The digital board composition and refreshment are all about digital fitness.
Contemporary boards play the crucial directorial role in business strategy oversight, performance monitoring, business advising and policy setting. They are also the mastermind behind the digital transformation. Not only do today’s BoDs need to have sufficient knowledge to understand the digital business ecosystem, but also they need to have the collective insight to present today and foresee the future. The matter of fact is that the changes sweeping the business are hugely disruptive and there is nowhere to hide. Leadership is all about change and directorship is about steering the business toward the right direction. From board composition and refreshment perspective, which challenges do you face, when and how do you tackle the issue of change in the boardroom? And how to build high-performance boards for today and the future?
How do you define diversity and embrace inclusiveness? What do you see as the most important types of diversity in terms of filling decision blind spots at the boardroom? Conventional wisdom defines diversity based on physical identities such as gender or race, but even you have the seemly diverse group of people, but if they practice the same “in box” thinking, without the cognitive difference, group thinking is perhaps still one of the biggest pitfalls to compromise decision effectiveness and board maturity. It is the difference in thinking and perspectives that diversified BoDs bring to team decisions. The board should optimize their decision-making processes in the presence of an "outsider," that causes organizations with boards of more diversified BoDs to outperform organizations with homogeneous boards. To put simply, “diversity of thoughts” should be the decision factor for the board to embrace inclusiveness. This diversity along with deep knowledge of the business will allow them to be real "thought partners" with senior management as they consider the longer term goals beyond quarterly earnings. Diversification is a component and in some cases a very good initiation of multidimensional business value creation. The directors need to be diverse by mindsets, industry background, skills, experience level, and perspective. If boards set the leadership tone for embracing cognitive diversity and appreciate independent thinking, people start to think, understand, learn and work together leading to better decisions and better performance.
How can board set the tone for encouraging innovation and digital transformation? Boards should understand that innovation is not one individual's or even a department's responsibility. It is a leadership effect and cultural issue. Boards as top leadership teams should participate or even lead in the area of both innovation management and management innovation. Thus, the board’s composition and refreshment will directly impact on the attitude and aptitude to innovation and digital transformation. The important issue is how the board accommodates diverse opinions and how they assess them and converge the diverse thought into wise decisions for both innovation governance and management innovation. Although the major responsibility of Board is for practicing governance, which doesn’t mean to stifle innovation, on the opposite, it means to set principles & guidelines for allowing the business to manage innovation in an effective way. With creative new blood, BoDs can make the proper policies to encourage innovation, as well as manage risks. It requires acknowledgment, involvement, and commitment.
How willing are directors to make way for new directors when fresh skills and diversified experiences more closely aligned to the digital strategy are called for? The Board is responsible for ensuring an appropriate mix of skills, knowledge, and experience are present or available for it to fulfill its function. The boards as top directorial roles need to be open-minded, embrace the better way to do things. Digitize boardroom via complementary skills and experience, build creative tension between collegiality and challenge. Even the majority of BoDs are senior executives, they need to break down the “status quo,” present learning agility. They need to educate themselves by hearing different views about the organization, its environment, and strategic alternatives. and show the inquisitiveness to ask the tough and right questions.
The digital board composition and refreshment are all about digital fitness. The best fit for the board depends on the Board’s current makeup, culture, and which “gap” needs to be filled. So the Board composition needs to embrace both cognitive difference, functional difference, and other experience/capability difference. The high mature digital board is built on a foundation of integrity, welcome and embrace diverse thoughts, value those thoughts and behave accordingly. Digital BoDs today are democratic, diversified, cogitative, and proactive, bring different opinions and viewpoints, should have the ability to balance resources, risks, and consequences.