AI Leadership for Boards – now a reality!

By Liselotte Engstam, IDP-C, NED and Chair, Communication, IDN Board Member

We are facing a period of disruption and disorder, and we need our leaders to show the way. Artificial Intelligence (AI) is one of the crucial technologies for solving our most critical business and society challenges for a more sustainable world. Board work is already a very challenging and complex task, and AI will bring that challenge to a new level.

When the National Association for Corporate Directors, NACD did a Survey of Public Company Governance 2019, prior to the pandemic, they found that three of the top five trends with the largest impact were technology related with growing business-model disruptions as the top trend.

Ref: NACD Public Company Governance Survey 2019

With an ambition to find insights to better guide boards, Fernanda Torre, House of Innovation at Stockholm School of Economics & Digoshen Partner, Professor Robin Teigland, Chalmers University of Technology and Board Professional, and I have pursued a two year academic and empirical research on the requirements of Boards Leadership of AI.  We found some unique insights on how boards can, without losing themselves in details or in technical jargon, move into the future of corporate governance.

To increase the impact, we decided to share our results in a bookAI Leadership for Boards – The Future of Corporate Governancewhich also holds guiding questions that can help boards move forward as they mature.

On 25 June 2020 we held our virtual book launch webinar and were fortunate to have some of our collaborators joining us, as the President of INSEAD Directors Network and Chair on multiples, Helen Pitcher OBE, CEO of Combient Mats Agervi, one of the founding faculty of Singularity University Kathryn Myronuk and MIT scientist researching digitally savvy boards and leadership teams, Stephanie Woerner.

The research was done in collaboration of companies like Combient, a unique joint venture of 30 of the largest Nordic globally operating companies, and FCG Group, a Northern Europe Governance, Risk and Compliance Advisory and Technology Services Company. We based the insights on literature review of both academic and practitioner literature, on deep dive interviews of more than 50 board members and chairmen and AI experts, on several board workshops including note debates notes and polls of 150 board members, and on surveys of 105 board members from across the globe, including the members of the global INSEAD Directors Network.

We have collaborated with INSEAD via guidance from Professor Stanislav Shekshnia and INSEAD Directors Network President Helen Pitcher OBE and with MIT via Dr Stephanie Woerner.

During the webinar we shared insights from the research that highlighted the need for boards to engage, and we shared example of cases and related board questions for boards to ask.

Dr Stephanie Woerner shared results from their research on the impact of Digitally Savy Boards and highlighted related insights of the new research of top teams.

Our findings identified that boards need to develop two competence areas to successfully steward their firms into the new normal. They will increasingly need to learn to balance the [1] guiding of Al operational capability and [2] supervising of Al governance capability.

The areas boards need to increase their focus and ambition on are within guiding of Al operational capability: 

1) Data Strategy and Management, 

2) Digital and AI-based Innovation 

3) Developing Digital Business Ecosystem

 

within supervising of Al governance capability:

4) Data, Ethics and Black Box Decision Making

5) AI Cyber Security 

6) Leadership in Digital Business Ecosystem

In the book, we have also summarized guiding questions that can help boards move forward as they mature.

Examples of questions in guiding AI Operational Capability

Examples of questions in supervising AI Governance Capability

The academic research project “4boards.ai”, has been run under the coordination of Chalmers University of Technology and Professor Robin Teigland, with contributions from Digoshen and House of Innovation at Stockholm School of Economics, in collaboration guidance of IMIT, an educational foundation ensuring increased cooperation between academia and industry to improve research validity and speed up the uptake of the results, and with funding from Vinnova – Sweden’s Innovation Agency.

The launch webinar was recorded and can be seen here.

The presentation deck can be found here.

A longer version of this blog can be found here.

