Not so long ago, serving on a board was an entirely different ball game than it is today.
There were meetings several times a year, with the board book coming in the mail a few days before the meeting. Yes, it was as thick as a brick. But there would be that PowerPoint presentation in the meeting telling you what management needed you to know. The conscientious board member invested time reviewing and making notes on the “brick” and participated in the meetings, but save for the occasional big crisis, there wasn’t much engagement outside of these episodes.
Fast forward to today: the average public company director now spends an average of 30 hours per month on board work. Private equity portfolio companies can demand even more. Similarly, management is spending more and more time preparing for precious board meeting time.
External factors arose which drastically changed the governance landscape. These forces have created a major challenge to the episodic nature of engagement in most boards.
Think: the financial crisis, digital transformation, healthcare consumerism, the MeToo movement, cyber risk, trade policy, GDPR, activist investors—these issues can rock the foundations of companies. And each has either cropped up or changed significantly in the past decade, to create an even more rapid rate of change. Boards are no longer just managing risk internally, they’re now forced to deal with tidal waves of change entirely outside the organization’s control.
We’ve seen companies that were unable to weather the storm: American Apparel with its CEO crisis, the Theranos and Wells Fargo fraud scandals, and Sears’ inability to adapt to shifts in its industry.
External chaos is the new normal in today’s business environment, creating unprecedented and risky levels of pressure on boards, c-suites, and investors.
How do boards adapt to what today’s crises and pace of change require of them?
Constant external flux demands that today’s board be agile, engaging dynamically with their work.
“Dynamic” is defined as “characterized by energy or effective action.” Ineffective energy and action are swirling around every organization, requiring agility from boards to keep pace with the change.
Critically, to engage dynamically does not require that a board involve itself in the company’s day to day operations. A board’s primary function is still to provide governance and guidance over the organization’s strategy, risk, and performance. But for most organizations, external forces can now create or necessitate dramatic changes in strategy, risk, and performance nearly overnight.
Today’s boards now function in two key realities:
The Board Book Is Dead
No individual element of board work highlights the contrast between static and dynamic engagement better than a board book. No one would hold out a shred of hope for a company operating from a 600 page manual produced and reviewed once per quarter. So why do we expect boards to use one as the primary source of information on the company?
Dynamic engagement requires that necessary and relevant information is pushed to the board on a continual basis, and delivered in media directors are able to effectively consume. Printed manuals and in-person PowerPoint presentations aren’t agile means of disseminating critical information. Effective boards are creatively adapting the content, timelines, and methods used to share and digest information.
Engagement Is Multi-Threaded & Always On
Traditional board/management team dynamics revolve around quarterly/monthly board meetings, with the CEO and other execs taking questions and processing feedback—a process and cadence that certainly no one involved has ever thought to be optimal. Business environments simply change too quickly and frequently in today’s world for this to be effective.
Dynamic engagement means that as the board is made aware of information, they engage with the organization appropriately and respectfully without overstepping boundaries. Perhaps that engagement simply involves making an introduction, or providing feedback on strategy, but speed and agility are absolutely critical in order for the organization to move as quickly as needed in order to remain competitive, or even better, grow. Board members often possess vast amounts of relevant information and knowledge, and quickly capitalizing on that asset is one of the biggest competitive advantages in many industries today.
HOW TO GET STARTED
The truth is that top-notch directors have always engaged dynamically, and top-notch boards have never relied on the board book alone. But the chaos of the business environment today makes agility a necessary survival skill for every board, not just a luxury of the upper echelon.
It’s critical that management facilitates a single, secure hub for this communication and information-sharing to take place. An effectively engaged board utilizing insecure communication poses just as big of a risk to an organization as boards who aren’t engaged at all.
That's why we built Cloud Concinnity. Request a demo with our team today and let us show you how we can help your board and management team engage dynamically and become more agile.