The responsibilities and influences of chief executives are not confined to their own companies and industries. Executives need the right kind of board to support them in all of the strategic decisions they need to make.
Until relatively recently, the role of the corporate board had, arguably, remained largely unchanged for a century or more, but this is fundamentally no longer the case. Just as business has been experiencing increased volatility and uncertainty, and grappling with new markets, new modes of doing business, and the immense changes that digitisation and technology have introduced, the boards that oversee our organisations are being rocked by the same tectonic - or tech-tonic - shifts.
Dr Jacek Guzek is an associate director at Deloitte Consulting, responsible for strategic sensing and insight, part of the strategy area that is looking into trends and directions of markets in our changing world.
A nuclear physicist by training, Jacek spent much of his career in R&D for mining companies before making a shift into business with an MBA some two decades ago. He joined Deloitte and never looked back. Today digital in mining is part of his wheelhouse, as are companies in the energy, resources and industrial sectors. Within this lies one of Deloitte’s newest and most exciting capabilities: the intelligent boardroom.
This, he says, is about equipping executives and boards with the insights required from a strategic perspective, to help them make decisions about the present and future. “The logic is informed by the relationship between the CEO and the board,” he says. “If you look at what a CEO needs from a board today, the rationale for strategic boards and intelligent boardrooms becomes very clear.”
The plight of the CEO
“Being a CEO is an exposed position today. It is a prominent role, an active one, and people look up to you, meaning it is also sometimes a lonely position. The buck stops with you,” says Jacek.
This is also why we are increasingly seeing a strong partnership forming between CEOs and CFOs, a relationship built on balance and trust. Similarly the C-suite needs a new relationship with their board.
The responsibilities and influences of chief executives are not only confined to their own operation and industry. They impact on multiple levels, including societal, cultural, environmental, and often even political. That is all happening in an increasingly complex, unpredictable, and disruptive world of today. In this context, Deloitte believes, the executives would appreciate having the right sounding board - pun intended - in all of the strategic decisions they need to take.
“We believe that the strategic board is not a ‘nice to have’. It's not enough to have the board of the past to ‘just’ check the regulatory and fiduciary boxes. It should help the CEO in a great way to take those strategic decisions. If it is properly constituted, and if there is a proper relationship between the chief executives and board, then the board will really become a strategic asset, representing a wealth of strategic and leadership experience.”
The challenges at hand
There are several needs, and do’s and don’ts to consider, says Jacek, all of which are part of how Deloitte arrived at the concepts of the strategic board and intelligent boardroom:
1. The CEO needs to take an active role in shaping the board’s new strategic role, and their strategic impact. “Most of the time boards of the past are a bit passive. We think it is the CEO's job to ensure that they have the right board for their needs. This is because most boards are not naturally positioned to drive change initiatives in behaviour or in mandate. There is a huge asymmetry of information between C-suite and board. This can deprive the chief executives of the board's true strategic value.”
2. The chief executives must be fearlessly open and transparent with board, and they should have an expectation of that being reciprocated. “That is easier said than done. Most of the time the directors on the board want the CEO to be successful. There is a great amount of goodwill which can be used for his or her advantage. But CEOs need to openly solicit feedback, and demonstrate that they are open to it, that they listen, analyse and take heed of the input, empowering and encouraging the board to provide this input.”
3. The CEO should embrace tension and diversity of opinion within the board. This leads to options and different views which might be enriching. “The benefits outweigh the negatives,” says Jacek. “We think it is a great idea that the CEO brings some unfinished or even half-baked ideas to the board, something that can still take shape with the proper feedback and guidance, something that can benefit from diversity of views. Disagreements mean pitting ideas against each other, and may be inviting tension in the room, but constructive tension can be for the greater good. For this to be constructive, there needs to be trust, respect and support, as well as a degree of emotional maturity that means understanding that not every conflict can be resolved with immediate answers.”