The Good Coach Wins The Game – The Chairman And Their Team

By Kolja A. Rafferty, MBA, IDP-C and IDN Switzerland Ambassador

In professional sports, mental readiness is key for champions.  This is highlighting the importance of being mentally balanced also for senior executives. The Non-Executive Board must observe and nurture the mental health of the firm’s top executives in addition to overseeing the firm and acting as the interface between shareholders and executive management, to create resilient and sustainable organizations.

Executives are skilled, able, and well-meaning! Yet, in situations of rapid change, they are observed to act dysfunctional.

Research has shown, executives are skilled, able, well-meaning, and well informed about the firm and its surroundings. In general, they are motivated to pursue the best interest of the shareholders. However, in economic turmoil, executive teams have been observed, to fall into a cycle of dysfunctional communication. This is starting with a state of secrecy and denial, further escalating to blame and scornavoidance and turf protection and finally passivity and helplessness.

“Some pressure is good. It makes them run faster!”

A myth in management claims: A level of stress enhances the task performance of the employees. This belief is based on research results conducted in 1908 by the two animal behaviorists Yerkes and Dodson at the animal behavior faculty of Harvard on Japanese dancing mice and has been challenged by various scholars in the past years. Unless the executive team has been recruited from Japanese dancing mice, an increased stress level is diminishing executive performance.

Global sports management is ahead of bespoke management practice

Across different disciplines the global market for professional sports achieved 2019 a total revenue of $ 1.8 billion, leaving an average sports team with a revenue of $ 39.5 mil., in the same spot, as many SMEs. The sports industry is in reality a subbranch of the media and entertainment sector, where task-performance objectives are only on semblance reduced to scoring goals, similarities to business are stronger than one may think.

Muscles and brains cannot be separated from each other. For professional athletes, peak performance is the result of rigorous training regimes and a state of mental readiness. Yet, other than in economics, mental preparation is not left at private discretion but is nurtured by mental coached, preparing athletes for the match. Mental readiness is understood as a critical factor, which is attended with thorough attention.

When it really matters, the framework for top executive performance is at its worst 

Stress factors, related to situations of rapid change, where the dynamics of the transformation keep accelerating and exceed the level of control of the management, are identified and can be categorized. Excess executive stress under distress and turmoil conditions is driven by four aspects.

  • Rapid and drastic changes in the work environment, including increased workload, changes in processes, style, and communication
  • Financial and legal concerns, caused by reduced payouts, fear of job loss, potential personal liabilities (et al.).
  • Emotional disruption, through continuous and repeatedly non-appreciating communication with various stakeholders, but also including disharmony in the intimate relationship.
  • Future worries, for reputational consequences, the continuation of the own career path etc…

Clustering the drivers for executive stress, most stress drivers are triggered by immediate and internal processes. The Board-of-Directors holds the authority, to establish a culture, voiding the most notorious stress drivers, to protect and retain executive performance in situations of rapid change. This can be a foundation for growth and sustainability.

A coach, allowing his team to be mentally distracted before the championship, will be fired on the spot! For a reason!

In situations of rapid change, higher levels of emotional stress and turmoil are suspected to be the differentiating element between the executive teams of firms in distress that must be liquidated and those, that manage to recover.

Capital markets are sensitive to the emotional well-being of the CEO already on a much lower level. Research has proven correlations between the emotional distraction of the experience of a recent divorce and the reactions of the capital markets.

In the 21st century, we are applying executive (self-)leadership of the 1800s

For once, let’s be honest: We all «kind of» know about the risks of Burn-out and the importance of mental health in the Executive world, yet, a stressful workday, permanent connectivity and late hours in the office are treated by many executives as “scares of honor“. Regrettable yet excusable liabilities to the family, the intimate relationship or the own, personal balance and well-being. For career frontlines, this is accepted as the price for success.

In parallel, Executive incentive systems are set up to foster the short term profitability of a firm, yet often fail to include mental balance of the executives in the considerations. It is fair to argue, high paid executives must observe their capabilities to perform themselves, yet, ignoring the relevance of mental balance for executive performance and focus on short term outcomes exclusively, can diminish the resilience of the organization.

