COMMUNITY UPDATE

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Stakeholders are demanding faster, more responsive businesses and Boards have a role to play in enabling this agility. They must also continue to provide excellent governance and ensure long-term value creation. This tricky balance requires an innovative mindset, trust and the courage to forge a unique path in today’s ever-changing marketplace.
 
At Criticaleye’s recent NED Forum, held in association with EY, non-executive directors and Chairs debated the importance of embracing both short and long-term opportunities.
 
Maria Elena Cappello, Independent Director at BPER Banca, an Italian banking group, said that Boards must be proactive, return oriented and ESG focused. “They need to look long-term and take courageous decisions to shape the company of the future, by thinking outside the box, the business model and their comfort zone,” she commented.
 
In today’s complex environment, Matthew Blagg, CEO of Criticaleye, agreed that showing independence of mind is crucial: “Boards and executive teams need to step back and focus on the bigger picture. Otherwise, there is the risk that they will jump on the latest trend and follow where others are leading."
 
He continued: “Sometimes courage is about standing still and taking stock while everyone else runs around. The confidence to forge your own path comes from strong alignment on the leadership team. This takes open discussion and strong strategic debate.”
 
The role of a strong organisational purpose cannot be underestimated when building the forward strategy. Reassuringly, a poll conducted at the Forum revealed an overwhelming 92 percent of NEDs believe their organisations are using purpose to drive long-term value.
 
Leaders must come together and align around this shared vision. “Purpose needs to come from the top: from the leadership of the Chair, the Board, the CEO and the management team,” Maria said.
 
Hywel Ball, UK Chair and UK & Ireland Regional Managing Partner at EY, set out the questions Boards should be asking themselves: “It's about having a coherent story from top to bottom. How does a company’s purpose help drive value creation? How does that deliver the value that we know stakeholders want? And how do we evidence that journey?
 
“If Boards keep challenging themselves on that then, as a minimum, I think [they’ll] deliver long-term value creation and secondly, as a by-product, [help stop] the erosion of trust in business,” he said.
 
 
Balancing today and tomorrow
 
Sustainability is one area where non-executives can provide an invaluable long-term perspective, but Catriona Schmolke FREng, Trustee and VP at the Royal Academy of Engineering, said Boards also need to act with agility on this today. “An awful lot of people don't realise that they need to get their house in order physically, as well as strategically,” she said. “From a climate change perspective, Boards should be making sure that they're really thinking about their risk as an organisation and their ability to operate.”
 
She continued: “In the past, it was all about seismic [events], but now [it’s about] sea-level rises, flooding, hurricanes and storms. For everything you see in the news, there are companies being impacted because they can't operate.”
 
If the Board is solely focusing on the long term, they will also miss opportunities to innovate and stay relevant. Maria observed: “The role of a Chair is sometimes really challenging, especially when you have a CEO who is conservative. It can be complicated to [bring] innovative thinking into the organisation, but you have to do it because otherwise your business model can become obsolete in a blink.”
 
In the ‘digital revolution’, being able to innovate first and scale at pace will help you succeed. “The challenge is that you need to think about a three-to-five-year strategic plan, but you also need to think in quarters, in weeks and in sprints,” Maria commented. “You must have an organisation that enables fast decision making at Board level.”
 
This is easier said than done. “The challenge, especially in more conservative industries, is a lack of time, resources and talent. You have siloed data, siloed departments, legacy technologies and the absence of processes for managing innovation,” Maria said.
 
Matthew agreed: “The quality of information reaching the top table isn’t always good enough to help the Board challenge robustly and then make fast, well-informed decisions. Chairs and non-executives must be clear about the information they need from management and why they need it,” he said.
 
More than anything, it is a strong and open relationship between NEDs and the executive team that will allow a business to plan for the future while being prepared for the unexcepted to occur.
 
“Successful organisations have leaders that build trust, demonstrate respect and listen. They will thrive over both the short and long term because they are curious and evolve based on what is happening externally,” Matthew said.
 
 
Anisha Tansley, Content Executive, Criticaleye
 
In the next Community Update, we will explore the key insights to come out of Criticaleye’s CFO Retreat 2021 – The Collaborative Leader.