In today’s digital age, organizations are faced with the changing nature of the demand curve and the element of uncertainty in the supply chain. For operations teams, the challenge and competitive advantage have become: How well do you respond and execute against ongoing uncertainty.
With the world being so unpredictable, chaos is now the new normal. Timetables and priorities have shifted. A supplier fails to deliver. Demands on supply chains are increasing exponentially. A few years ago, supply chain performance was all about batch quantities, timetables, and lead times. Today, millions of packages are shipped in a day, with many with just only a few items.
In the face of this upheaval, supply chains try to predict what will happen, then optimize performance against plan. Most often, those plans are not met. The path forward demands a bold leap in supply chain performance.
Business in the Midst of the Digital Age.
Chaos is the new normal. This is the central challenge companies have to contend with today. Demand on the Supply Chain is increasing exponentially whereas Supply Chain performance before used to be all about batch quantities, timetables, and lead times. Today, times have changed.
Business Transformation has become pertinent. Timetables and priorities have shifted and, in fact, suppliers are now finding themselves unable to deliver at the required time demanded by the market. Whereas before deliveries were in batch quantities, today millions of packages are shipped every day with many having just a few items. Customers are now encouraged to order multiple sizes and colors of the same items, choose what they like best and return the rest.
In this upheaval, Supply Chains must respond accordingly. There have been attempts to predict what will happen with performance being optimized against the plan. Companies are increasingly investing in Supply Chain capabilities. Yet, these have triggered nonproductive finger-pointing and disappointing results.
Something is missing. A Supply Chain Strategy, as part of Strategy Development, is now essential to be able to pursue a bold leap in Supply Chain performance.
The Digital Supply Chain Strategy
The Digital Supply Chain Strategy is the new approach to Supply Chain resilience. This is best undertaken using a 2-prong approach.
- Sense and Pivot. A Supply Chain Strategy, Sense and Pivot focuses on building adaptability of Supply Chains. When this is undertaken, it will allow organizations to create greater flexibility across the Supply Chains. New processes, governance, and ways of working will be developed that will leverage technological capabilities being advanced. Significantly, it will make planning, manufacturing, distribution, and logistics more adaptive toward demand volatility, customer expectations for personalization, and an increasingly unpredictable operation environment.
- Digitize and Automate. Digitize and Automate is another Digital Supply Chain Strategy that is focused on building the capability of the Supply Chain to execute against the plan. When this is undertaken and effectively executed and implemented, organizations can expect a better informed, more frictionless, more cost-efficient, and capable Supply Chain. Further, it will enable organizations to undertake more informed Strategic Planning as more accurate forecasts are achieved.
The Digital Age calls for a new approach to Supply Chain Resilience.
The Importance of Supply Chain Resilience
Why is Supply Chain Resilience important today? In today’s digital age, companies can expect to encounter potential disruptions. These potential disruptions can effectively be addressed using the best strategy. Automation and smart software are effective tools for minimizing disruptions on business operations. Embracing digital advancements will provide organizations real-time data for a more reliable supply value chain. Definitely, there will be integration challenges. But the use of Digital Age Supply Chain Strategies will guide companies to counter these potential disruptions and challenges.
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The amount of time the Board of Directors spend on their work and commit to strategy is rising. Directors say they dedicate more time now to their Board duties than ever before. In fact, since 2011, the directors have cut in half the gap between the actual and ideal amount of time they spend on Board work.
In the newest McKinsey Global Survey on Corporate Boards, the results showed that strategy, on average, is the main focus of many Boards. Yet, directors still want more time for strategy when they consider their relative value to their companies. This is more than any other area of the Board work.
The Evolving Trends Influencing Board Work
In recent years, the amount of time the Board of Directors spends on Board work has increased. Compared to 2011, directors now spend five more days per year on Board work. Another trend that is happening is the increase in time. As the number of days has grown, so has the amount of time spent on strategy.
Based on the survey, a total of 772 days was spent on Board work in 2013. This has increased to 1,074 in 2015. Subsequently, 8.91% was spent on strategy in 2015 compared to 7.85% in 2013. With an increased focus on strategy, directors are dedicating more time on Strategic Planning and to discuss strategic issues.