In sports this would be equal to send the best player of the team to the match, whilst ignoring recent, previous injuries. Chances are: Small problems will cause bigger problems and end in negative outcomes when it really matters.

A small injury, left unattended, can prove being fatal in the final match.

The Good Coach

For the coach it is key to understand, performance levels vary even for top players. This can be due to daily performance variance, subject to dealing with legacy issues, or emotional burdens. In either case, the result of today’s match may be depending on high performance to be delivered to the point. To win the match the coach must exercise the right assessment of the status of the team and its key players.

For the Chairman, the ongoing monitoring of the capabilities of the executive team is at the core of her responsibilities in order to facilitate long term and sustainable growth and success and foster the resilience of the firm.

Executives are on top of the daily challenges and routines. Even on a “bad day“ they will perform on a sufficient level. Things can turn critical, if the tides are rising. It has been observed, companies, heading for growth and, firms exposed to disruption in the external environment, carry high risk of failure. Resilience is key for the executive team, to deal with situations of rapid change, where the dynamics of transformation keep accelerating and the level of control is diminishing. Here, executives need excess capabilities to control the situation and quickly adapt to a new reality.

For the chairman it is key to understand, if she has the right team in the game. Cheering and motivating, directing from the sideline, bringing in expert players for special situations but also making sure exhausted players rest, and bringing in fresh blood to the match are part of orchestrating a match.

Rigorous training leads to the championship

Success is not born on match day, but build up over the season.  Resilience and engagement on the executive level is the result of a process.

To the good, a healthy and well facilitated culture, regular executive education can build up a strong and capable team, able to take on turmoil and situations of rapid change; yet, to the bad, toxic work environments, unhealthy relationships, exhausting periods at work without rest etc. can deplete the resources of the executives and bring individuals close to a point, where breaking sooner or later is inevitable. A little increase in pressure, and the capabilities of the team can be exceeded.

Take away – game changer or playmaker?!

Understanding skills and current capabilities of the executive is at the heart of the chairman’s responsibilities.

Selection, succession planning, challenging, re-training, of the executive team – these are disciplines, easily agreeable to be mastered by the Non-Executive Board. Yet, there is more to it. Identifying and mentoring key players on different levels of the organization, assessing temporary downturns of individual performance and understanding trends vs. events is key to be able to facilitate sustainable success and build resilience throughout the organization. Also, creating a culture, which is aware and hedging for systematic stress drivers, the executive team is facing, specifically in situations of rapid change and moments of turmoil, is key to create value from the board and prepare an organization for rough times ahead.

Kolja A. Rafferty, MBA, IDP-C is an author, consultant and executive.  Kolja focuses on situations of rapid change, turmoil and economic distress. He is operating for Private Equity investors and Banks in Europe and the Middle East, helping to resolve distress situations in companies of different sizes and sectors.

First published here.

 

Getting Board Ready

By Mary Francia IDP-C, IDN Americas Ambassador

As part of the Leadership Development Series for the INSEAD Alumni in North America, Mary Francia has been delivering webinars designed to help position leaders for C-Suite and Board positions.

This paper is loosely derived from her presentation about how boards function, how boards are changing to meet the emerging demands of the 2020s, and how prospective board members can best land their first director positions.

Part 1: About Corporate Governance

Types of boards

There are different types of boards—seed/early stage, later stage, private, public, not-for-profit, and advisory—and each has different goals, operating procedures, challenges, and expectations for their board members. A startup or early-stage company, for example, typically expects its board members to contribute knowledge—things like how to turn an emergent technology into a business plan, how to scale upwards, or how to court investors. Public boards, meanwhile, expect directors to be stewards of the company’s long-term strategy, advisors to the CEO and executive team, monitors of company performance, and public faces for the company.

When looking for your first board position, it’s important to be familiar with these differences. You also need to decide what kind of board you’re interested in serving on, and what type of board will be best served by your presence on it.

