These questions have always been asked by both the executive team and the board of directors, but instead of three-year strategy cycles and yearly strategy reviews, these kinds of questions now need checks and answers on an almost daily basis. The level of complexity and uncertainty has never been higher, and the same goes for the corresponding need for adaptability, information processing and agility to stay on a winning course.
It is indisputable that the strategic space for companies has changed significantly, so where do the boards fit into this new picture? What role do they play in these constantly changing markets?
The brief answer is that the boards have to become far closer to the business in two ways: First, by sparring with the executive team on how to work with a broad vision instead of specific targets. Second, by being up to speed on which trends and tendencies currently characterise the markets and sectors in which the company operates. The individual board member needs to move out of his or her comfort zone to contribute with valuable knowledge on what the company should do now and not only on what the company should aim for in five years.
And the board and not least the individual board member should carefully consider what kind of value they can offer the company. Because even though it is popular among retiring CEOs to offer their experiences and services to the boardrooms, a gilded CV and solid experience are no longer a guarantee that you will be able to add value to the board and to the company. Your experience is still valuable, but only if coupled with broad and extensive insights into current developments and trends. For the same reason, diversity in terms of both background, age and gender is necessary to ensure breadth as well as depth in the combined knowledge pool of the board.
But let us first look briefly into the kind of changes that are happening in the companies and affecting the role of the board.
The permanently ready organisation
Irrespective of sector, the technological development, social media and the UN global goals all contribute to the fact that every link in the company’s value chain and every element in the business model may potentially change overnight. The tricky question is not whether we need to change but rather where, when and how!
Our organisations basically have to be designed to be able to handle speed and complexity. It is no longer enough to develop the organisation to be able to produce a service or product in the most efficient way. The most critical competitive advantage that the company can develop is the ability to course adjust at any given time. In other words, how do we develop our business model and organisation to be in a permanent state of readiness for potential change, and how do we know when to execute which change? All without stressing the organisation but rather motivating it? This is a fundamentally different way to both lead and develop your organisation, also for the board.
And it will have rather dramatic consequences in terms of how we think, lead and execute the development of our organisations. A natural consequence of this is that knowledge, decision-making and execution powers need to be strengthened throughout the organisation. First of all, it simply takes too long to run decisions back and forth in a conventional hierarchical system. Second of all, it becomes necessary to mobilise the organisation to always be on top of new developments and tendencies, whether they are changes in customer or user behaviour and needs and/or technological opportunities that will affect the service, etc. Everyone in the organisation needs to be prepared to make fast changes, be they minor or major.
The permanently ready board
So what does this all mean to the board’s role in the company? The question that any board should ask itself is what role and value they can and should have in the development of the “permanently ready” organisation. Or to put it bluntly: If the board wishes to avoid simply becoming company administrators that retrospectively follow up on how things went and want to truly contribute to the development of the company going forward, then the boards also need to prepare themselves for a permanent state of readiness.
Let us explore three possible avenues for achieving this:
The executive team has to focus far more than ever on defining visions more than conventionally defined balanced scorecard strategies. The executive team also has to ensure that the frameworks and prerequisites are present to enable the organisation to relate to strategic decisions, which used to be reserved for the executive floor.
But where does that leave the board of directors?
First and foremost, it makes it necessary for the board to take the vision into account and to contribute to its definition. And even more essentially, to follow up on the strategy definition and the related KPIs, to spar with the executive team, to challenge the executive team, to cooperate with the executive team – perhaps quarterly, perhaps more often than that – on how to best ensure that the prerequisites for success are present in the company. Just as the executive team has to facilitate its managers and middle managers, so does a board have to do with its executive team.
Those days are gone where you automatically brought value to the board by the grace of your past merits and the sum of your experience. We do not mean to say that this experience is not valuable because it is – it is just not enough. A board member must bring new trends and inspiration to the table. Not only because the board must be able to contribute to the vision but also because the board must offer valuable sparring to the executive team and challenge them in constantly and gradually developing the organisation to the next stage in permanent readiness. This requires both insight into and a fundamental understanding of the company as well as an outlook on the trends and possible developments with respect to technology, policy, customers, etc. that may affect the company either positively or negatively. The board’s knowledge level and understanding must be in sync with the market, and the individual board member must be able to contribute to this dynamic.
Dynamics in the board
The board of directors will soon become the only part of an organisation that is considered permanent. But when the rest of the organisation must be able to be agile and change from day to day, to obtain new knowledge and convert it into action, the same should apply to the board. If the board is to be able to truly contribute to defining the right visions, to spar with the executive team and to contribute to the achievement of the vision, the board must possess both insights and the ability to spot trends. Irrespective of the sum of experience in the boardroom, you have to create a flow in the composition of the board that matches the need for knowledge or to create a more dynamic board composition to ensure that the board is an active catalyst in ensuring the prerequisites for success.
And yes, we know that this is far more easily said than done. The tricky part is that we cannot provide you with a roadmap for getting started on setting up the perfect board or being the best board member that you can be. The whole point is that roadmaps and recipes for success are a thing of the past. The only thing we know for certain is that we all need to prepare ourselves for being in a constant state of readiness.