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11 Jun. 2018 | Comments (0)

On Governance is a series of guest blog posts from corporate governance thought leaders. The series, which is curated by the Governance Center research team, is meant to serve as a way to spark discussion on some of the most important corporate governance issues.

(This is the second part of a two-part series on the philosophy of filling boards with competent directors, making them more effective, and rebuilding them when necessary. The first part  addressed board composition and effectiveness.)

Building Your Board

An astute chair is thoughtful in blending the varying strengths of board members, so the board is firmly grounded in its history and values and also able to offer future-focused perspective and risk-managed judgment.

In addition to the common factors for director selection -- education, experience, expertise, and diversity, we increasingly include discussion about vision capability— i.e., hindsight, insight and foresight — in matters of board selection as well as board development. We discuss three facets of vision capability.

  • Focus: Does a candidate or sitting director tend toward hindsight, insight or foresight?
  • Range: Is a director able to contribute in each of the three areas?
  • Proficiency: Where does a director demonstrate mastery [or notable weakness]?

 Assembling a full board profile is straightforward from individual assessments. These discussions are a commonsensical lead-in to dialogue about strategy.

Focus

Hindsight

Insight

Foresight

 

Contribution to the board.

 

 

 

-Comprehensive recollection of what has happened.

 

-Contrast of past events within the present context.

 

 

-Discovers important things.

 

 

-Determines which market signals matter most.

 

 

 

-Clear thinking about “what” must be anticipated or undertaken.

-Spiritual leader for the future.

 

 

 

Value- add

 

-Descriptive recall

 

 

-Diagnostic expertise

 

 

-Predictive or Prescriptive thinking

Behaviors that Differentiate 

- Accurate, apolitical observational skills.

 

 

-Explains history in context with the present.

 

-Facilitates the full board’s understanding of what has happened.

 

 

-Able to offer the board not just recollection of facts but reflection.

 

-Explains why events occurred

 

 

-Delivers the “a-ha” epiphany

 

 

-Proficient at detecting patterns; trends; cause/effect relationships.

 

-Re-examines conventional wisdom; challenges the status quo.

-Offers realistic ideas about future choices

 

-Able to lead and reshape other director’s thinking.

 

-Adept at gauging risks: with the status quo and with a change agenda.

 

 

-Provokes the board to “reach” or re-direct; triggers action.

 

 

 

Recognizing Plateaued Directors

The contribution of every director has a life cycle. Ranging from the beginning of their board service to their departure, directors contribute in different ways as they move along their service tenure. Predictively, at the beginning of service, a new director has insight into the marketplace and is able to bring foresight vision, risk appetite, and innovation to his or her contribution. Hindsight may come from prior service on other boards but does need time to develop for a current board.

The contribution of each director must be monitored and assessed. Over time, directors can lose their sharpness and connection to the marketplace. They become less able to contribute insight and foresight, and their base of contribution may increasingly come from hindsight. Directors who have become less able to deliver foresight, may slide back toward anchoring their contribution with hindsight. Of course, some directors are just better equipped and possess personal competencies that make them more valuable. Imagine the consequences of a full board sliding away from offering foresight and moving toward the contribution of hindsight.

These are “plateaued directors,” or perhaps directors in decline. Their wisdom may continue to be relevant and dominate but they begin to contribute more limited foresight. A chair or governance committee must recognize these changes and respond with professional development and coaching that enables the director to remain fresh and able to formulate insight and offer foresight. Board evaluations may be tailored to address the skew and predilections of the board and individual directors.

There comes a time for a board to nudge a director toward retirement in order to skew the collective balance of the board toward a more ample and able contribution of foresight.

Wrapping up.  Is There a Formula for Striking Balance?

No. While we work with chairs that recognize the push by activists and governance pundits toward greater attention to strategic matters, these chairs will caution others not to neglect oversight of the present in their board work. Their message –- “Don’t play so heavy a hand with foresight and strategy matters that your business is surprised by current events in a rapidly evolving, disruptive marketplace. Yes, your strategy must be thoughtful but solid everyday operational expertise just might trump great strategy.” Their message is stay close to the “now” in your board governance oversight.

Our sample is small but the suggestion is to time-manage your board with 15 percent on past matters; 60 percent of time on present matters; and 25 percent on future focused matters. Your time allocation will likely be different.

The views presented on the Governance Center Blog are not the official views of The Conference Board or the Governance Center and are not necessarily endorsed by all members, sponsors, advisors, contributors, staff members, or others associated with The Conference Board or the Governance Center.

  • About the Author:Patrick Dailey

    Patrick Dailey

    Patrick Dailey, Ph.D., is an industrial and organizational psychologist.  He has senior level corporate and consulting experience with major international organizations including Hewlett Packard,…

    Full Bio | More from Patrick Dailey

     

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