The mandate

The chief goal of the corporate director is to create and protect value for the shareholders; directors do this by guiding strategy, monitoring the financials of the company, managing human capital (especially leadership), and overseeing risk.

In executing this mandate, board members face three main challenges.

  1. Information: Boards have to be on guard against “window dressing”—i.e., information that is impartially curated and filtered in ways that veil the true health of the company and the viability of its strategy. This often means that directors have to go out of their way to be knowledgable about the company’s performance and fact-check the information they receive.
  2. Group dynamics: The board is not your typical leadership team, and working together is important, but it’s not always easy.
  3. Time management: The average corporate director spends 240 hours a year on board work—that’s six forty-hour weeks, excluding travel. And in times of crisis, that 6-week-a-year commitment can turn into a full-time role. Far too many new directors underestimate the amount of time they will have to devote to the job, so it’s important, before you begin looking for a director role, to honestly calculate the feasibility of this commitment.

Fiduciary duties

Boards have three primary duties against which their goal of long-term stewardship and resilience is measured:

  1. The duty of care (fiduciary and legal responsibility).It sounds like common sense, but directors have a legal obligation to care about their company’s health and to act upon that care. The board of Blue Bell Creameries, for example, faced legal action when—in the wake of a listeria contamination that ended up killing three people—it was demonstrated that the board had failed to recommend or implement any system that would monitor the safety of the company’s product and production methods.
  2. The duty of loyalty.As is implied above, directors need to be loyal to the company, not to themselves. In other words, directors shouldn’t take advantage of the information available to them because of their role as a board member. Board members can face jail time for offenses such as insider trading.
  3. The duty of candor. Directors are duty-bound to make full disclosures of pertinent information to other directors, management, and shareholders—regardless of how unpopular or personally inconvenient that information might be.

Part 2: Getting Board Ready

What boards want—the behavioral traits of a good director

  • Good directors are balanced judges with strategic clarity. Because CEOs average about five years in their positions but directors generally serve longer, the board gives the company stability of oversight, helping it weather executive transitions and retain continuity of purpose. One aspect of this, and one of the board’s most important jobs, is judging the leadership team’s fitness to steer the company.
  • Good directors are skeptics. They are uncomfortable following impulses or gut reactions. They want to see the data and develop a fluent grasp of all the options before they make up their mind.
  • Good directors are collaborators. The board as an institution relies on its members to correct each other’s blind spots and those of the executives they oversee—and good directors, directors who value collaboration, thrive in this context.
  • Good directors are socially savvy.They are adept at measuring personalities and know how to deliver information to different kinds of people. Like politicians, they need to be able to structure their advice around the emotional and intellectual needs of the people to whom it is addressed.

What boards want—skillsets

For decades, financial expertise, executive experience, and prior board experience were the most desired skillset traits on boards. Recently, however, responding to widened complexity, the speed of change, technological disruption, and a new suite of business risks, the primary expertise profile has expanded significantly to include, among other things, expertise in international politics, sustainability, national security, strategic development, and information technology. This has opened whole new sectors of the workforce to board positions at the highest level.

Certain prerequisites to board service remain in place, however, and all prospective board members should have experience working closely with a board, and/or a developed understanding of corporate governance principles. This is where mentorships and formal director education programs are invaluable.

