Time for boards to be agile
By John Harte, Managing Partner at Integrity Governance
Volatility is continuing for boards after the upheaval caused by the pandemic. The situation in Ukraine, rampant inflation and supply chain issues are of particular concern.
When the Governor of the Bank of England predicts inflation in the teens, a long recession, and increased volatility only two years after the worst recession for centuries then boards need to sit up and take notice.
These issues, along with Covid, have highlighted the importance of being agile. Agility is a necessity for those boards serious about responding to new challenges in a way that will ensure the long-term success of their organization. Also, it’s by being agile that they will continue to be an effective decision-making body that adds value.
The important question is: how can boards be agile?
Move fast and break things
This often-repeated quote attributed to Mark Zuckerberg should be a mantra boards adopt. Boards need to move quickly to respond to events that impact on their business, such as the invasion of Ukraine. The survival of their organization is at stake. They need to innovate at speed to remain ahead of the competition. If they break things along the way, so be it.
While Silicon Valley is not perfect, maybe boards need to think about how “move fast and break things” would work for their business. After all, Facebook and a number of other leading technology businesses have experienced huge growth as a result of this approach.
War gaming
A great way to be prepared for future events that could have a significant impact on your business is to test plans by war gaming. For boards, it provides sophisticated simulation and validation of strategy and contingency plans through predictive analysis. This way ideas, proposals, and theories are put under pressure and can be examined to breaking point. Risk and unintended consequences can then be factored into gameplay, ensuring boards are adaptable and ready for fast-changing future events. By taking this approach it’s also possible to find out what a decision means from a regulator and consumer point of view. Furthermore, war gaming can be used to find out more about competitors and how to successfully compete against them.
Scenario planning
To aid agility it’s important boards undertake scenario planning. This is about inputting a few variables to see the impact they have on the board’s assumptions on the expected future. This means identifying a specific set of different “realities” of what might happen and will have an impact on your business, along with responses to each of them. Planning could factor in scenarios around energy price inflation or supply chain problems, for example. By taking this approach boards become responsive, resilient, and effective, as the future becomes a reality.
Challenge assumptions
When looking to take quick decisions because of the need for agility during volatile times, or indeed any decision, those on the board must challenge any assumptions, otherwise the decision made could be a poor one for the business. With the interplay between the three critical elements of risk, strategy, and return often based on assumptions at board level, these must be challenged to validate their relevance. Only then can the board have assurance that they are on the right path.
Risk
Effectively planning for risk helps to ensure agility in the face of a crisis. The pandemic exposed the failure of many boards to effectively understand and predict risk. As a result, many organizations have suffered losses or have had serious problems and are in danger of failing, or have even gone under.
In these uncertain times it’s more important than ever that boards are aware of and properly plan for risk. However, they need to understand that effective risk management is not only about avoiding losses, but in enabling value creation through improved business planning, organizational efficiency, and enhanced social license. Effective risk planning can provide a new opportunity, a competitive advantage, to drive long-term business success.
It’s up to boards to be at the forefront of identifying, planning, and reacting to risk. After all, they are charged to generate the best return from the capital of the company which demands forward thinking and the ability to anticipate “the effect of uncertainty on outcomes”.
Board composition
Boards that are agile usually have a diverse representation. Diverse teams typically outperform homogenous ones, which is why diversity on boards is very important to deliver effective decision-making.
In fact, every board should look at its board through the prism of the five drivers of diversity™- demographics, skills, experience, thinking styles, and circles of influence – and contemplate how well their current lineup matches up. True board diversity is broader than any one of the five drivers™ and delivers wider perspectives, improved decision-making, and outcomes.
Boards should make sure they have directors with the skills and experience in the areas where they need to be agile. For example, with the rapid pace of change in the technology and digital worlds, and its impact on business, many boards need directors with the skills and practical experience in those areas. Only then can they realize the opportunities for their organization.
Appropriate leader
The pandemic highlighted that while some CEOs identified a once-in-lifetime opportunity to transform, often at great speed, how their organization operates to ensure it thrives, many others did not. All CEOs need to be agile during volatile times, along with resilience, demonstrate emotional intelligence, and be future thinking.
To have the assurance that the CEO is agile and remains the right person to effectively lead the board and organization in the future, the board must review the performance of the CEO at least annually, and provide training and support if the feedback demands it. Conversely, the assessment might reveal that the CEO is no longer the right person for the role and needs to be replaced.
To ensure the CEO evaluation process delivers a vital 360-degree performance review, one that provides an objective assessment, the board, CEO, and their direct reports must reflect and provide feedback on the CEO’s performance and development needs. This involves qualitative and quantitative research based on an online survey and face-to-face interviews. This assessment must be honest, impartial, and strictly confidential with the “psychological safety” of the CEO paramount.
Right culture
It’s not only important for the CEO and board to be agile, the rest of the business must be too if the change is to effectively happen. To foster business-wide agility and adaptability it’s vital boards promote an entrepreneurial spirit which will also help unleash the potential of their people to provide new ideas to help take the business forward. As part of this, boards must encourage curiosity and fearlessness to inspire creativity, innovation, and continuous improvement. It’s through leading by example, by demonstrating the diversity of thought and ideas in the boardroom, that the rest of the business will have the confidence to follow suit. Directors must be “effective enablers” when it comes to culture and consider how fit theirs is for the future.
It’s agile boards that will add value by successfully helping their organization to navigate these challenging times, thereby driving business success. Those that take the appropriate steps to engender agility will reap the rewards.
Uma Rajagopal has been managing the posting of content for multiple platforms since 2021, including Global Banking & Finance Review, Asset Digest, Biz Dispatch, Blockchain Tribune, Business Express, Brands Journal, Companies Digest, Economy Standard, Entrepreneur Tribune, Finance Digest, Fintech Herald, Global Islamic Finance Magazine, International Releases, Online World News, Luxury Adviser, Palmbay Herald, Startup Observer, Technology Dispatch, Trading Herald, and Wealth Tribune. Her role ensures that content is published accurately and efficiently across these diverse publications.