In the next three years, directors would like to dedicate more time to Strategy Development and on organizational health and talent management. Directors want to increase the time spent on strategy due to its relative value to their companies.
The 3 Types of Boards
Performance of Boards based on overall impact, performance, and operation showed that there are 3 types of Boards.
- Ineffective. Ineffective Boards report the lowest overall impact and non-performance of tasks. They have the lowest overall impact on long-term value creation. Ineffective Boards are least effective at the 37 tasks required of the Board and they do not execute some of the tasks at all. Only a few are found to be effective at any one task.
- Complacent. Complacent Boards have a much more favorable view of their over-all contributions. Half of the directors considered their Board having a very high impact on long-term value creation. Complacent Boards have been found to be effective in the performance of tasks on management review of financial performance, setting the company’s overall strategic performance, and formally approving the management team’s strategy.
- Excellent. Excellent Boards are the most well-rounded of the 3 types of Board of Directors. Their overall impact is very high. Significantly, they project greater effectiveness in the performance of tasks than peers on every single task. Further, they are effective in strategy and performance management.
Achieving Board Excellence: What Does It Take
Those boards that reach Excellence are found to be effective at 30 of the 37 tasks undertaken by the Board. Compared to others, they stand out in the ways they operate. They have an especially strong culture and mechanism for feedback. They are more than twice as likely to conduct regular evaluations and ask for input after each meeting.
While this may sound daunting, achieving a value-creating Board is achievable. There are just fundamental principles that the Board needs to follow to achieve Board Excellence. One of these guiding principles is spending more time. Across-the-board increases are often achieved with more time spend on Board work.
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Enterprises invest in Analytics to improve Decision Making and outcomes across the business. This is from Product Strategy and Innovation to Supply Chain Management, Customer Experience, and Risk Management. Yet, many executives are not yet seeing the results of their Analytics initiatives and investments.
Every organization putting on investment in Analytics has experienced several stumbling blocks. This differentiates the leaders from the laggards. Analytics-driven Organizations have clearly established processes, practices, and organizational conditions to achieve Operational Excellence. Their commitment to Analytics is creating a major payoff from their investments and a competitive edge.
What It Takes to Be Analytics-driven
The Harvard Business Review Analytic Services conducted a survey of 744 business executives around the world and across a variety of industries. Their focus was on the performance gap between companies that have struggled to get a return on their Analytics investment and those that have effectively leveraged their investment.
The survey showed that Analytics-driven Organizations get sufficient return on investment in Analytics. In fact, they have been highly successful in gaining a return on Analytics investment. This is gainfully achieved as organizations use Analytics consistently in strategic decision making. Executives of Analytics-driven Organizations rely on Analytics insights when it contradicted their gut feel.
Essentially, Analytics-driven Organizations have reduced costs and risks, increased Productivity, Revenue, and Innovation, and have successfully executed their Strategy. Yet, in evolving the organization’s Analytics approach, there can be 4 core obstacles that can affect their drive to getting a greater return on investment in Analytics.
The Core Obstacles to Finding Return on Analytics Investment
Let’s briefly take a look at the first 2 obstacles:
- Communication and Decision-making Integration. The lack of Communication and Decision-making Integration limits the integration of Analytics into workflows and decision processes do not reach decision-makers. As a result of these core obstacles, the use of Analytics is limited in specific areas.
- Skills to Interpret and Apply Analytics. A second core obstacle is the inadequate skills of business staff to interpret and use Analytics. In fact, the survey showed that only one-quarter of frontline employees use Analytics with only 7% using Analytics regularly.
The other two core obstacles are siloed and fragmented Analytics and time delay. These are two equally important core obstacles that can hinder the use of Analytics to maximize return on investment. Further, the 4 core obstacles are barriers to analytic success.
Are You Ready to Be an Analytics Leader?
Leaders use Analytics consistently in decision making. In fact, based on the survey, 83% of executives use it in business planning and forecasting. On the other hand, laggards only use it 67% of the time. Even in various aspects of the organization such as Marketing, Operations, Strategy Development, Sales, Supply Chain, Pricing and Revenue Management, and Information Technology, laggards use Analytics only half the time compared to Analytics Leaders.
