Compare and contrast: Proactive vs. reactive governance
The modern general counsel is charged with giving the best possible advice to organizational decision-makers. As a trusted adviser, they need the best intel available to help leaders make effective, well-informed decisions. As the amount of information available online increases, new methodologies for streamlining governance have emerged. One such methodology is governance intelligence. Governance intel leverages content which would often otherwise be classified as either market or competitive intelligence. The aim is to synthesize actionable insights or intel which can be used to inform director-level decision-making. Beyond that, effective governance intelligence empowers proactive as opposed to reactive decision-making. This article takes a closer look at the importance of proactive governance, breaking down its benefits and examining the consequences of reactive governance.
Differentiating Between Proactive and Reactive Governance
It's important to first establish the difference between proactive and reactive governance.
Reactive governance means acting to address an issue or resolve a problem before it becomes a crisis.
Proactive governance means acting to avoid ever having problems in the first place.
The difference between the two often comes down to when a board is made aware of the magnitude of a risk, the probability of its occurrence, and the best course of action to pursue when trying to evade it. It has become all too easy to let actionable intel slip past unnoticed. Information is available online today in unprecedented quantities. Social media has ramped up the speed at which that information travels. This has proven to be a lethal combination for organizational leaders. The quantity of information has led to information disengagement (or "analysis paralysis"). Directors literally have more information than they know what to do with. At the same time, the speed at which information disseminates online makes anything resembling "paralysis" the worst possible affliction in cases for which failing to act quickly can have major consequences.
Reactive Governance Means Losing the Battle
Consider the case of a product recall. Complaints begin pouring in from disgruntled–often former—customers. The word spreads: your company's product is causing harm. An avalanche of complaints pours in from social media taking a devastating toll on your company's reputation. Then come the lawsuits (themselves, a source of bad publicity). "Companies should always be on the lookout for an unusually large number of negative product reviews, especially products for children, the elderly and animals," warns Colin Kelly, a partner at the law firm Alston & Bird. 'For this purpose, tracking social media is the best tactic," Kelly advises. "Looking for even just a few negative comments can save the day if it warns you of a problem at the outset." As with other corporate scandals and crisis events, product recalls can shake consumer confidence in a brand. However, consumers are much more likely to be forgiving if food safety concerns are addressed quickly and honestly. Proactive governance gets ahead of the rigmarole of negative public sentiment. "In these situations, most of the time you want to be in a proactive stance, not reactive because if you're in reactive mode, you're already losing the battle," Kelly warns.
Precursors of Reactive Governance
The proactive general counsel must be able to identify the antecedents of reactive governance. The first and, often, most notable indicator comes in the form of data. No amount of effective communication can make up for having disorganized pool of data. Decision-makers will inevitably find themselves searching for a "needle" of actionable intelligence in a "haystack" of available information. It's important to note that avoiding a disorganized pool of data does not mean avoiding a large pool of data. A large quantity of data can just as easily work in directors' favor as it can work against them. The difference is whether or not the data is well-organized. The larger the quantity of data, the more important it is for the information to be well-organized.
Another major precursor of reactive governance is when information intended to guide directors' decision-making goes unused. This suggests that the information lacks either quality or relevance. Data that lacks in quality might be published by an unreliable source. The information may be outdated or presented within content that regurgitates or recapitulates on its source. The more removed data is from its source, the more room there is for editorializing and the stripping away of relevant context.
A third key precursor to reactive governance is when an organization lacks the resources to turn information into insights. Organizing and interpreting large amounts of data means having effective technological resources while articulating actionable insights often requires a human touch.
Fostering Proactive Governance
There are three broad benefits to proactive governance:
- Successfully evading risks,
- Seizing on untapped opportunities, and
- Avoiding the consequences of reactive governance.
For an organization's general counsel to counsels to champion proactive governance in the boardroom, they need the results of interpretation and analysis—insights that they can digest rapidly before setting the wheels of governance in motion. Proactive governance can best be achieved by streamlining the collection, curation, and interpretation of market and competitive intelligence. Governance intel provides a framework by which this may be accomplished. Without breaking down the governance intelligence methodology in its entirety, there are a few objectives an organization's general counsel or corporate secretary should aim to achieve to keep the board informed.
Know Your Search Parameters
Know the most important topics, companies, markets, industries on which to gather intel and develop the processes with which to automate the collection of data. Set up a notification system using RSS feeds or Google Alerts to send the latest content straight to your inbox. Understanding Boolean logic—a logical structure often used to enhance search engine queries—and other query tools can help narrow the scope of information down to exactly what you're looking for. This plays a major role in cutting through the noise to supply board members with actionable insights.
Know What to Share and How to Share It
Prioritize insights over information. This isn't to say the insights you choose to share shouldn't be well-supported. However, leading with key assertions (each backed by evidence and given context by further commentary) lets directors drill down into supplemental materials at their own pace without reading any more than is needed to make an effective decision. Pile them high with everything at once, and before you know it, your decision-makers will find themselves paralyzed.
Structuring insights in such away that allows directors to dive deeper down the rabbit hole (until a decision is reached or course of action is determined), you will need some flexibility in how information is presented. In most cases, this can be as simple as a thoughtfully-formatted email newsletter. However, it's important to also consider the technological aptitude across your board. While emails aren't typically seen as being particularly sophisticated, it's still worth considering the extent to which "form" must play second fiddle to "function".
Conclusion
Governance intelligence has the power to bring a sea-change to boardroom deliberations. Board members learn more from reading less, ultimately enabling them to more efficiently make the most effective decisions. The methodology makes a world of difference for directors committed to proactive governance. After learning the risks and consequences faced by a boardroom forced to react to developments (both within the industry and the organization itself) the importance of a proactive approach is clear.