4. Traditionally the board duty is equal to participating in a few discreet meetings throughout the year. Deloitte believe that there is a lot to gain from facilitating the ‘board experience’, rather than a series of meetings, and that the CEO should facilitate this. “Lots of things happen between meetings. “The board experience - as opposed to ‘just’ hosting board meetings means that views take shape between meetings. Leaving that time ‘uninfluenced’ can be a waste,” he says.
5. The CEO must not be shy to signal to the board what capabilities he or she expects the board to have. “This is part of having the right people in the board, of the calibre to advise the CEO strategically,” says Jacek. “Sometimes we see boards that are stale. People get comfortable and there is very little movement, little fresh blood or new perspectives. This was largely fine in the past, but it won’t work in the workplace of today and the future. Of course, it is not the role of the CEO to assume the nomination prerogative of board appointments, but there is nothing wrong with the CEO expressing their views on what calibre of people are needed, what kind of capacity, expertise, and capability they are looking for in order to have the board as a strategic advisor.”
6. Finally and most critically, the chief executives must provide the board with the right information, the right perspective, right quantum of information, through the right presentation. “This means not too much, not too little,” he says. “This is an ‘ought’ on its own, and this is where our intelligent boardroom helps. The board will only be as good to the CEO, to the company, as the information they possess and understand. So it is critical that we give the board the information they need to be helpful.”
The Goldilocks of insight
Getting the balance of information provided is top priority. “It is so easy now with electronic communication to attach whatever information and distribute without thinking,” cautions Jacek. “But this also means we can send too much information. Someone needs to spend time on collating the right information, analysing it, and pointing out exceptions. Being guided by exceptions frees up the board from going systematically through everything which has already been agreed. Here we can very quickly and clearly focus the discussion on what is important.”
Deloitte’s position is that chief executives should be asking the board what is working, whether they are getting the right information, and in the right volume. A few interactions like that will result in the information being tailored as required.
“This is an exciting thing that we have conceived here, and have been developing for a while,” says Jacek. “The intelligent boardroom we create for our clients focuses on integrating information, leveraging,technologies and digited assets to analyse - through machine learning, artificial intelligence and so on - to arrive at a situation where business performance is managed by exception, focusing on deviations from the plan, where they arise, understanding external risks, and if they could be avoided and how to avoid them in future.”
In this way, the intelligent boardroom is a business tool that enhances strategic decision-making. “We are using technology to enable integration of data across our organisations, and also using data to understand what is happening in the market, what competitors are doing, and what factors are shaping the industry. This allows us to have the right perspective to facilitate conversation around strategy.”
Diamonds in the rough
“When we collaborate with clients it is at two levels: Firstly, there is a digital nerve centre level, then the intelligent boardroom on top.” At the first level, there is a data and analytics layer containing the right leading metrics and predictive analytics which draw information from various systems in the organisations, such as ERPs and sensors.
“This layer is designed to drive operational excellence, through full visibility of the operations in real time, and across the entire value chain,” he explains.
On top of this, as stated, sits the intelligent boardroom, which is the space between the operations and the corporate structure. “It is, importantly, based on information that is consistent across organisation, one version of the truth that the digital nerve centre provides. Once you have that, you can enable the strategic decision-making, and management of shareholder and stakeholder objectives.”
With an intelligent boardroom in place, Deloitte says clients are better positioned to measure organisational performance against strategy, and interrogate whether their actions are really driving the outcomes they want to see. This lets companies and boards see if they are off-track and how decide how to get back on track, through scenario modelling or planning.
“Then there is the external view,” he adds. “Drivers from outside of your organisation like political, social, technological, economics and environmental factors interact and create "mega-trends" that affect sectors and companies. Having insight on both levels is part of being future-proof. With advanced insight into these metrics, you can assess the health of your strategy for now and the future.
“People say that the data is the commodity of the now, but we say data is a dime a dozen. Data is all around us. Without thinking you can measure something that is not driving the strategy. Rather, we need the "so what", that insight that lets us decide what to do and how to position the company,” says Jacek - and that is like the difference between raw diamonds you wouldn’t even recognise as diamonds, and the sparkling cut jewels that are so prized the world over.