Tools to Adapt to a Profoundly Fast-Changing World
Being able to survive and thrive was the focus of Charles Darwin's On the Origin of Species. "Survival of the fittest," a phrase that originated from Darwin's evolutionary theory written in 1859, suggested that organisms that adapted to their environment are the most successful in surviving and reproducing. This thinking could not be more relevant for business today.
Survival is not just about physical or intellectual strength. The ability to both think and adapt to a changing environment will determine who will prosper and who will become irrelevant. Major forces are currently reshaping how we live and work. For boards, the global pandemic has accelerated the adoption of new technology such as virtual platforms and artificial intelligence (AI). At the same time, the board is expected to understand the oversight of environmental, social, and governance (ESG) objectives.
These forces are creating the need for stronger, more competent private-company boards and for directors to raise the level of their strategic engagement to work through these challenging issues with immediacy. Adding to the board's oversight responsibilities is the need for succession planning that ensures leadership at both the board and management level can effectively address these profound changes.
My thinking has been forged by the breadth of my experience serving on both public and private boards in various leadership capacities. Very often, day-to-day operational realities take priority over board governance needs. An agile board will make room for both.
We are in an unprecedented time where there is a greater need for independent directors to strengthen the culture of these boards to ensure robust and challenging strategic discussions with management that are forward-looking. The criteria for consideration for board membership should include governance expertise, strategic thinking, communication skills, leadership, diversity, and, more recently, understanding the "social" aspects of ESG that relate to the purpose of the business and how that is translated to the oversight of human capital and workforce management and performance.
Independent directors on private company boards have a crucial role in ensuring the next generation of company leadership. Any discussion about succession can be painful if not managed properly. And, the topics of leadership development and succession planning are a priority that, unfortunately, sometimes gets mired in internal politics.
Experienced independent directors can look over the horizon and ensure this becomes a business discussion rather than a personal one. Succession planning is a duality that involves both management and the board. To compound this challenge, we all know that umpires will not throw themselves out of the game, and the same is true for board members. One of the critical board leadership skills for the future is the ability to communicate to a multigenerational workforce, some of whom may still be working virtually, and a customer base that will continue to be quite fluid.
Disruption is creating new opportunities. For example, the acceleration of the introduction of telemedicine was born out of the terrible reality that tertiary hospitals were at full capacity with COVID-19 patients. In its place, AI and new technology platforms were literally introduced and adopted overnight. The deployment of any new technology requires discussion at the board level that addresses intellectual property protection, cybersecurity, and the identification of new threats and vulnerabilities. Board agendas now need to include cybersecurity planning and dashboard items to monitor performance.
Jim DeLoach, managing director of Protiviti, reports that its annual global risk survey consistently shows that data security and privacy concerns continue to be among the top challenges facing companies worldwide. "No matter how much organizations spend on cybersecurity, the threats continue to evolve in terms of sophistication, intensity, and focus," he writes. Analyze the cybersecurity budget and planning to determine that protection, detection, response, and recovery receive sufficient investment.
Good governance requires a regular and thorough review of board and committee structures. If committees have not yet been established, this, too, should be prioritized. Embedded in these board discussions should be the mission of each committee to adopt committee charters that detail the composition of membership and leadership of each. Many private companies do not have these important disciplines in place because it is sometimes difficult to analyze gaps that require new action.
One way to organize efficiently is to use dashboards. Effective dashboards need to be created with clear data, understanding the sanctity of time for both management and the board. While agendas outline issues for board meetings, dashboards provide insights and data that chronicle performance. One private company CEO shared that since the onset of the global pandemic, the frequency of board meetings has increased to once a week. Board meetings require intense preparation by management that may take them away from their day-to-day operational responsibilities. It also means that the board becomes perilously close to violating the lines of operating accountability versus strategic oversight. Focused dashboards should capture key issues, and responsibilities can be established by proactive and engaged private company boards working with the CEO. That way, meetings won't necessitate this kind of weekly attention and are kept on track.
Ensuring that your private company board adapts to change—and avoids becoming part of a new generation of fossils or dead organisms—is a choice. The choice is the board's to make.
Stuart R. Levine is chair and CEO of Stuart Levine & Associates.