Seven steps for getting board ready

  1. Know your motivations.By knowing why you want to join a board, you can better identify what kind of board role you’re best suited and what types of companies and boards that you should consider.
  2. Identify your proposition. This is harder than it sounds, and it often involves doing some serious self-evaluation. On the positive side, you need to identify both what value you can bring to a board—what specific skills and behavioral traits make you stand out from other prospective board members. But you also need to build a clear picture of the skills, experiences, and knowledge that you don’t yet have—then go about filling in those holes, either by taking classes or changing roles or jobs. Looking for firms that offer leadership development and succession planning programs can be a huge benefit for prospective board members.
  3. Know where you’re needed.This, too, is harder than it sounds, because director expertise is often relevant outside of the specific industry from which it comes. Finance experts, for example, are highly sought out in non-financial fields—as are technology experts, supply chain experts, and others. Sometimes your expertise may be in high demand in spaces you haven’t considered.
  4. Write a board CV or bio and tailor it to each board.Just as you might slightly (and truthfully) adjust the emphasis of your resume depending on what job you’re applying for, you need to adapt your CV to highlight the specific skills, experiences, and traits that will be appreciated by boards. In addition to your skills, your CV should outline your motivations, the value you expect to bring to a board, and the specific kind of role you expect to play on the board in question.
  5. Control your image and reputation. In searching for your first board, you’re trying to project a persona. You can influence your online persona by publishing articles, appearing in interviews, and, conversely, by ensuring that you come across as calm, mature, and balanced in all online appearances.
  6. Make your interests known.The best way to get on a board is by networking, so it’s important to tell your acquaintances—especially those who currently sit on boards—that you’re interested in a board position. At the very least, these current directors can offer you guidance or act as references. In the best-case scenario, they may be able to introduce you and help bring you onto their board when a vacancy comes up.
  7. Network responsibly. When self-marketing, it’s essential to put yourself out there while not seeming pushy. You don’t want to appear self-serving or monomaniacal. Attend events, engage with people, and expand your network—these actions will get you seen over time.

Part 3: New Board Challenges

Risks—direct and indirect, short-term and long-term

Boards have a duty to consider risk and risk mitigation from two perspectives: the current cost of mitigation, and the future cost of failing to mitigate. We can see this paradigm in the way companies are currently responding—or not—to climate change, which has a number of significant implications around the world. Given that five of the World Economic Forum’s top 10 global risks for 2020 are environmental in nature, corporate boards can no longer rationalize unsustainable business practices with their duty of care. Today’s board members need to find ways to minimize their company’s contribution to climate change while offsetting their exposure to its fallout.

New Competencies

As mentioned in Part 2, boards are looking for a far more comprehensive range of competencies and experience than they did several decades ago. Public boards especially are now finding it necessary to devote board-level expertise to a number of major categories formerly considered outside the mandate and responsibility of business. These include:

  • Environmental expertise: an expert who can realistically gauge the company’s impact on and susceptibility to the environment.
  • Social expertise: an expert committed to thinking about the short- and long-term implications of the company’s actions on stakeholders.
  • Geopolitical expertise: an expert—probably with experience in academia and/or government—who has the tools to monitor, gauge, and steer strategy around geopolitical fluctuations.

To help manage this diversifying array of risks and responsibilities, some companies are creating adjacent advisory boards whose members help provide subject-specific guidance to directors and executives. For prospective directors, getting a position on an advisory board is a good way to get the corporate governance experience required for more traditional board positions.

Conclusion

It is the job of corporate directors to successfully guide their companies through a business landscape now defined by its exponential rate of technological disintermediation, rising levels of environmental and health risks, and rampant geopolitical uncertainties. These three factors are fundamentally changing what it takes to be a board member, what mixtures of expertise are relevant, and how a board’s composition is directly related to its effectiveness. These changes have significant implications for demographics like women and people of color, who were traditionally excluded from the boardroom but whose presence has now been demonstrated to deliver superior performance and enhance shareholder value. Organizations that fail to enlist this broader range of director expertise and diversity are likely to face a variety of consequences—some short-term, others long-term, some reputational in nature, others existential.

Mary Francia IDP-C is the IDN Americas Ambassador. 

Corporate Governance and Performance Imperatives in Africa

Imperatives for Directors – SDGs, AfCFTA and Agenda 2063

By Dr. Lucy Surhyel Newman IDP-C

COVID – 19 appears to have enhanced the brightness of the stage lights on stakeholders’ expectations of good corporate citizenship, with closer scrutiny of how boards plan and execute corporate brand identity strategies as fundamentals of the corporate culture.  Emerging issues with potentially profound combined effects include increasing shareholder activism, increasing relevance of Environment, Social and Governance [ESG], the socioeconomic effects of COVID-19 and, the social awakening on the need for enhanced inclusivity and diversity.  Many Boards have from March 2020 to date, had at least one Board meeting that calls for revisiting their corporate fundamentals and strategies over the next two to five-year horizon, in context of this momentous time in human history.

