War in Ukraine, disruption of supply and distribution due to sanctions, soaring inflation and murky geopolitics. These are uncertain and volatile times for every organisation, coming hot on the heels of the Covid health emergency.
As a result, it’s more important than ever that boards navigating these challenging times have a chair who has the skills and experience to ensure they remain an effective decision-making and value adding asset that drives business growth.
Today, it’s vital that the chair ensures directors have role clarity, which is the foundation of an effective board and leader of the board. Good chairs clearly understand their role in helping the board add value to the organisation, the demarcation of responsibilities between themselves and the CEO, and ensure each director is clear on their role in contributing to the work of the board.
Good boards also understand where their role ends and the role of management begins. Any ambiguity and confusion over roles on the board, particularly in an unpredictable world, will have a negative impact on board effectiveness and decision-making.
Chairs should also have clarity about the value they add in leading the board, which includes board composition, workplans and calendars, that reflect this value delivery.
Agile boards are ready for the future
At a time of significant upheaval, the chair must understand the importance of agile and adaptable boards. What worked well during the Covid crisis might not work so well today. Therefore, it’s vital they ensure the board is adaptable and agile as their business navigates its way through these uncertain times.
The chair needs to focus the board on future strategy—how the organisation can achieve its purpose during this volatile time—by looking at new opportunities, rewards, as well as the risks. Importantly, they need to make future strategy live in the boardroom—not something the board focuses on once a year.
With the interplay between the three critical elements of risk, strategy and return often based on assumptions at board-level, the chair must ensure that assumptions are challenged to validate their relevance. Only then can the board have assurance that they are on the right path. Being challenging in this way is particularly important during periods of volatility.
There’s a need for adaptable, agile leadership in an increasingly virtual and challenging world. Therefore, it’s time for the chair to move from the traditional command-and-control style to a more facilitative leadership—one that embodies emotional intelligence.
This way chairs can create and nurture a board culture of psychological safety, where bad news travels to the board more quickly than good, where directors have the courage to constructively challenge, and where it is fine not to have all the answers, particularly during these difficult times.
Due to the huge impact it has on the performance of the company, the most important relationship in the governance system is between the chair and the CEO. As I’ve already touched on, the foundation of this relationship is based on role clarity that the chair is the leader of the board, and the CEO is the leader of the business.
To be a value-adding relationship, this needs to be one built on trust and respect, where there’s candour and honesty on both sides. Smart chairs reflect on how well this relationship is working and take the opportunity to recalibrate where required to ensure that the rapport is an asset to the board and the organisation.
Check your composition
The chair needs to consider whether the current composition of the board is the right one to take the organisation forward and ensure it is fit for the future. They should look at their board through the prism of the five drivers of diversity—demographics, skills, experience, thinking styles and circles of influence—and contemplate how well the current line up matches up. True board diversity is broader than any one of the five drivers and delivers wider perspectives, improved decision-making and outcomes.
It’s worth remembering that with the rapid pace of change in the technology and digital worlds, and its impact on business, boards need directors with the skills and practical experience in those areas. Only then can they realise the opportunities for their organisation.
While “You are on mute!” was the catchphrase of 2020, most boards have now adopted processes and ways of working that demand the leader of the board is adept at using technology for meetings.
Manage reviews of the CEO and directors
Many organisations stopped undertaking reviews of those on the board while in crisis mode during the health emergency. Now is the time to restart them, if they have not already.
All on the board derive substantial benefit from a structured and systematic performance review at least once a year, with clear accountability and follow up.
As it’s the role of the chair to ensure that the board, CEO and even themselves are ‘fit for the future’, they must lead and manage the review process.
Undertaking a 360-degree evaluation of those on the board is the only way to find out if they have the capacity, capability and culture to deliver success for the organisation in the future.
It’s these assessments that might prompt the board to consider if a different director is needed to improve effective decision-making and help drive business success.
Undertaking succession planning for the CEO, themselves and board members, is vital for the chair to maintain business continuity. They should not only prepare well in advance for planned departures, such as retirement, but also unexpected ones, such as due to illness, or not being up to the task in hand, post review.
To avoid the potential for disruption to decision-making by the board, and reduce the risk when recruiting a new director, the chair needs to focus the board on succession planning. It should be reviewed annually for all on the board, to ensure the right leadership team is in place, so the board can achieve its purpose.
Another key process the chair needs to take the lead on today is in the planning and implementing of a thorough induction for new starters to the board. This involves a bespoke “journey of learning” that should unfold over 18 to 24 months. It must include formal governance and company specific governance training, organisation, customer and sector experiences, and an effective buddy system.
This is the best way for new directors to make a valuable contribution to the board as quickly as possible—vital during challenging times—and bring the onboarding process into the 21st century.
Gone are the days of dumping a pile of reading material on a new director and expecting them to hit the ground running.
Those chairs that take these important steps will ensure their board continues to be an effective decision-making asset that drives business growth during these volatile times.
John Harte is managing partner at Integrity Governance