2023 IoD Leadership Conference: Panel discussion on governance

The global and local landscape has faced extraordinary challenges that have shaken the foundations of organisations and their boards. As we move towards a new normal, boards need to rethink their governance practices and adapt to the changing environment.

Key actions for directors and boards to consider are to:

• refocus on strategic decision-making and the long-term direction of your organisations
• reflect on the board’s governance frameworks and practices and embrace opportunities to improve and implement best practice.

During times of crisis, it is common for immediate attention to be directed towards operational concerns and boards naturally engage in hands-on support. However, the real governance challenge lies in striking a balance between addressing operational matters and recognising when to step back and adopt a broader, long-term strategic perspective. While crises necessitates swift action, it is crucial to ask where the focus needs to be right now, and whether the board needs to redirect its attention towards strategic priorities.

As boards tackle long-term decisions, one important duty falls on the chair – making sure the right people are part of the board. Guiding boards through an ongoing process of renewal is vital in a constantly changing environment. By regularly refreshing board members, bringing in fresh viewpoint, and avoiding getting stuck in the same ways of thinking, directors can greatly improve the effectiveness of the board.

It is essential to regularly evaluate how the board is performing to identify areas that need improvement, foster mutual accountability and nurture deeper reflection on the board’s capabilities. It’s important to handle board members’ retirement carefully, especially during critical times, to ensure a smooth transfer of leadership.

Recent events have shown that boards need to be agile and responsive. Technology has emerged as playing a crucial role in helping boards meet the organisation’s needs quickly. By using flexible meeting practices instead of strict schedules, boards can improve their approach, ensuring that discussions contribute value exactly when needed. Embracing adaptation and change allows directors to navigate the ever-changing landscape and come out of crises stronger and more resilient.

Actions for directors and boards

Given this background, directors and boards should consider the following actions:

• Have regular strategic sessions: Set aside dedicated sessions to focus on long-term performance. These sessions are valuable for assessing risks, discussing emerging trends and ensuring alignment. Investors and owners now expect a clear vision that looks ahead 10-15 years for long-term value creation. By involving relevant stakeholders, boards can tap into diverse perspectives, leverage different values and specialised knowledge and foster collaboration. Governance is ultimately about people – people with opinions who desire more involvement.
• Regularly review board performance: Boards should take responsibility for self-regulation. Conduct regular assessments of board skills, experiences and diversity, taking into account the evolving needs of the organisation. Annual reviews of the board’s performance and governance practices help identify areas for improvement and ensure alignment with changing needs. Make sure to schedule these reviews on the board’s calendar. Maintaining a continuous-improvement mind-set ensures boards remain agile and responsive to emerging challenges and opportunities. Proactively consider the board’s composition in light of strategic direction for the next five years. Invest in educational opportunities to enhance directors’ knowledge and skills.
• Fine-tune governance frameworks and processes: Continuously review and adjust governance frameworks and processes to respond more effectively to crises. Ensure that the board can swiftly respond when necessary. Implement agile decision-making structures, strengthen risk management protocols and enhance crisis response mechanisms to ensure organisational resilience and effective governance. Anticipate future challenges and opportunities through scenario planning and strategic foresight.
• Foster open and constructive dialogue: Cultivate an environment where open and constructive dialogue is encouraged. Urge board members to share diverse perspectives, challenge assumptions and engage in robust discussions. Actively seek dissenting opinions and alternative viewpoints to avoid groupthink and promote intellectual curiosity. Engage external experts to provide objective analysis, industry insights and guidance. Their involvement will stimulate new conversations, enhance transparency and foster a culture of innovation.
• Improve transparent and timely communication: Effective communication is crucial for maintaining trust. Cultivate a culture of open and transparent communication, using regular channels to engage with stakeholders, solicit their input and listen to their concerns. Building strong relationships during favourable times establishes trust and creates a supportive network that can be leveraged during crises.

Questions to ask

By embracing these actions, boards can effectively navigate crises, ensure long-term success and drive dynamic governance. Some useful questions for directors to ask themselves include:

• Are we striking the right balance between operational focus and strategic thinking that respond to the current needs of the organisation?
• Do we have the right mix of skills, experiences, and diversity on the board to respond to changing environments? Are we operating as a cohesive team? How should the board evolve in the future?
• Are our governance frameworks and processes agile and responsive to potential situations?
• Are we fostering a culture of open dialogue, diversity, and innovation within the boardroom?
• Are we proactively anticipating future challenges and refining governance practices accordingly?
• Is our communication transparent, timely, and fostering trust among stakeholders?