Dr. Lucy Surhyel Newman IDP-C in this article, earlier published in IoD Nigeria’s quarterly journal The Director, makes a clarion call on Directors of African corporates and global corporates with operations or interests in Africa.  The principles are adaptable to other continental blocks while placing Directors at the center of the article’s expectations for closer attention to the need for alignment of corporate strategy and corporate social impact initiatives, with systemic issues in the broader environment within their sub-region and continent, even as they keep track of global market trends and competitive benchmarks.

Article Reference – Newman, L.S (2020). Corporate Governance and Performance Imperatives for Directors in Africa: SDGs, AfCFTA and Agenda 2063. The Director, a Magazine of the Institute of Directors Nigeria. Issue No. 24; Pages 64-71.

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Dr. Lucy Surhyel Newman IDP-C is a Policy Advocate, Independent Director and Corporate Governance & Performance Improvement Advisor.

Brave boards in a new world: What can gender diversity contribute

OECD-CFA Institute Webinar in collaboration with INSEAD IWIB Club

By Marina Niforos, IDN Ambassador France and Non-Executive Director

On 29 June 2020, the CFA Institute and OECD co-organized a discussion on the challenges that boards are facing in the aftermath of this unprecedented crisis we are going through and on the lessons that can be learned for ‘building back better”. IDN Ambassador France, Marina Niforos participated in the discussion that aimed to address the role corporate governance can play in navigating the “new normal” and how board diversity can contribute to the reconstruction phase.

Josina Kamerling (Head of Regulatory Outreach, CFA Institute) opened the panel, stressing the following: Despite codes metrics and consistent efforts to increase gender diversity at Boards over many decades, change remains slow and does not always trickle down to action. Will this crisis present an opportunity for Women in Leadership? Uncertainty is the new normal: A Threat or an Opportunity?

While the participants came from different board backgrounds (regional, supervisory board, corporates, funds, insurance, infrastructure, sovereign funds) there seemed to be consensus on the nature of the crisis and the impact:

  • The nature of the COVID19 crisis is unprecedented, of a much larger magnitude that the 2008 financial crisis. People are questioning the fundamentals on both a professional and personal basis, as they are confronted with a threat on their own wellbeing and of the things they value most. A ‘grey swan’ or a ‘black swan’, the recent crisis has ‘put in question many past orthodoxies and shown boards that we cannot solve unpredictable challenges without increased diversity of thinking at board level.  As Georges Desvaux (Axa, Chief Strategy Officer) noted:

”Boards will require a new skillset, that goes beyond from the typical profile of a another CEO that was the preferred candidate of choice for board seats”.