Analytics Leaders always ensure that they establish the processes and organizational conditions to allow them to successfully deploy Analytics. In fact, to increase return on Analytics, organizations must undertake the use of four interrelated initiatives that will drive greater return on investment Analytics. These are four initiatives essential to building an Analytics-driven Organization.
One is building an organizational culture around Analytics. To achieve this the organization must have clear, strategic, and operational objectives that are set for Analytics. Second is deploying Analytics throughout all core functions of the business.
Starting with an Analytics-driven Culture can greatly facilitate cross-functional deployment of Analytics.
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Human judgment can be unreliable as these are all susceptible to errors. In Strategy Development, organizations make a lot of strategic decisions. These strategic decisions share a common feature: they are evaluative judgments.
In making these tough calls, a large amount of complex information must be weighed down and evaluated. While some management decisions are made without weighing quite so much information, yet strategic decisions involve the distillation of complexity into a single path forward.
With the unreliability in judgment, particularly in decision making, there is a need for a practical, broadly applicable approach to reducing errors. This approach is called the Mediating Assessments Protocol (MAP).
Why Human Judgment Can Be Unreliable
Human judgment can be unreliable as evaluations are susceptible to errors. These errors stem from known cognitive biases. There can be a tendency to give more weight to information that comes to mind easily because it is recent or striking than other more important facts. We have the tendency to notice, believe, and recall information selectively which confirms our preexisting hypotheses and beliefs.
Making decisions can also be affected by the Mental Model we have formed. This is an impression of a complex situation that is often less nuanced and more coherent than the reality it represents. When decision making is influenced by biases, there will be errors in decision making.
The 3 Core Elements of MAP
MAP or Mediating Assessments Protocol is a structured approach to Strategic Decision Making. It consists of 3 core elements.
- Advanced Assessment Definition. The first core element requires the identification of mediating assessments. Mediating assessments are key attributes critical to the evaluation.
- Independent Assessments. The second core element is grounded on the evidence available. It uses fact-based independently made assessments.
- Final Evaluation. The third core element is undertaken when the mediating assessments are complete. The final decision is discussed only when all key attributes have been scored and a complete profile of assessments is available. However, the final evaluation may not be undertaken if a deal breaker fact has been uncovered.
Understanding the Importance of MAP
Any organization is a decision factory. Many decisions made can shape the future of organizations. At the same time, many decisions have caused organizations to fail. Decisions, unlike physical products, cannot be quality checked. However, it can be improved by working on processes by which they are made.
Mediating Assessments Protocol (MAP) is an approach that can bring quality assurance to complex decisions. One of its strategic application is in structuring one-off decisions.
Structuring one-off strategic decisions is a type of strategic decision that makes use of explicit assessment as a basis for the decision. It requires leaders to make separate, explicit assessments of each aspect.
The use of MAP in structuring one-off decisions can limit the risk that a compelling narrative will sway board discussions and affect quality decisions. When there is a rigor of formal structure in strategic decision making, it has the benefit of sequencing the process resulting in more quality decisions.
The use of MAP requires very trivial extra effort yet it can bring a lot of benefits. Board discussions are more organized and focus than the usual process, but is not necessarily longer or more contentious. Important facts are less likely to be overlooked and thoughtful, self-critical consideration of trade-offs is more likely to occur.
Most importantly, the use of the MAP can lead to producing strategic outcomes when used in structuring recurring decisions.
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Many Boards have improved their structures and processes. Yet, despite all the corporate-governance reforms undertaken, many Boards failed the test of the financial crisis. This shows that even if the Board of Directors is stacked with high qualified members and best practices, these are not enough.
Human Dynamics has come to fore in today’s highly volatile business environment. Without the right Human Dynamics, there will be a little constructive challenge between independent Directors and Management, no matter how good the Board’s processes are.
