The value-adding board: How high performing boards stay ahead
Boards play an invaluable role in guiding governance at organisations. The strategic value provided by their advice cannot be overstated in today’s dynamic world.
However, the impact of their guidance can be constrained by many factors. Additionally, the growing costs in running modern board meetings are mounting. Research by Diligent revealed the cost of running a single board meeting can range from NZD $55,000 to $105,000 for a medium-sized organisation, to NZD $650,000 to $1 million for a large organisation.
The need for boards to show their value is more urgent than ever, because time is money, and a high performing board can be key to a company's growth.
This begs the question: how can Boards ensure their effortsalways add maximum value to an organisation?
Maximising decision-making through active director engagement
Many directors feel board meetings take up time that could be better spent elsewhere. Harvard Business School research shows that 35% of time spent in board meetings is unproductive, with 73% of directors found working on other tasks during meetings.
Additionally, the What Directors Think report by the Diligent Institute found 19% of directors believe their board weakness links back to disengaged or underprepared directors. This might be addressed with solutions that encourage active engagement from directors in board meetings, to ensure boards continue to add value.
Virtual meetings have shown promise in helping address attendance and engagement, as Diligent’sown conversations with Directors has showna link to flexible ways of working and engagement. Still, longer-term research is needed to confirm if the trend is sustained.
Another action to enhance engagement is ensuring better preparation for board meetings. This always begins with a clear plan – well-defined meeting goals that dictate the flow, length and agenda of a meeting. When information is concise and digestible, it encourages debate which facilitates more meaningful decision-making. These actions, along with continuous assessment and improvement, are what will truly set value adding boards apart.
Enabling effective oversight and upskilling the Board
Directors are constantly exposed to the same rapid changes in technology as all workers in all industries. They must proactively equip themselves with knowledge and information to make strategic decisions in the face of constant disruption.
This challenge of understanding, and adapting to, the constant changes in technology was highlighted in the What Directors Think survey by Corporate Board Member, co-sponsored by Diligent. It reveals that alongside capital allocation, mergers and acquisitions and other core business issues, cybersecurity and artificial intelligence (AI) have begun to dominate board agendas. AI is rapidly advancing, as are the risks and costs of inadequate cybersecurity preparedness,and both are poised to create unprecedented challenges for corporate governance.
Furthermore, Diligent Institute’s 2024 Cybersecurity, Audit and the Board report also names AI and cybersecurity as areas most Directors struggle to oversee effectively due to a lack of specialised knowledge. The report identified similarities in companies that were best prepared to oversee these risks, noting boards with specialised risk or audit committees see better outcomes than companies that rely solely on theboard for risk oversight.
Mitigating risks requires the leadership of directors with the skills and knowledgeto effectively oversee and ask the right questions. At the same time, directors must ensure that governance structures like risk or cyber committees are in placeto more effectively distribute oversight and provide additional supervision that boards, with so many competing priorities, cannot do consistently.
Continuous assessment and improvement of Board members’ skills, and making sure new members are filling knowledge gaps of existing board members,will help build a well-rounded Board. Ongoing Director education is also criticalin forming an adequate layer of defence to support organisational governance.
Strategies, data and technology for a value-adding board
Diligent recently hosted a roundtable discussion with corporate governance leaders in Melbourne; the question of ensuring the boards’ ability to continually add value in their roles was raised.
One point of consensus was the need for relevant, reliable and timely data that aligns with business goals and strategic prioritiesfor a board member to capably oversee governance. Boards must strike a balance between operational and strategic discussions, with a bias to thinking strategically, and having the right data at their disposal is paramount to getting this right. If Directors are drowning in too much data, they may not find the valuable insights needed to think strategically, instead they will defer to operational questions instead. Meanwhile, the board chairperson must facilitate engagement by challenging directors and askingquestions that probe the most pressing concerns.
Not all risks are equal, so the board must prioritise risks according to areas that require the most attention. Ensuring the board is using the right technology to run its meetings is paramount in ensuring directors can collaborate effectively on the right problems, share insights and data and communicate seamlessly with other internal committees.
Value-adding boards employ solid frameworks. These ensure alignment and self-reflection that are the basis for good governance. This is achieved by first performing a needs-based assessment and research on best practices. They gather input from all relevant stakeholders to draft a framework for the board to approve and adopt. They alsohave mechanisms for continued monitoring anda structured review process that includes self-assessments from board members.
With companies generating large amounts of data every day, technology has become an indispensable tool in providing effective oversight and governance, as it opens a streamlined path for the most critical insights to reach the board. This enables the board to be more proactive in making smart and strategic decisions for the organisation. On the directors’ part, an intelligent data consolidation platform saves time in identifyinginsights, while also enabling better decision-making.
Good governance in data-enabled teams
The crucial task of effective governance falls in the hands of directors. But as the world advances and evolves at a breakneck pace, it also creates less certainty about what exactly good governance should look like and how boards cn ensure they continually add value.
Fortunately, there are methods to ensure an organisations governance frameworks are on the right track. For instance, boards that have a consistent system for self-assessment set their organisations up to become value drivers and outperformers. The characteristics of highly productive boards include well-considered and always-evolving governance frameworks; access to in depth insights into threats and opportunities involving the latest emerging technologies; and the right technology that enables efficient, effective and productive board meetings.
The quick and intelligent evaluation of large volumes of data via technology is a major differentiator in today’s competitive landscape. Directors who capably deliver strategic value not only have access to, but also take full advantage of, these razor-sharp insights to add value consistently.
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