Seven ways to improve board effectiveness in uncertain times

Wednesday, 12 October 2016


    In its latest Board Effectiveness Report, Deloitte explores the key drivers of board effectiveness and how these elements, when applied collectively, can help to manage and embrace uncertainty.

    Deloitte’s latest Board Effectiveness Report1:19

    Uncertainty isn’t new. It is driven by so many factors and has certainly become more complex and relentless. As a result, business is operating under levels of pressure never experienced before.

    Recently, Deloitte engaged directly with more than 50 senior and experienced directors, many from ASX200 boards, to assess their thinking on what board effectiveness will look like in the future.

    From these conversations has come a new report, Courage in the boardroom: Winning in uncertain times.

    The report presents seven key themes, and distils director thinking on what is needed to drive the big winners in this world of uncertainty. These include:

    1. Bold, decisive leadership
    It’s important to have a strong strategic framework that facilitates better and faster decisions and outcomes. Boards should not be looking backwards, but rather, should rely on the right forward-looking information about strategy, culture, people and customers. This, along with clarity and strong alignment of the organisation’s purpose and strategy can cut through the noise and enables decisions.

    2. Opportunity mind-set
    Enabling directors to focus on supporting new opportunities is important for an organisation’s future. This can be done with meaningful risk appetite statements and clear communication of risk capital and risk pricing. The board needs to be clear on its appetite for innovation and should have realistic expectations for failures that will occur along the way. Its role is to drive a culture that encourages and understands failure as part of the innovation process.

    3. Ecosystems are crucial
    ‘Doing the right thing’ can create conflict and uncertainty for boards in balancing competing stakeholder demands. Building valuable, open relationships across multiple stakeholder groups is key to building brand trust and organisational resilience.

    4. Match fit
    The ability to seize an opportunity depends on how nimble the systems and processes of a business are. Boards have a role to play in challenging these, and are looking to manage the tension of the new models threatening the existing ones. To do this, the board and the organisation need to be agile and open.

    5. Culture, culture, culture
    Culture matters and depends on the right people are needed who can calmly and quickly work through left-of-field events and other challenges. An effective organisational culture is one where responsible risk is encouraged, all employees understand the purpose of the organisation and how their role contributes to meeting this purpose and personal responsibility and openness are encouraged. Boards can lead a good culture by demonstrating the importance of accepting failure without blame and systematising how to learn from it.

    6. Cracking the diversity code
    Tomorrow’s boards must consider dynamic renewal, bringing fresh perspectives and diversity of thinking at a functional as well as cultural level. Directors can accelerate the process of enriching board thinking through gender, educational, cultural, global and experiential diversity.

    7. Curiosity is key
    Directors should get out of the ‘same old’ boardroom, and should even look across borders to learn from approaches in different companies, industries and countries. Developing new skills and insights are essential for innovation and should be sought to create the questioning and challenging environment needed to imagine, inspire and deliver better outcomes. Complacency can be a killer.

    Richard Deutsch is Deloitte Managing Partner, Assurance & Advisory and Directors' Program Leader.

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