Without Human Dynamics, the Board’s contribution to the company’s fortune is likely to fall short of what it could and should. This is also a concern for executives who are not Directors but report to the Board. Without Human Dynamics, it makes it difficult for them to develop healthy and productive relationships with their Boards. This can have a dire effect on Strategy Development or when organizations are undergoing Business Transformation.
The Importance of Human Dynamics
Human Dynamics is an organizational state where collaborative CEO and Directors think like owners and guard their authority. Without the right Human Dynamics, there will be a little constructive challenge between independent Directors and Management.
Why is Human Dynamics important? When there is a lack of Human Dynamics between CEO and Directors, this can lead to an ineffective performance in the Boardroom. Board’s contribution to the company’s fortunes will fall short of what it could and should be. Non-director executives will have difficulty developing a healthy and productive relationship with the Board. Most importantly, aspiring Directors will be unable to learn what it means to be a good corporate Director.
This can be detrimental to the organization and can direly affect its competitive advantage. However, achieving the right Human Dynamics is not easy. Understanding and identifying the contours of such a fluid interpersonal exchange can be a challenge to both the Board and the CEO.
The 3 Tests in Assessing the Board’s Human Dynamics
While it may be a challenge, building the right Human Dynamics between the CEO and the Directors is essential. There are 3 Tests executives can use to guide them in assessing the Board’s Human Dynamics.
- Board Ownership Mindset. Currently, outside Directors continue to be passive participants. They do not challenge Management beyond asking a few questions during Board meetings. This test is focused on building Boards to be vital stewards of the organization.
- CEO Collaborative Mindset. CEOs nowadays are failing to inform or involve the Board on critical developments such as merger discussions. As a result, there can be a breach of trust which can cost the CEOs their job. The second test ensures that a collaborative CEO is in place.
- Board Authority & Independence. The third test is focused on enabling the Board to protect its stand and independence. This is necessary when the authority of the Board is being chipped away as the CEO experiences greater success. There is also less robust questioning of Management’s proposal or worst, the readiness of the Board to agree to unreasonable demands on executive remuneration.
The 3 Tests for Boards is an effective guiding principle in developing the right Human Dynamics between the Board and the CEO. When it comes to well-functioning Boards, best practice structures are not enough. It is essential that the right Human Dynamics exists as it can help the Board and Management to fulfill their potential.
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The business has become more challenging as the global market becomes more demanding. This change in the global market is putting pressure not only on Management but also on the Board. Strategy Development now demands that organizations should not only be effective but there should also be Board Excellence.
Today, the demand has ceased to be about spending more time. Boosting the effectiveness of the Board is not anymore about spending more time. The urgent call now is to focus on changing the nature of engagement between directors and the executive teams that they work with.
The Importance of Board Engagement
Changing the nature of the Board Engagement will lead Directors and CEOs to make effective use of their limited time. It will build the capacity of the Board Members to bring disparate points together. This is critical when keeping a Board functional rather than dysfunctional.
There are no shortcuts to building and maintaining a well-attuned Board and executive mechanics. These require hard work from the Board Members and a CEO with a thick skin. But a good Director will provide the extra effort, and an effective CEO will make the most of an engagement board’s limited time.
Achieving Board Engagement
Board Engagement can be built and it can be improved. The nature of engagement between the Directors and Management need not remain at a standstill. There are 5 areas to improve Board Engagement.
- Engagement between Board Meetings. This is more than just meetings. It is about touching based between meetings. When this is undertaken, it keeps Board Members informed and strengthens the Board’s hand on the company pulse. Engagement between Board Meetings minimizes the background time that slows up regular Board meetings.
- Engagement for Strategy Formulation. This area of improvement enables the Board to actively participate in the formation of strategy and be proactive. Participation is already encouraged right at its early formation and stress-testing of strategy.
- Engagement for Talent Development. When this is put in place, Board Members get to act like a highly effective search firm. This happens as a result of a change in focus from simply observing talent to actively activating them. This area of improvement raises the bar to actively cultivate talents.
- Engagement in the Field. This area of improvement may be something that may be new to Board Members. Often, the Board has been used to taking a role in policy making however they have not been part of operations. Engagement in the field is focused on assigning Directors specific operational areas to engage on. This will require the Board to visit at least one business site every 12 months. Doing this will bring a load of advantages as the Board gets to be more knowledgeable about the organization.
