Boards are getting better — some by choice, and the rest by a push from multiple stakeholders. Investor pressure on corporate spending, greater concerns about consumer protection and marketplace risks, increased media coverage about boardroom “fails” — all of these and more have created a demand for better governance and oversight. And most boards have stepped up to this.
However, times are changing. For years after the start of the recession, we saw many boards “reaching down” into company operations to ensure that cost-cutting and compliance were prioritized. But with the recovery, while regulatory concerns still occupy much board discussion, effective boards are stepping back and devoting more and more time to strategy.
We see directors looking more expansively at their role in bringing insight to management, especially as new threats emerge that require an “all hands on deck” approach to board guidance. Cybersecurity risks, digitalization and global geopolitical issues that can put the emergency brake on company operations — such as a major data breach or a terrorist incident — demand that boards have the ability to think far outside normal operations for business to continue.
For boards today, strategic insight is knowing there is no “normal” anymore, whether it’s threats to your company’s supply chain or a sudden change in customer preferences (given the rapidly shifting global consumer markets) or disrupted distribution channels. Good directors, as stewards of the company and its stakeholders, must ask management the tough questions about strategy, and be responsive when developments force that strategy to change.
THE NEXT CHALLENGE: THINKING THREE STEEPS AHEAD
The best boards are spending their time on the future. With business models turning upside down and competitors targeting businesses both across industries and across the globe, companies need boards that can see these changes coming and the fault lines growing.
The best directors also know that what they are certain of today may not be true tomorrow. Companies today are facing a confusing mix of trends and countertrends, making long-term strategic planning especially challenging. As just one example, boards can ask themselves the question: Who are our true competitors? It may be a case of the digital meeting the analog, as when e.g. tech giants enters the home-delivery business. It may also be a coffee company getting into banking.
To see these and other threats around the corner, and to see over the horizon for what opportunities lie ahead, boards must move beyond insight to offer true foresight to their companies. And at the root of this foresight are new ideas and fresh thinking—and, importantly, time devoted to this on the board.
Board agendas are often packed and there is little time for open conversation. Often they found value in planning for a time period at the end of the board meeting for ‘no specific topic’ discussions with the CEO and for ‘board only’ discussions where they can reflect and think ahead. But, ultimately, boards must look at who the individual people are who are sitting in the boardroom doing the thinking: are these the right people at the table? Are these the people who are going to push the board beyond oversight and insight and bring an invaluable forward-looking perspective to the discussion?
BRING FORESIGHT INTO THE BOARDROOM
To engineer this kind of thinking, boards need a truly diverse set of experiences and perspectives. Multi-gender, multi-national, multi-regional, and multi-generational diversity on boards creates the set of conditions to be looking ahead—to new markets, new technologies, new consumers, new everything.
Greater transparency into candidate selection and pressure from stakeholders, including men and women board chairs who are helping to drive this change, are forcing boards to become more meritocratic in their selection. This push will ultimately create boards that bring the essential foresight into corporate governance that will keep companies truly competitive.