9 September 2017
By Ricci Carlsson
Boards of directors are facing a paradigm shift, which will change board work and what is required of you as a board member. Read below and learn how to keep up with the times and develop your board of directors now and in the future.
The future is knocking on the door of the boardroom. This adds new requirements to the competencies that the board needs to possess and the work effort it must deliver.
Where the traditional board manages and monitors the executive board, the board of the future must supplement the monitoring task with strategic feedback to a much greater extent. It is not in the reactive, listening role that the board delivers the most for the company, but rather in the role of providing proactive feedback.
Perhaps you are nodding in agreement and thinking that that makes sense, but the reality is still slightly different. Unfortunately, I still often witness competent board members leaving most of their competencies outside of the boardroom and taking on a passive mindset before entering. This poses a great challenge, because, in doing so, board members are not delivering the value that is needed for future success.
Why is board work changing from how we know it? The answer, of course, is fast development. We live in a world of many rapid changes in several business parameters, which affect companies legally, socially and from a business perspective. Therefore, the board of directors needs to have a completely different and broader perspective than what was required previously.
You see, the board of directors must be able to see and spot everything that the executive board doesn’t. You don’t see new business opportunities and potential threats if, as a board member, you only think of the company around the four annual meetings and otherwise don’t concern yourself with it. I normally say that there’s no more SITTING on a board, it’s time to be WORKING on a board because the board of directors can only deliver the necessary constructive feedback to the executive board if there is a more continuous involvement.
“If you want to be an attractive board member who adds value, it takes more than common sense.”
It therefore surprises me that I often come across the same traditional conception of board work where the company is passively monitored and there is no real collaboration with the executive board. Far too many boards of directors believe that common sense is enough. But, unfortunately, that no longer suffices. Boards of directors are facing a paradigm shift, and if you want to be an attractive board member who adds value, it takes more than common sense – much more.
Boards of directors are increasingly held responsible for companies’ successes and failures by the media. This should increase boards of directors’ attention on how they can help add value to the company and help the executive board minimise and tackle risks. That fact alone ought to be a wake-up call for most boards of directors and make them realise that they, too, are responsible for securing future business opportunities and innovation.
The chairman of the board should also take on a different role than previously. The role does not only entail securing formalities. You see, from now on, the chairman must be a real leader of the board – and that is an entirely different discipline than being a shadow executive board. The time consumption thereby increases, and in the vast majority of cases, board work will not be an appointment with a low working effort – it will be a job that is both demanding and exciting and has a great influence on the company’s future.
The chairman of the board should also ensure that there are competencies within the board that are necessary to provide strategic feedback to the executive board. In other words, boards of directors should preferably not be made up of eight clones. Consider carefully how to cover the various necessary competence areas, such as digitalisation, finance, marketing, etc. The strongest boards of directors have great collective business experience, but that doesn’t mean that all members have the same kind of experience.
“The strongest boards of directors arise from a combination of experience and innovation.”
To put it briefly: in the future, the right board of directors must be put together based solely on the business need. Naturally, someone must still monitor the financial side, but there should also be board members with completely different focus areas – members who can see new business opportunities. That ability often requires somewhat younger individuals with different capacities to come on board as well.
That type of board member may not have the greatest “business-as-usual” experience, but they may have experience with exponential business; because they must be capable of something different. The strongest boards of directors arise from a combination of experience and innovation. Naturally, this requires that the meeting is conducted openly and honestly and that all parties are willing to listen and embrace new ideas. I have no doubt whatsoever that the boards of the future will be made up of many more different types than we see today, because, as Churchill said, “If two people agree on everything, one of them is unnecessary.”
At the risk of oversimplifying the world, many boards of directors have not yet heard the future knock on their door. They carry on and do things the same way they did last year and the year before that and, unfortunately, I fear that many of them will face a bit of a rude awakening. Fortunately, others are sensing the change and attempting to strengthen the competencies and the construction of their boards of directors. The board of directors of the future will have the right and indeed an obligation to initiate new topics, which they haven’t had before, such as identifying necessary changes in time.
The board of directors should help the executive board balance the present and the future through strong strategic feedback.
“Everyone must contribute in their area so that the board of directors moves from being a burden to bringing relief.”
The greater expectations of the board of directors apply to all members. No one is exempt. Everyone must contribute in their area so that the board changes from being a burden to bringing relief. To summarise, the board’s success criterion is helping the company navigate an extremely changeable world, rather than merely checking the numbers.
As a board member it is important to understand that, regardless of your role, you are personally responsible for the company’s finances and reputation, which is yet another reason for living up to the responsibility you have taken on as a board member. Staff-elected board members in particular will need to upskill their competencies in matters such as finance and law, and therefore I believe that you should insist on getting those competencies because you are liable on a par with all other members. You cannot take being a board member lightly.
In boards of the future, personal competencies will also grow in importance, in my opinion, and we are starting to see this in many other places, too. Some people make quick decisions, while others need more time. Some people are good at arguing, but does that mean that they have the best arguments?
When the requirements of the board of directors increase, it is also important that all members can bring their views into play while being able to listen and navigate the relationships among the other members of the board. The communications aspect will also grow in importance on boards of the future – not only internally, but also externally to the outside world.
As a board member, you are ALWAYS an ambassador for the company. Many stakeholders around the company notice how you act in more contexts than the ones you articulate in connection with your role as a board member. The board of directors will therefore contribute much more to the company’s reputational account. The greater the surplus in that account, the more there is to draw on when something goes wrong. Unfortunately, I often see that boards of directors and executive boards who are not particularly interested in depositing anything into the company’s reputational account very quickly descend into the red when something bad happens.
The board of the future will have more requirements, but they will also have a much greater chance of having influence. The executive board may be driving the car, but it is the board of directors who decides the speed and helps set the direction. It will be an exciting task, but for boards of directors to succeed in the future, you must have a proactive, strategic mindset and be ready to provide your input in the boardroom.