- Engagement on Tough Decisions. The main focus of this area is on the value of probing difficult, strategic decision making. One may wonder how can this build Board Engagement. Every Board Member need not have industry experience. Yet, they must have the courage to ask difficult questions. When this happens, you get to raise your Board from being dysfunctional to being functional and involved.
Board Engagement is very crucial at this point in time. It is not enough that they spend more time in Board meetings. It is not enough that they continue to assume roles that they have been doing before. The changing business environment has raised its spectrum when it comes to performance and effectiveness. And this does not only include Management or its employees. This now also involves the Board. Hence, the Board of today more be more engaged and take an active part in areas that are crucial to the organization to remain competitive.
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Organizations are continually searching for innovative ways of enhancing competitiveness. This is brought about by evolving external factors such as changing demographics, globalization, and technology. Because of changing dynamics, it has required managers to rapidly rethink and retool their organizational management strategies.
Coming up with the appropriate strategies calls for an increasing need for organizational diagnosis in developing and maintaining a competitive advantage. Researchers believe that in conducting organizational diagnosis, organizational effectiveness must be viewed from a systems perspective using a multidimensional approach in assessing the factors affecting enterprise performance management.
At this point wherein the role of organizational climate in business performance has become significant, there is a need for a business model that is most influential. To date, the Burke-Litwin Change Model is the best known and most influential model suitable when it comes to organizational climate.
A Quick Look at Burke-Litwin Change Model
The Burke-Litwin Change Model is seen as a conceptual framework that can best describe the relationships between different features of the organization, as well as its context and effectiveness.
According to Burke and Litwin (1992), Change Management models are not meant to be prescriptive. They are meant to provide a means to diagnose, plan, and manage change. Using the Burke-Litwin Change Model will provide organizations an effective diagnostic tool to improve overall organizational performance. It is a useful model for understanding the organizational change process.
The Burke-Litwin Change Model, as a change management tool, assumes 12 organizational elements that determine a change within an organization.
The Burke-Litwin Change Model 12 Drivers
The 12 key drivers of the Burke-Litwin Change Model interact with and affect each other. The change in the 12 key drivers brings about a series of changes in the structure, practices, and the system of the organization.
The 12 key drivers have been organized based on their specific roles within the organization.
- External Environment. The External Environment is the external influences important fo organizational changes. These are the economy, customer behavior, competition, politics, and legislation.
Throughput: Transformational Drivers. Transformational Drivers are those that make up the fundamental structure of an organization. It relates to the organization as a whole. There are 3 Transformational Drivers.
The 3 key drivers have over-riding importance of dealing with a change that is intended to share up “the way things are done around here.”
Throughput: Transactional Drivers
Transactional drivers are drivers that are more easily changed, but rarely have the same kind of impact on organization-wide performance. This concerns daily activities that take place in organizations and their mutual cohesion. There are 7 Transactional Drivers.
- Management Practices
- Work Climate
- Task and Individual Skills
- Individual Needs and Values
The Transactional Drivers can affect performance. However, performance can only be long-lasting if these key drivers are aligned. The 7 key drivers are critical in their role of supporting the change process.
Individual and Organizational Performance is the 12th key driver. It is the outcome of the change.
The 12th Key Driver: The Individual and Organizational Performance
The only thing that is constant is change. As output changes, so does the input and the factors of change. Individual and Organizational Performance is the measure of the effectiveness of the change. It measures the performance levels of both the individual employee and on the departmental and organizational level.
Individual and Organizational Performance can be measured on the basis of turnover, productivity, quality requirements, efficiency, and customer satisfaction. This is the key driver that impacts on the external environment.
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Many large corporations depend on M&A for growth and executives can boost the value that deals create. But poorly executed M&A can saddle investors with weak returns on capital for details. In fact, the margin between success and failure is slim.
Many Boards are reluctant to cross the line between governance and management. The level of engagement is often outside the comfort zone for some executives and directors. As such, they miss opportunities to help senior executives win at M&A.
