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    On complexity, prioritisation, decision-making

    Accountability Complexity Decision Making Governance Leadership Monday Muse Societal Wellbeing Strategy
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    The onset of the latest war in the Middle East has captured the hearts and minds of political and business leaders, and the general population, around the world. The mainstream media is awash with coverage of military interventions and responses, and, now, the choking of the Strait of Hormuz. ​And this is reasonable, for the impacts on global commerce are being felt widely.
    That the situation is complex is axiomatic. But it is not a new phenomenon: the Middle East has been a hot-bed of disputes since biblical times. Muslims, Jews, Ottomans, Babylonians, Zoroastrians, and other groups including colonial powers have fought over land, water, and, latterly, oil, for a long time. If history is a reliable indicator, lasting peace will be difficult to achieve. ​
    The situation is instructive for another reason too: the near-total focus on the subject. ​From mainstream media to business meetings, and in conversations around dinner tables and in local pubs and bars, the topic du jour is the Middle East War (an intentional descriptor, for the scope has long-since reached beyond Iran and Israel). Little else matters at the moment—or so it seems. And yet other battles continue around the world, in Ukraine, Afghanistan, Pakistan, and elsewhere; the climate continues to change; China’s influence continues to rise; and the impacts of Brexit and Covid continue to be felt, despite fading memories. 
    That events beyond the Middle East War are not being widely discussed does not mean they have gone away or are no longer relevant. ​
    The parallels for boards and business leaders are stark: That which is front-of-mind dominates the mindshare. However, just because risks are not discussed does not mean they are not present. Boards that ignore complexity and dynamism do so at their peril. To wit, how often does your board allocate time to consider carefully still-weak signals, strategic risks, various scenarios and interdependencies? In times of great change or disruption, “At every board meeting” is a good answer. 
    If boards are to have any hope of governing with impact amidst complexity, directors need to be on their game. That means preparing well (understanding extant risks, emerging developments, and interdependencies); being actively engaged and decisive in meetings (includes prioritising where and how limited resources are applied); and holding fast to the tenet of collective responsibility after a decision is made. 
    Directors who keep alert and maintain a strategic mindset are more likely to detect still-weak signals, make smart decisions and, ultimately, realise the potential to the company they govern.
    And what is not to like about that?
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    Is an elephant [in the room] obscuring our view?

    Accountability Corporate Governance Governance Research Sustainability Value Creation
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    ​The rise of artificial intelligence capabilities over the past 4–5 decades (you read that correctly, not 4–5 months or even 4–5 years) has brought some awkward questions into stark relief.
    • How might AI enable or impair our strategic priorities?
    • Are the data in management reports to the board accurate, and conclusions credible?
    • As directors, we’re supposed to govern with impact. But what matters most amongst the many priorities in the reports from management—and how might we decide?
    • Are the so-called experts that management keeps putting in front of us actually experts, or are they just AI-junkies who have generated content that appears to be informed?
    These questions, and many others like it, highlight an overarching question that has become very real for many directors, more so as the onset of AI-generated content has started to pervade boardrooms, executive suites and beyond:
    The report behind the question brings the problem into stark relief: Many conclusions developed from academic research and peer-reviewed articles may not be reliable. Indeed, many may not be worth the paper (screen) they are written on, despite the seemingly attractive arguments put up by the authors.
    This being the case, how might directors validate the data and reporting in board packs?
    If boards are to govern with impact, they must first ensure the reports they receive are not only accurate but credible. This is a demanding expectation, but it is the baseline. Fortunately, we are not the first people to ponder this matter: This muse explores some of the core considerations.
    The elephant in the room is not AI, per se; it is the directors’ ability to distinguish between what matters and what does not—the signal and the noise.
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    On high-performing boards: unlocking potential

    Accountability Corporate Governance Effectiveness Family Business Governance Leadership Monday Muse Performance Tough Questions
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    Have you ever stopped to wonder why so many companies fail to realise the potential they aspire to?
    When I speak with directors, the desire to operate at high levels of performance is palpable. In my experience, most say they aspire to have a great impact. But when one looks more closely, a great many boards struggle to break the shackles of average: they are constrained by confusion over the role of the board, impaired by dysfunction within the boardroom, and/or expectations are misaligned.
    A recent survey (conducted by PwC) highlights the characteristics of high-performing boards:
    • strong and effective leadership from the chair
    • strategic vision and focus
    • proactive engagement
    • culture of trust and collaboration
    • pragmatism and responsiveness
    • focus on high-performance [mindset and teamwork]
    • awareness of stakeholder expectations
    • cool in a crisis
    This is quite a list! Yes, it is. But most of these characteristics are consistent with the findings from ground-breaking board research conducted over a decade ago. That research concluded that if the board is to have any impact beyond the boardroom (especially on firm performance), three things matter: 
    • capability (what directors 'bring')
    • activity (what the board does)
    • behaviour (how directors act and interact)
    Board structure and composition is relatively less important, to the point of being insignificant. This finding (now known as the Strategic Governance Framework, see this article for a summary) emerged from a peer-reviewed long-term observation study of boards going about their work—one of a small handful conducted to date. As with studies conducted by the late Jane Goodall, my study sought to get as close as possible to the subject of interest (the board) to observe them in their 'native' habitat. That meant direct observations, for the board only exists when the directors meet.
    Since that time, the Strategic Governance Framework has shown itself to be a useful mechanism to help ambitious boards move beyond orthodoxy and box-ticking, to realise organisational potential. But the embrace of such a mechanism is not without its challenges: it means stepping away from the perceived safety of 'best practice' recommendations—a daunting prospect of some. 
    Ultimately, boards must decide: is compliance with contemporary recommendations, codes and regulations sufficient to discharge duties owed, or is more required? For those who decide more is required, the Strategic Governance Framework ​may be worthy of consideration.
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    Keeping up appearances