  • In practice, according to Marina Niforos (NED, HCAP), corporate governance is facing opposing forces: on the one side, boards are thrown by circumstance into a crisis management mode, firefighting role that pushes the perception that ESG and general sustainability considerations are a luxury for “when times get better”. On the other hand, there is increasing pressures from stakeholders (customers, employees, investors, regulators and citizens at larger) that are stressing the need to address these issues as strategic in establishing trust and ensuring that economic recovery is perceived as possible and equitable by all. Boards and companies who are unprepared to provide credible answers and scenarios will be subjected to public scrutiny and reputational risk. McKinsey’s report Diversity Still Matters makes the compelling business case that companies with more gender diversity and ethnic diversity outperform their peers, contributing to the resilience and long-term performance of the organization.
  • Franca Ruhwedel (Professor and NED) stressed that, despite the focus on short-term risks, a positive development has been the change of tone and new culture of ‘discussion’ in Supervisory Boards in two tier systems, allowing SBs to move beyond a compliance, tick the box modus operandi to a more hands on, strategic approach and has fostered stronger ties between supervisory and management boards.
  • This crisis can be an opportunity to advance in the diversity and sustainability of boards and the companies they serve. Whether NEDs or executives, Boards need to seize the opportunity as to address these issues as a strategic medium-and long-term objective that will define their competitive advantage. The complexity of the new challenges, ESR ones at the front, and the agility required to adapt now call for new profiles, more connected to the market reality, the ones that will be able to figure out resilient scenarios and better solutions for long term sustainability.
  • This need for a diverse skills set on the Board, a greater stakeholder management experience and empathetic leadership presents an opportunity to go beyond the traditional profiles and closed network where board members were co-opted and allow more professional women to enter the pipeline. According to Marina Niforos, this will require professionalization of board searches and a move from credentials of that “make the board look good to criteria that make the board do good”. “Strategical broader vision expected from board members requires not only technical or industry specifics competencies but also a more global mindset and open-minded collaborative attitude that let opportunities for more diverse talents” said Nicole Gesret (CEO, SITG).

The Link between Diversity and Sustainability: How to measure Impact?

“Boards are accountable to contribute to truly to their shareholders but also to the overall ecosystem of stakeholders and to the next generation: how can we use experience to measure board diversity on corporate sustainability?” (Josina Kamerling)

There is a lot of discussion since the COVID19 breakout on the need to put sustainability squarely on the agenda of companies. In the past, many companies made bold statements about the importance of sustainability but few addressed it as part of business strategy, relegating it to the realm of CSR policy. The crisis has made people realize the fragility of our ecosystems and the vulnerability this implies for us and our societies. There is increasing grass roots momentum as citizens are very concerned about the future and potential threats and are pressuring their own political representatives to take sustainability considerations and climate more seriously and customers are challenging companies on the origin and quality of the products they buy. In turn, governments are mobilizing to ensure that climate becomes a policy priority with specific conditionality for companies, as for example in the case of granting EU state aid for the post-COVID recovery, eg. Air France.

Additionally, mainstream investment funds and asset managers are clamoring to claim the space of ‘green investments’, to discredit perceptions of ‘green washing’, creating new funds and making capital commitments for green investments (Goldman Sachs, JPMorgan) Yet, in order to take advantage of this wave of good will and translate pressure from stakeholders into lasting results, certain critical success factors need to be at play:

  1. Metrics are key: “what get’s measured, get’s done”.
  2. Convergence around a common methodology that allows for progress checking and benchmarking is important to provide transparency across industries and sectors. Initiatives such as the Taxonomy for Sustainable Finance at EU level is intended as an effort to provide a market standard. However, if tools are too complex to apply, SMEs who do not have same resources as large companies may find themselves at a competitive disadvantage.
  3. At the same time, pressure for compliance to these demanding standards will push boards to search for the requisite skillset, opening up more board seats for women and men.
  4. Training and corporate culture change is a continuous process and needs to have investment by the board: The skillset regarding Diversity and inclusion culture, same as ethics, is something that should form part of the continuing education of Directors, so that their more openness of spirit at board discussions, tolerance for dissension and move beyond just the simple ticking the box.
  5. Accountability for results: Boards need to hold management accountable for diversity and ESG objectives. In an environment of post crisis pressure management will be risk averse and unwilling to take on less conventional profiles on their boards. The board a s collective should ensure that management stays on track and does not lose its focus. The example of a ‘living cv’ that is a public registry tracing the past performance of Board Directors was held as a practical example of an accountability mechanism accessible to all.
  6. Board self-assessments: Beyond management, boards should exercise their own self evaluation at board and/or committee levels, with external evaluators when possible, to encourage introspection and have specific action plans when weaknesses are identified. Those can be publicly disclosed on company websites for full transparency.
  7. Diversity is not just a Board issue: diversity is not just a question of board composition but of the company talent management strategy as a whole, a strategic objective squarely under the Board’s oversight. It is important to ensure that a culture of inclusion is reflected is senior management and the different management levels of the company to ensure a robust pipeline.

