing trend to bring members with experience in environmental, social and governance (ESG) matters.
  • Identified, differentiated value-added per Board member.  For example, based on their business or government connections or on their customer contacts.
  • Subject matter expertise to provide support and guidance to specific senior managers lagging or developing particular skills needed for a particular project or strategy. To satisfy this need, it is also common to hire an external consultant to support the particular project or strategy, rather than incorporating a new member to the Board.

In this context, talent attraction should become a standard practice.  Companies are advised to maintain an active pipeline of potential candidates to be able to replace and/or incorporate new members, as new demands emerge.

2. Increased Engagement

An increased time dedication by its members is fundamental nowadays for the effectiveness of the Board, as it facilitates more active, live discussions and more efficient use of time during Board meetings.

This higher level of engagement demands ongoing and more constant interactions with management, beyond the customary quarterly meetings, while avoiding micromanagement and/or overstepping management’s responsibilities.  

Some useful practices to promote greater engagement include:

  • Inviting Board members to listen to or sit in certain key management meetings or discussions.
  • Expand network of senior management staff with access to Board members.
  • Greater investment in Board members’ orientation and education, by 1) inviting them to strategic events, such as products/services launchings, customer and investors conferences, strategy retreats and off-sites; 2) organizing and encouraging participation in visits to operation and productions sites; and, 3) organizing lectures and training sessions to facilitate learning about new technologies, products and risks trends.

3. Measurable Board Performance

It is important for the Board to operate as a high-performance team. As such, the Board members’ collective and individual contributions should be somehow assessed and compared against a defined role profile, setting out their mandate and detailed responsibilities.

This periodic assessment should contemplate the feedback from top key management, shareholders and other key stakeholders, as well as from the other Board members and follow an objective methodology that assess each member’s individual contributions and results and avoids favoritism and other conflict of interests situations.

Periodically assessing the performance of the Board promotes greater teamwork and less silo and discourages any potential egocentric behaviors.

4. Improved Management of Board Meetings

Board effectiveness cannot be achieved solely focusing on its integration and members; it also requires upgrading of its processes and overall operation. Improving this element benefits the Board by reducing the duration of the Board meetings and promoting more eco-friendly approach.

Recommended practices for the effectiveness of the Board meetings include:

  • Implementing an Enterprise Board Governance management tool, cloud-based, offering appropriate security features.
  • Promoting continued engagement by Board members, through constant uploading of relevant information in the referred above app, irrespective of Board meetings calendar.
  • Redesigning Board material templates to make them shorter and more strategic in content and offering Board members preparatory, informative sessions for complex matters before the scheduled meetings.

If your company is contemplating to evolve and improve the effectiveness of its Board, it is important to note that the suggested approach is not to turnaround the Board all of a sudden. Without question, some of these suggestions cannot be done all at once; for example, greater diversity needs to be achieved progressively, as members conclude their tenure and their replacements are selected.

Similar to the actions that anyone will adopt when implementing a key project, the recommendation is to prioritize your needs and develop an executable roadmap that includes an expected timeline.

PD: I invite you to follow me on Twitter where I will also be publishing my articles, reflections, comments and content. You can find me, as in the others social media channels, under @dortegasosa. I look forward to your participation!

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