    Accountability Corporate Governance Effectiveness Governance Monday Muse Research Sustainability
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    Today, on the third day of an intrepid journey through several Eastern European countries, we have been exploring Kraków Stare Miasto—the Old Town—searching for glimpses of how life was lived in the past. Back streets and less-trod paths, away from trinket stands and touts, are my happy place, for they offer opportunities to peer beyond facades and veneers. ​​
    This scene was one amongst several that caught my attention today. The seemingly decrepit building itself was far from remarkable—but then I noticed two signs—clues to what lay inside: a five-star hotel named after a Polish polymath, and a Michelin-starred restaurant. Who knew? 
    As I looked at the building and signage, a woman sauntered past, on the phone to an unknown soul and seemingly oblivious to her surroundings. My mind wandered. Who was she speaking with and about what? Was she a local or a visitor? What were her circumstances?
    The imagery and parallels with board work are stark. Statements written in board packs may seem complete and accurate, but they may not be. Often, there is more to the story than what is first ‘seen’ in the board pack. Depending on how eloquently the papers have been written, directors may find it easy to form opinions quickly—jump to conclusions, even. Directors should resist such urges! Boards have a duty of care to look beyond the facade, to gain a more complete understanding through discovery and debate, before deciding. Some boards do this well; some are well-intended but struggle; and yet others appear to be motivated by looking good (as evidenced by complying with various ‘best practice’ recommendations and corporate governance codes) than doing what it takes to operate as a high-performing unit.
    When the pretence of keeping up appearances is stripped away, how does  the board you serve on stack up?
    Wittgenstein cautioned people to reserve judgement, for what seems to be so may not actually be so.
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    Preparing for board meetings: how?

    Accountability Artificial Intelligence Corporate Governance Decision Making Director Development Governance Value Creation
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    The ways board directors prepare for board meetings is changing. Gone are the days when most directors simply turn up for the meeting, open the supplied packs and rely on their instinct as they sit through presentations by management (read: work it out on the fly). Most directors these days are well-intentioned, having diligently read papers before the meeting (having received them via a portal tool, PDF stack or thick package of printed materials). Some of these directors augment their reading with additional enquiries, in an effort to fill in blanks or formulate suitable questions to ask during the meeting. Though a small coterie still rely on their instinct to listen carefully and discern in real-time (read: work it out on the fly, during the board meeting), the world is moving on, and rapidly so. The emergence of AI assistants is proving a boon for smart directors: they are embracing a new generation of tools to enhance their preparation—on the basis that better preparation is an antecedent of better decisions. 
    Preparation takes time, of course, and many directors say,  "It'd be fine if I had the time." My response is curt: "Given the duties you owe, and the importance of governing with impact, what else might be more important than preparing well?"
    In the spirit of collegial learning, how useful are Shekshnia and Yakubovich's insights, and how are you using AI to augment your board meeting preparations (if at all)? Please comment below.
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    Who controls your board’s agenda? Who should?

    Accountability Corporate Governance Decision Making Effectiveness Governance Performance
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    I had a fascinating conversation yesterday, with an esteemed board chair I have known for some years. Our wide-ranging exchange saw us dip into several topics of mutual interest including family and my recent 'elevation' to grandfather-hood; an upcoming advisory engagement; the importance of ongoing education for directors, especially in relation to 'soft skills'; techniques to chair a board meeting well; and board agendae.
    During the flowing conversation, Robert (*) said he had recently chaired a meeting in which a couple recommendations within what he called the “QuarryGroup Report” (a board/governance assessment that I completed last year) were to the fore. 
    Referencing the recent meeting, Robert said the agenda was packed, and that management had put up many papers to support the agenda items and ensure directors were well informed on what it deemed pertinent matters. He added that the meeting agenda was too full for meaningful discussions, let alone informed decisions. When I asked how he handled the situation, he referenced the QuarryGroup report. He said three items stood out as having strategic implications for the business and decided that is where the board should spend its time. He spoke with several directors after the board pack was issued and, in board alone time immediately prior to the meeting, confirmed the three items would take precedence. Through this action, Robert asserted control over the board's meeting. Management had proposed an agenda and prepared papers based on what it had thought important, which is OK, but Robert and the board had a different perspective.​
    Some readers may wonder about Robert's actions. Is it reasonable for a board chair to propose ignoring items or altering an agenda? Surely, management understands the key issues that need attention better than the board?
    I suggest the guiding principle to inform a response is this: The role of the board is to govern (to steer, to guide, to pilot). And, if the board is to have any hope of providing effective steerage and guidance, directors need to understand their role, and they need to apply their minds to the major issues and opportunities that lie ahead and make decisions accordingly. For this, the board needs to drive the agenda and ask management to prepare reports accordingly. Research shows that if this does not happen, the likelihood of the board influencing the performance of the company is low.
    When I asked Robert how compliance reporting and historical performance was handled (the board's 'control' role), he calmly said, "That is what committees are for." I smiled, for I was in agreement.
    What are your thoughts on this? Does the principle described hear apply everywhere? 
    (*) name changed.