There is a need to modernize the Board’s role in M&A. Modernizing the role of the Board in M&A can result in the alignment of the Board and management on the need for bolder transactions with more upside potential. Further, this is essential in achieving a competitive advantage.
The 3 Core Opportunities in M&A
There are 3 core opportunities for the Board to play an impactful role in M&A.
- Potential for Value Creation. The first core opportunity, potential for Value Creation enables the Board to challenge the executive’s thinking on potential transactions. This is an opportunity for the Board to maintain constant touch with the company’s M&A strategy, the pipeline of potential targets, and emerging deals.
- PMI Plans. This is an essential core opportunity that enables the Board to boost value creation to as much as 2-3x the net value. Post-merger Integration (PMI) Plans representat an opportunity to pressure test against stretch growth and cost goals before and after a deal. Greater variation in the quality of post-merger plans exist compared to financial analysis and pricing of transactions.
- Competitive Advantage in M&A. Competitive Advantage is a core opportunity that is unrelated to a transaction’s deadline. This is an opportunity to create a competitive advantage through M&A skills. These are corporate assets that can be difficult to copy. Making that decision to create a competitive advantage through M&A can lead to bolder decisions with more upside results.
The 3 core opportunities can promote greater Board engagement. When this happens, discrete deals can be converted into ongoing deal processes and dialogues that can deliver greater value from M&A.
Maximizing Core Opportunities to Attain the Greatest Deal
The potential of the 3 Core Opportunities to embolden the role of the Board in M&A is great. Organizations just need to have a good understanding of each core opportunity and the underlying key areas or dimensions of each key area. Let us take a look at the 1st Core Opportunity: Potential for Value Creation.
The Potential for Value Creation has 3 critical key areas that can challenge that lead opportunistic transaction to succeed. One critical key area is Strategic Fit.
Strategic Fit is key to determining why a company is a better owner than competing buyers. Deals driven by strategy succeed more often when they are part of a stream of similar transactions that support that strategy. This is a key element in Strategy Development.
How can we enhance the role of the Board relative to this key area? The Board can play a vital role in clarifying the relationship between a potential transaction and strategic planning. They are also in the best position to define how the deal will support organic-growth efforts in target markets and provide complementary sources of value creation.
The other key areas under the Potential for Value Creation are Financial Statements and Risks vs. Rewards. The Financial Statements is a key area that can correct the Board’s tendency to put emphasis on price-to-earnings multiples which can be limiting. The Risks vs. Rewards, on the other hand, is a key area that challenges the Board to acknowledge uncertainties in pro forma.
The other 2 Core Opportunities also have their own essential points or dimensions the Board must focus on. Only then can these core opportunities be of the maximum potential of modernizing the Board’s role in M&A and gaining the greatest value.
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When things go wrong on a grand scale, often we direct our attention to the role of the Board. Debate exudes and often gets heated up and intensifies. This often happens when the Board spends more time looking in the rearview mirror and not enough scanning the road ahead. When this happens, governance suffers.
Often, the Board of Directors spend a bulk of its time on quarterly reports, audit reviews, budgets, and compliance. However, with the change in the business environment, there is a greater need to redirect the Board’s attention on matters crucial to the future prosperity and direction of the business. One of this is Strategy Development. Achieving this requires the development of a dynamic Board with a long-term mindset capable of creating forward-looking agenda and activities that get sufficient time over a 12-month period.
The Changing Board Agenda
The Board Agenda is changing. It is becoming more dynamic and it has increasingly highlighted forward-looking activities. Long-term economic, technological, and demographic trends are radically shaping the global economy. The second Industrial Revolution now requires the Board to shift focus. The Board is now challenged to focus on matters crucial to achieving Operational Excellence and the future direction of the organization. Directors must devote more time to strategic and forward-looking aspects of the agenda. They must cease seeing the job as supporting the CEO, but instead, be strategic in making sure long-term goals are formulated and met.
Having a forward-looking Board has now become every organization’s imperative. However, this can only be achieved if there is a solid foundation that is anchored on three guiding principles. Organizations must have the right Board Member, a clear definition of the Board’s role, and greater time commitment from members. At this time when a long-term mindset has come to a fore, these have become essential.
