In this podcast I have back well-known Board of Director thought-leader Sheila Hooda for a discussion on Boards can deal with the disruptive nature of current climate of economics, politics and business. She provides a clarion call for Board renewal through refocusing on strategy as a Board imperative. We explore several areas of Board refocus and renewal.
We begin with some of the disruptions Boards face including digital, market, and regulatory disruption. We are seeing massive disruption – at a scale and pace never seen before and the pace is accelerating. There is disruption across industries and business models, brought about by a confluence of factors including Technology and digital forces, changing demographics and consumer preferences, regulation and market forces.
Tech has moved from being the enabler and supporter of business to being the primary driver and the differentiator. It has literally become the heart of the business, bringing both opportunity, challenges and new risks. Companies that do not change their strategy, innovate and move as a faster pace to keep ahead of this dynamically changing environment will risk losing their competitive advantage and ultimately go out of business.
We next consider the implications for the Board, since the Board’s fundamental obligation is to enhance the long-term value of the company on behalf of shareholders. Therefore, the Board’s responsibility for dealing with disruption is grounded in this principle and this reality. As business disruption threatens the very sustainability of a company – it is the core fiduciary responsibility of the Board to manage, navigate and mitigate the risks of disruption for the companies they oversee.
Hooda believes that to discharge their responsibilities, Boards will need to evolve their practices and priorities with an urgency to remain relevant and to pivot and future-proof the companies they oversee. Boards set the tone at the top and with management for the organization. Embracing change, managing risks and fostering innovation-lead growth is needed to stay ahead of this tsunami of disruption to empower the organization to evolve faster and to succeed. Boards will need a new and enhanced role to play in managing change and disruption. High performance governance must lead, it does not follow.
With all this disruption on the horizon, what is the Board’s role and how can they be part of the solution to insure their company is ahead of the curve and competitive? Hooda believes that to answer the call for Board governance renewal, what can Boards do to reshape their roles to (1) Embrace change and disruption ; (2) Foster innovation; and (3) Manage the inherent risks.
Hooda concludes by noting that leading through disruption and fostering innovation is not easy and will require a delicate rebalance of the fiduciary responsibility of the Board and the executive power of management. To achieve this, she says there needs to be a brand-new way of thinking about Board-management engagement. Management and their Boards need to begin to have a different kind of dialogue, one that is characterized less by fully baked ideas and more about an open-door policy characterized by a free exchange of ideas and perspectives. This shift requires a new vulnerability on the part of management and the willingness to seek out Board members’ perspective on a regular basis.
On the Board’s part a stronger partnership with management is needed to share ownership. This will require a higher level of trust and transparency. Sufficient time should be allocated on the Board’s agenda to continued education, brainstorming, debate and discussion, and honest feedback about ideas. This model of governance also requires both management and Boards to stay current which is a major challenge in the face of constant change. Boards will need to be create some space to have blue ocean type of continual education and thinking so that Boards and managements can discuss alternatives, changing assumptions and the competitive environment.