We each often use the end of the year to take stock in our personal lives. What’s coming down the road? Is there anything we’d like to change in our lives? Are there are new paths we’d like to take? The same applies for boards: a time to reflect. Looking backwards at what’s happened - across another tumultuous year in politics, the economy, security and the climate. And also at what’s been achieved.
In the spirit of the season – and in line with what The Effective Board does each December – here are a few thoughts to help in your reflections. These of course are far from complete, nor are they authoritative. But they capture some of the questions boards might need to make space for over the next year.
We wish you all a happy festive season and a successful 2025.
good practices to consider...
- Check that your climate change discussions are about the opportunities, not just the risks and reporting. These may not be immediately obvious, and possibly not short term – but it’s a dimension that needs to be regularly revisited. Make sure the opportunities are thought through – and that there’s actually a plan to make the most of them, as well as to mitigate the risks. ?
- Work out what Artificial Intelligence might mean strategically and operationally, even if the direction and destination are unclear.? Perhaps moving away from an all-encompassing label will help to avoid tripping up: define it as different sets of opportunities and challenges to be found across product, services, operations, people…????????????
- Analyse how far you really talk about innovation. It might be about new product developments or fundamental AI-driven shifts – or just about new processes and working differently. At any level, a board should be pushing to know how the organisation is searching for opportunities and following through.? Start with the presumption that the organisation culture, reward system, processes and resourcing will all put up obstacles, and ask about what’s being done to overcome them.?
- Set out what you want to achieve from board diversity and what that looks like for you. More than ticks in boxes…? What do you – and can you –gain from varied experiences, varied perspectives and varied styles of thinking? And how might you encourage this? Does it have to come through a long process of changing the composition?????
- Take stock of how the board is helping to drive organisational diversity. We see many boards who are making the right noises – often with a NED champion – but the hard part is to see that real change happens. The best initiatives recognise that bringing the organisation along is key: mindsets can’t be imposed by executive diktat, so it takes sustained, thoughtful effort.? NEDs can make a big difference by encouraging management to keep at it. And of course, they will share experience of what they see working well elsewhere.?
- Challenge yourselves on how far the Purpose and Values of the organisation are really present in the boardroom. Look for opportunities to use the purpose to energise discussions across the agenda. Check that the values are part of decision-making – not with an explicit box to be ticked on the board paper, but implicitly throughout all of the management thinking and board discussion.??
- Make more time to think through the implications of geopolitical and macroeconomic change. The possibility of more trade barriers going up before we’ve learnt how to live with the consequences of Brexit, realignment across economic superpowers, continuing wars and political instability in Europe, never mind elsewhere…? Ask management to think it all through in a structured way and to set out their analysis of emerging risks, possible impact and potential response.? And don’t forget the opportunities – they will be there too.?
- Make 2025 the year you get on top of the board papers (again…)? This time, help the owners and preparers of papers to really understand what a board wants and what NEDs need. It means explaining the NED mindset, what information is needed for oversight rather than for managing, how NEDs can best be equipped for useful discussion and decision-making, and what that looks like in practice.? It means executives being clear in their own minds about what a good discussion at board level would look like, and what they want to get out of it. Then they know what they are briefing the board for, which is the basis for working out how best to do it.?
- Spending board time for the “E” of ESG primarily on the associated reporting requirements and frustrations. Yes, getting this right matters, but there’s a tendency for boards to put this ahead of the strategic opportunities. Nor should you allow the rest of the discussion to focus on the potential downsides.?
- Putting all things AI in a single bucket.? It may not be clear what “AI” is or what it will become, but does that matter?? It does when it’s discouraging boards from thinking through the consequences – both positive and negative. Instead, think of it as categories of technology-driven change. That can help the Board get its arms around what can otherwise be an overly-daunting and ill-defined topic.??
- Losing sight of innovation as a critical strategic driver. Most organisations declare it loudly to be key, but then it somehow rarely surfaces in boardroom discussions. It may not make sense to have an “innovation” agenda or report – innovation will be spread across many areas and activities remote from the boardroom. But getting each area to highlight what’s being done, and possibly pulling together a “this is how we’re changing” report would help boards do a sense check to make sure “innovation” is a driver, not just a slogan.??
- Slipping into a mindset which combines satisfaction with the gender ratio with a resigned acceptance that achieving any other diversity is near-impossible given the pool constraints.? If the obvious way seems closed, look for other paths. Ask what you want to achieve and what is missing – and then look for different ways of shaking things up a bit. Get some younger ones in, either as board members or as presenters, who might have good thinking and insight, even if they’re short of grey hairs? A few more sessions with SMEs? Reverse mentoring for NEDs with some of the workforce? A “mirror” board??
- Pushing ahead without a view on how the business should benefit. The moral imperatives matter, but it helps to bring the organisation along by explaining why it matters strategically too, and how it enriches the work experience for all. And good intentions are easily diluted by words unsupported by actions. A good board will be helping management face up to and avoid that risk.??????
- Failing to think through how Purpose and Values are relevant to the way the Board works and what it discusses. Or even worse, letting it be seen that the Board isn’t very sure what they are and how much they matter. If management are giving a strong message to the organisation, the Board should be visibly backing them up. If they aren’t, a board should be asking why not. Or challenging them why the leadership are stuck in the “only hot air” zone.????????
- Accepting that a few thoughts shared in the CEO Report is all that’s needed.? Surprisingly few boards spend much time on what it all might mean.? The board might not be able to influence the macro picture, but it can ensure there is systematic thinking through the potential consequences that will at least help towards being forearmed.????
- Accepting that “we’ve made progress” is good enough. Too often that means success in shortening and in driving out detail into appendices. That sort of success is always temporary (sigh…), because it’s dealing with symptoms, not with the root cause. It’s a problem that never seems to go away – so how about making this year different? In a year’s time, when you look back at the coming year, wouldn’t it be satisfying to finally cross this off the list????????
Written by Richard Sheath – A founder of Independent Audit Limited, he is the main author of our monthly eBulletin, The Effective Board, and leads our Thinking Board? online governance assessment service. He also regularly leads reviews of internal audit.
If you’d like to discuss any aspect of board effectiveness with our advisors, or to find out more about our board review services, please contact Remneek Sangar or go to www.independentaudit.com