Developing a Long-term Mindset: The 4 Essential Tactics
“Strategy without tactics is the slowest route to victory. Tactics without strategy are the noise before defeat.” – Sun Tzu
Organizations can undertake 4 essential tactics to encourage the Board to have a long-term mindset.
- Study the External Landscape. This is the starting point of creating a forward-looking mindset. The primary purpose of this tactic is to expose the Board to new technologies and market developments relevant to the company’s strategy. Studying the external landscape will challenge management with critical questions.
- Participate in Strategy Development. This tactic focuses on making strategy a vital part of the Board’s DNA. Participating in the Strategy Planning process will strengthen the Board’s role in co-creating and ultimately agreeing on the company’s strategy.
- Focus on Long-term Talent Development. The third tactic, this tactic focuses on unleashing the full power of the people. It will effectively reallocate skills and experience to a business with more potential. To achieve its expected result, the key is the Board must agree with management on a sensible approach to reviewing executive talent.
- Identify Existential Risks. This is the tactic that focused on the Risk Management of existential risks. Because of accelerating technological progress, existential risks have become a recent phenomenon. Existential risks have a great detrimental impact not only on business but also on mankind. The Boards have the duty to ensure that management teams pursue bottom-up investigations, identify key risk areas, and act on the results.
The 4 tactics are essentially effective in creating long-term mindsets. When this is achieved, Board Excellence is never far behind.
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The pressure on Boards and Directors to raise their game has remained acute. A survey of more than 770 directors from public and private companies across the industries around the world suggested that some are responding more energetically than others.
There is a dramatic difference between how directors allocate their time among boardroom activities and the effectiveness of the Boards. One in four directors assessed their impact as moderate or lower, while others reported as having a high impact across Board functions.
Today, the call to become more forward-looking and achieving Board Excellence is further highlighted. This is further emphasized when the Board and Management are pressured to find the best answers to global business concerns and issues. In Strategy Development, this becomes invaluable. It does not only lead to clearer strategies but also the creation of alignment essential in making bolder moves.
While these are essential, there is a need to raise the quality of engagement on strategy between the Board and Management for each group to achieve smarter options. This is possible only if organizations have high impact, strategic Boards in place.
High impact, strategic Boards have a greater impact as they move beyond the basics and face increasing challenges.
The Challenges that Today’s Board Face
Business is fast-changing and rapidly transforming. The global economy is increasingly pushing businesses, as well as the Board to face a gamut of challenges.
What are the 2 main challenges facing Boards today?
First is Time Commitment. Working at a high level takes discipline – and time. In fact, the greater time commitment is expected on high impact activities. The Board often have 6 to 8 meetings a year. As a result, they are often hard-pressed to get beyond the compliance-related topics to secure the breathing space needed for developing a strategy.
Often, it is the very high impact Directors who invest more time compared to moderate or lower average Directors.
Who are your very high impact Directors? They are those spend a total of 40 days a year working for the Board compared to 19 days of low impact Directors. An extra 8 workdays a year is invested in strategy and an extra 3 workdays a year are spent on Performance Management, M&A, Organizational Health, and Risk Management.
High impact Directors who believe that their activities have greater impact spend significantly more time on these activities compared to low impact Boards.
Second is Strategy Understanding. Why is Strategy Understanding a challenge for the Board? Limited understanding of the organization’s strategy can result in the Board’s limited engagement with the organization. Based on the survey made, only 21% of the Directors have a complete understanding of the current strategy. Often, Board members have a better understanding of the company’s financial position rather than its risks or industry dynamics.
If we look at high impact Directors, they invest more time in dealing with strategic issues. In fact, they invest 8 extra workdays a year on Strategic Planning and discussing strategy compared to low impact Directors. High impact Directors center on Strategy Focus Areas which can, in turn, spur high-quality engagement from the Board on strategy development. The quality of Board engagement on strategy is enhanced, both when the engagement is deep and during the regular course of business.
The Board just needs to focus on 3 areas of discussion for the Board to enhance Strategy Development. One of them is Industry and Competitive Dynamics.
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