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Embracing Transformation or Why You Will Need to Replace 50% of Your Board
May 6, 2020
On April 28, in another installment of The McMaster Collaboratorium, Principal of The Directors College, Michael Hartmann and guest panelists Richard Counihan, CEO DigniFi and Barry Libert, Chairman and CEO, AIMatters, explored how companies will need to reexamine the competencies of their directors given the current and lasting ways in which markets are changing and business models are being disrupted.
Most board members lack knowledge into today’s technology, business models and go to market strategies and are ill equipped to make decisions around artificial intelligence, big data management and other digital innovations.
Boards need to understand that risk management is the same as reward management, and stop managing risk from their current perspective instead of a strategic perspective.
The pandemic is forcing more scenario planning and strategic modeling, but should also include taking a look at the composition of the board to ensure there are more voices around the table that can speak to managing and positively harnessing disruption.
To start making changes to board composition, everyone must align around a robust business model, which may have changed since inception, and leadership and board members should have an equal voice, sharing their own expertise, to determine who is the best fit for moving the strategy forward with speed.
Innovation savvy boards are also more fluid – not regular scheduled meetings, but more interaction with leadership on an as needed basis and continuous communication to ensure alignment. Real-time interactions and ongoing engagement using digital tools, now being adopted, are critical to innovative governance.
Committee driven boards are no longer serving companies. A more holistic approach will better support fast changing circumstances, like those that have caused a major impact with the ongoing pandemic.
Organizations are integrated systems and boards need to understand how organizational systems are quickly evolving in the real world and how that evolution impacts the business. Technologies supporting boards need to be continuous, automated, real-time and online.
Efficiencies will come from a greater, disciplined focus on the purpose of the business – the proven business model – and the risks and rewards associated with that purpose.
There remains a high probability that boards will continue to replace themselves rather than seeking diversity of thought, experience and perspective and members who understand today’s realities. The impact of the disruption from the pandemic remains to be seen.
Watch key messages from the webinar here.