Keeping board activities behind closed doors is a luxury of the past. Karen Brice outlines essential elements for ensuring effective board dynamics and culture and, aligning leadership strategy with drivers of long-term value creation.
In the last few weeks, boards have had to open their doors to the outside world more than ever before. Whether it’s due to the increased attention from regulators, or as a result of the 2018 changes in the UK governance code, one thing is clear: many chairs see greater transparency and collaboration as the way forward for their boards. What does this mean in practice?
Leading board dynamics from the front
As boards look at how to adapt in the months to come, role-modelling from the front is vital. Many leaders have experienced what can be achieved from a strong sense of purpose and culture. Old-school mindsets around the board being a 'closed shop' are giving way to a more dynamic environment, where adult behaviours are increasing the pace and focus of discussion.
By generating a sense of trust and mutual respect among members, board dynamics become more inclusive and diverse - all of which improves the quality of decision making.
The principles of accountability, transparency and engagement must be applied when defining board effectiveness and culture. But why change?
Executive and non-executive directors (NEDs) alike tell us that, if their board isn’t adapting fast enough to provide the kind of leadership that is needed to protect and grow the organisation, they could face an increasing sense of isolation from management teams.
In fact, while the highly challenged management teams need to be held accountable at board for their decisions, they also need to be supported with additional skills and experience.
Executive directors have a right to know they have the trust and respect of the NEDs so they are able to bring forward discussion areas where the business is struggling. Otherwise, what is the benefit of disclosure? And so, the chair’s skills of facilitation and coaching are key to ensure the culture evolves to reflect the business needs.
The evolution of the non-executive director
Over the past few months, boards have faced everything from survival and decision-making that limits business impact, to long-term views on resilience and sustainability. Business leaders have had to adapt rapidly, increasing their transparency about their processes and driving new ways of working throughout their organisations.
The emphasis now is on speed, collaboration and value, while the board dynamics need to work well in this new virtual environment. NEDs are telling us they want to reflect in their role the changes that are happening at the executive leadership level, ensuring opportunities for increased effectiveness aren’t missed.
Moving forward, NEDs and boards will need to take a more agile and adaptable approach in reacting to their business’ needs. In changing times, it is essential that the role of the NED evolves to ensure it remains effective.
Traditional board dynamics that enable internal competition, dominance and defensiveness slow down the pace, undermine equality and eat into the agenda when boards are talking about being busier than ever before.
The leadership imperative for boards is to address any unhelpful behaviours that create inequality in board and committee meetings. We see seven interrelated areas requiring heightened board stewardship for defining an effective board culture, in particular:
Boards should consider the benefit of having a culture 'away-day' session alongside classic strategy planning, whether they choose to adopt the organisations’ purpose and values or not. It is for the chair to set the tone, but for everyone to set the board dynamics.
Stable board dynamics in unstable times is a must. A lack of stability harms culture, stifles productivity, erodes trust, and makes it extremely difficult to retain top talent.
Stable leaders model a level of constancy and consistency that organisations so desperately need, but often find missing. It is essential to consider agreed norms of behaviour and decision making, the scope of activity, welcoming engagement across stakeholder groups and visibility with access into the organisation.
3 Future-fit succession
While it takes an emotionally mature board to recognise the value of continuous improvement, chairs should subjugate egos for the greater good to grow their team performance.
Alongside core skills and market knowledge, the best board hires will come with expertise in leading change, organisational wellbeing, executive coaching or even start-up experience.
Because of this, boards need to push forward on their diversity and inclusion agendas fast. And succession isn’t just about NED rotation and executive succession. Businesses of all shapes and sizes need to grasp the nettle when it comes to taking the development of the tier-1 management team direct reports.
Management teams need mentoring, communicating and collaborating – whatever it takes to build the leadership capacity to drive growth.
The best decisions come from teams that see themselves working together towards a common aim or purpose, moving away from varying levels of commitment and engagement.
This should never be at the expense of challenge, scrutiny, ideas sharing – what matters most is harmonious board dynamics. Otherwise, it is the chair’s responsibility to confront the issue with a growth mindset.
5 Governance and ethics
The UK corporate governance code provides the template for board dynamics. However, the board needs to seek the reassurance it needs of what is happening in the organisation to counteract unethical behaviours and negative conduct.
NEDs must insist on exploiting new ways of working more closely with the primary stakeholder groups so that they can re-assure themselves they are getting the whole story at first hand.
6 Continuous team improvement
The traditional view of board dynamics is rarely presented as a ‘team’, but that will need to evolve if the culture is to mature.
Under the right chair’s leadership, the right board dynamics can and will flourish, even in times of continuous change. For a board to grow, members need to engage in a shared belief that developing new skills must happen more rapidly than circumstances change, with the need to focus on where collective skills and development would add real value.
Boards that believe all teams have the capacity for endless growth value their collective wisdom and learn together, both technically and culturally, with the benefit of an independent board coach attending occasionally.
The board meeting doesn’t benefit from being a hostile operating place, and the lack of real-life, face-to-face contact could increase that. Many boards have had to balance the unfamiliarity of remote working with the pressures of protecting their organisations. While most are still finding that balance, this shift needs to allow for more inclusive and bolder conversations, improving collaboration and exposure.
Unconscious bias and pecking orders that drove the dynamics need to be addressed once and for all to prevent the board from diluting its effectiveness in the months to come. All boards will benefit from a healthy and emotionally mature set of board dynamics.
Board dynamics for agility and adaptability
Ensuring that boards are more agile and adaptable in their approach to their business’ needs will drive leadership success more than ever before. Agile working will no longer be a cliché, but the marque of progressive and future-fit boards.
In the months to come, it is important that boards ensure executive decisions are not only well thought through, but delivered with respect and care. To do this well, the board needs to work as one, rather than on opposing sides.
While NEDs have the right to challenge every aspect of management actions, management teams have a duty to bring business decisions to the board for discussion. Only by working together within a culture of shared purpose and mature dynamics, can boards make more of a difference than ever before.
To discuss board dynamics and effectiveness further, contact Karen Brice.