Changes in some of these environmental factors could be forecast or sensed by on-board instruments but, as much as anything, it was also about the crews having ‘their heads out of the boat’. Actively monitoring the changing conditions around them and sensing new possibilities to gain (or maintain) speed were frequently the deciding factors in winning a race.
We hope to see these kinds of behaviours reflected in governing boards. A proactive, ‘heads out of the boat’ kind of board is alert, agile and focused, representing one end of a continuum. Members constantly scan the environment to understand and draw potentially significant signals to the attention of colleagues and executives alike. A positive board dynamic—high in trust and mutual respect—allows new information and ideas to be processed in time to take advantage of a constantly changing operating environment. These boards are clear on what success looks like and their members are determined to ‘make the boat go faster’.
At the other end of the continuum are boards whose members are often disconnected from each other and even the organisation they govern. Directors are mostly earnest and well-intentioned but have their heads down inside the boat. These boards are passive and more likely to defend the status quo than seek out opportunities to achieve a strategic advantage. They inch through meetings with agendas that hardly change from one meeting to the next and are likely to follow mindlessly unproductive practices and processes inherited from their forebears. Typically, they will be drowning in volumes of largely unprocessed and often irrelevant data contained in backward-facing reports.
The time and attention of these ‘asleep at the wheel’ boards’ tends to be consumed by business-as-usual. It is highly likely they will fail to pick or even notice a significant ‘wind shift’ that could affect the reputation—and possibly the viability—of their business.
If your board is at this end of the continuum, think about how you might get out of the water, up on the foils and flying. Here are seven pre-conditions and practices that could create some lift.
1. Clarity of organisational purpose
“Because good governance starts with good judgement about what matters most to the organisation, boards and management must sift through information, read signals, pay attention to cues and clues, and ultimately discern what really matters”. (1)
The process of discerning what really matters is virtually impossible if a board does not agree on organisational purpose and what success looks like. There is no reference point for identifying opportunities, finding and fixing problems, and making strategic choices. In the absence of a clear destination, any road will do. Board and management are likely to monitor and measure the wrong things and miss signals from the environment that should prompt a change of tack. (2)
2. A relevant and up-to-date strategy
Sir Winston Churchill is reputed to have said, “Plans are of little importance, but planning is essential”. More recently, boxer Mike Tyson bluntly observed that, “Everyone has a plan until they get punched in the mouth”.
Many, if not most, traditional strategic plans are out of date by the time they are completed. The time they take to develop, and their cost, means there is little appetite for a regular refresh, so their value as an organisational guidance tool diminishes and something different is needed.
Henry Mintzberg argued that it is more useful to think in terms of ‘emergent’ strategy—the way a company responds to unanticipated events. He observed a tendency for decision makers to overestimate their ability to predict the future and plan for it in a precise and technocratic way. Mintzberg urged them instead to watch carefully for changes in their environment and make course corrections accordingly.
Timing is vital. Waiting to make course change decisions until the future is sufficiently clear is unlikely to be a winning strategy. If your competitors notice and respond to a wind shift—or the possibility of a wind shift—before you do, it’s race over!
3. Good access to up-to-date information and thinking
Many boards tend to wait for their management teams to tell them what is going on, so are constrained by whatever framing management puts on that information. In other organisations, management teams welcome the range of market intelligence and analysis that directors can and should bring to the table.
What is the prevailing model that operates in your board? Are board members allowed to switch off between meetings or are they encouraged to keep watch for what is happening in the organisation’s operating environment?
Board members worth their place come to meetings with their ‘brains on’, ready and willing to contribute to a stimulating discussion about what is happening in the organisation’s operating environment, and how it might take advantage of any changes. These directors are likely to read widely about the sector and pass on what they see and hear that could be significant for the organisation. They are likely to at least monitor, if not participate in, social media forums that relate to their organisation and its sector. As expected of any professional, they will also seek out the best thinking about governance practice and performance.
They will have the use of a board portal that puts all the documents relevant to the board’s work as near as their smart phone. They will also have direct access to company information systems so they can track company performance data in real time. When the environment is changing, real-time information is critical. “The lack of updated environmental analysis and programme evaluation should be as unthinkable as not having current financial statements.” (3)
Besides self-directed continuing professional development, directors will likely be supported by their company’s own programmes, including specifically designed opportunities to explore and better understand various business drivers and emergent risks.
4. Future facing performance measurement
Many boards complain about meeting packs that contain too much material, often including a large proportion of relatively unanalysed data.
Another barrier to board understanding and timely decision making is poor selection of performance measures. Too often the choice is governed by what is easiest to measure—activity (internal effort) rather than impact (external benefit). It is always the case that ‘an OK measure of the right thing beats a perfect measure of the wrong thing.’
Much of the information boards traditionally receive (particularly financial) is backward facing. This kind of ‘lag’ (or after-the-fact) information has its place in keeping score but is received too late to inform action. Remembering that they can only influence what has not yet happened, boards also need ‘lead’ indicators—performance indicators designed to predict the probability of desired outcomes being achieved.
5. Board meeting intentionality
Sensing, and making sense of, what is happening in the organisation’s operating environment, must be a core board activity. Board meetings must be designed to focus on things that matter, which includes making time to gather and process insights about issues that might alter the organisation’s operating environment. Without an explicit intention to get the best out of the meeting, time and energy will be consumed by ‘business as usual’. Inevitably, this is at the expense of identifying and evaluating opportunities to make the boat go faster.
6. Board capability
Does the board’s membership have the diversity of thought it needs to fully understand the firm’s operating environment and to respond appropriately to a complex stakeholder environment? Does it have the appetite to consistently challenge the validity and acceptability of the status quo? If the board cannot change its composition, there are many ways to bring in outside views to challenge and better inform its thinking.
7. A commitment to reflection and active learning
Even at the international pinnacle of a sport like yachting, not everything goes perfectly. There is always something to learn from the way a race was sailed. As at the end of a race, the end of a board meeting is a valuable opportunity for learning.
Before a board concludes its meeting, a brief review can create considerable value for both board and management with simple questions like:
- Was the meeting as purposeful and productive as it might have been?
- Did we have the information we needed (neither too much nor too little)?
- Was it in a form that made it easy to understand and engage with?
- What did we deal with today that we might have handled better?
- Was there anything that anyone wanted to bring up today but did not get the chance to?
- Cathy A Trower (2013). The Practitioner’s Guide to Governance as Leadership. San Francisco, Jossey-Bass, p.132
- The board of a disability support organisation and its management once declared to us at the start of a strategy workshop that they were in the housing business. Modifying existing houses to mitigate the physical disability of their client group was the strategy the founders had chosen. Forty years on the client group still had the same disability but by now quite different needs that could be satisfied by our client. By the end of the workshop the group had decided to exit their housing stock and adopt a different way of supporting the client population. They had unwittingly allowed their historic modus operandi to become a proxy for their purpose. In recent times they had been trying to solve the wrong problem.
- Raymond Fisman, Rakesh Khurana and Edward Martenson. ‘Mission-Driven Governance’ Stanford Social Innovation Review, Summer 2009, p.43.