2015

Issue 16

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BoardWorks International
Issue 16, 2015

Focusing on the Future

Is your board paying adequate attention to the future or is it one of those whose 'rear vision mirror' become so large it has blocked its forward view of where the organisation is heading?

There is a fundamental reality that all boards must confront: they can only influence what has not yet happened. Monitoring organisational performance against plans is important, as is checking compliance with legal obligations and the board's own policy settings. A board can - and should - take time to learn from past experience.

Ultimately, however, a board's leadership impact will come down to its ability to 'give direction' to the entity it is governing. Boards know this intuitively but few boards my colleagues and I have worked with over the years have been satisfied that they spent enough of their time on future-focused or 'strategic' thinking. Our research suggests this is a universal anxiety of boards around the world. Achieving the necessary orientation to the future is something that boards typically seem to find quite difficult.

So what is it that typically comes between the aspirations of many board members and the effective exercise of their primary responsibility? A range of factors seems to inhibit boards from engaging consistently in a meaningful future-facing dialogue. Amongst these are:

  • Misplaced assumptions about the board's role. For example, that directors' primary role is to supervise and critique management work rather than to spend time applying their collective perspectives, wisdom, and experience to 'sense making' and anticipating and influencing the future.
  • A parallel lack of understanding by management of the board's role and responsibility and, therefore, a failure to stimulate and support the board's work.
  • Board composition that lacks directors able (or, in some cases, willing) to contribute to what is essentially an intellectual process requiring conceptual and analytical thinking;
  • The 'chicken and egg' problem that there is inadequate articulation and documentation of strategic intent. Principally there is too much emphasis on 'how' than on 'why' and 'to what purpose'? When 'strategic plans' are predominantly about planned management initiatives and activities there is little context for the board's strategic dialogue.
  • Inevitably it follows that reporting to the board is not only retrospective in nature but mostly draws the board's attention down into the job of management.
  • Board meeting agendas that are poorly designed in terms of both their content and structure; and
  • Insufficient understanding among directors about the business and/or its external operating environment. Sometimes this is accompanied by a fear of that ignorance being exposed by management or other directors;

Setting the scene for a continuing strategic dialogue in the boardroom requires the creation of the type of boardroom culture and governance infrastructure that will ensure the board is able to conduct the right kind of conversations. The following principles are generally applicable in this context.

Board meetings are for the board

Firstly, be sure to treat every board meeting as a board meeting, not as a management meeting attended by directors. Board meetings are the primary vehicle for the board to attend to the responsibilities it is held accountable for. These responsibilities all link back in some way to ensuring the organisation achieves what it should. Executives will contribute to and benefit from meaningful governance level strategic dialogue, but they act on behalf of the board not the other way around. A board must, therefore, do its job first. This may mean some boards may need to completely rethink the purpose of their board meetings.

Board meetings need to be well planned

Board should have an annual agenda or work plan that determines ahead of time - at least roughly - where the board intends to focus its attention. This should go way beyond a calendar of meetings to include the specification of key issues and decisions to which the board must apply its collective mind. This will then drive the content and structure of each meeting. Allocation and sequencing of the time at each meeting should reflect these high priority issues and decisions.

Board meetings are essential elements in a continuous strategic thinking process

The boardroom culture should be one in which strategic thinking is regarded as 'what we do around here.' It is not a magical, esoteric or academic pursuit carried out in a special meeting perhaps once a year. There should be an expectation that the knowledge, experience, analytic capabilities and common sense of all directors is both a valued and an expected contribution. Boards must be intent on rising above the 'day-to-day' to instead address 'the big picture' and reflect a commitment to looking ahead rather than behind. The past is a 'sunk cost'.

Management reporting must speak to the board's needs

All too often board papers consist primarily of reports and information prepared for a different purpose, namely executive operational control. Management teams are often critical of their boards for 'deep diving' but they have helped directors into the pressure suits and fastened the weight belts. At the same time, we shouldn't be unduly critical of management for that. Reporting problems tend to stem from the lack of prior, board-set criteria. Consequently, board meeting materials are almost always broader in scope and more detailed than boards need. They need concise 'dashboard' type reports that enable governance-relevant financial and non-financial performance metrics to be quickly evaluated. Valuable board time is then available for strategic conversations.

The Chief Executive's report should be separate and focus on the headlines

The Chief executive's report should satisfy - very concisely - the board's natural need to know that 'all is as it should be' and, if it is not, what is being done to address matters of concern. This report should not, however, confine itself to giving the board a succinct sense of the overall condition of the business. It should draw their board's attention to actual or potential changes in the operating environment and the accompanying opportunities and threats. It is the first report a director would want to read when the board meeting pack arrives. It should focus them on the future.

Strategic thought at the board-level should be well supported

It is important that the strategic thinking process is well resourced. This means suitable background papers prepared to stimulate discussion. It also means directors putting in their own preparation for the exploration of important topics. When an executive prepares material to support a board discussion topic the time allocated should not be dominated by its presentation. Relevant material should be circulated in advance and 'taken as read'. At the meeting key management and technical personnel should be present but mainly to provide interpretations and additional information in response to questions.

Once these building blocks are in place the board can get on with the job of 'designing the future'. In a future article I will outline some of the strategic questions that can stimulate the type of conversation the future oriented board might be having.

 

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