Key Recommendations for policymakers and companies

  • Boards “Need to walk the talk”, to show demonstrable and measurable results not just paper. Demonstrate by example, as we have seen Danone in changing their legal status to a ‘purpose-driven company’. This type of public commitment then becomes a process for delivering results.
  • Policymakers should actively engage with private companies to encourage positive outcomes through the right incentives. This exercise should not be about format, but about a continuous dialogue and will require flexibility and persistence
  • Companies should not wait for the regulator to impose quotas or similar measures but should actively have develop their own self-governance initiatives to encourage diversity. • Setting quotas might work for some countries and cultures while others will be more resistant to top down approach.
  • Go beyond the compliance approach. You can comply with the law and still not do a good job. The important thing is to ensure transparency, report on what you are doing on diversity, have it on the board agenda, report on how do you do the selection and then let the market do its work.
  • Regulators should ensure, where they can, that boards have sufficiently trained and certified board directors and ask that it becomes the standard, thereby creating a market for these skills.

OECD Representative, Mathilde Mesnard (Deputy Director, Financial and Enterprise Affairs) closed the conference stressing that the crisis is perhaps creating a paradox. Women at the bottom of the pyramid are disproportionately impacted and data indicates that violence against women is on the rise since the outbreak, but on the other hand, we might have an opportunity to make a a difference for women in leadership and women on boards, if we manage to maintain momentum and put in practice some of the lessons learned.

Create and believe in the future – INSEAD Professor Nathan Furr

By Liselotte Engstam, IDP-C, NED and Chair, Communication, IDN Board

Now more than ever, leaders and boards need to take charge and help create a new and better future.

“Innovation is the ability to see change as an opportunity not a threat“ –  Steve Jobs

We were fortunate to discuss leaders & boards roles for corporate renewal with INSEAD Professor Nathan Furr, even prior to the outbreak of COVID-19 and the following pandemic crisis.  What truly strikes you when you listen to the podcast is how well he described the needed actions and leadership treats, that is in even more demand now, that will bring companies into a better future.

Transformation may be one of the hardest things leaders are called to do. By transformation, we mean seeing the possible, valuable futures for your organization and then successfully overcome the barriers to create that future” explains Professor Nathan Furr

You find the interview in podcast form with Professor Nathan Furr  here.

Nathan outlined an excellent and relevant process for leaders and board members to follow to ensure they lead the way, which is fully relevant for most companies going forward from the current crisis and the pandemic. The process entails:

  • Envisioning the future
  • Break the bottlenecks
  • Navigating the unknown

Envisioning the future

To envision the future, leaders and boards need to break out of the ordinary and IMAGINE what is possible. Take the time (fence the time for the board and leaders), ensure INSIGHTS (bring forward insights about the trends from technology, political, geographical and demographical changes) and ensure IMAGINATION (help the organization to explore a valuable future for both the organization and its’ stakeholders).

This need to be closely followed by creating a way to BELIEVE in the future (create narratives on how the future will look, and find ways to tell it in an engaging way). There are many ways and tools to do this, some are described in Nathan Furr’s book Leading Transformation, (Harvard Business School Press, 2018), based on years of research and client engagements, with some examples shared in the podcast episode including such novel ways as working with Science Fiction!

Nathan also points out that the process is as relevant for individuals as for organizations.

A great question posed by Nathan to consider is

What stories motivate you to take action?”

Break the bottlenecks

Breaking the bottlenecks is both an internal and an external process. In many ways it is closely related to culture and the way that processes have been fermented in organizations with little flexibility to change even when needed.

Consider revisiting decisions maps both formal and informal, but also look into the language and adapt closely to your company (“Are you an engineering company or a design company?). How have you aligned incentives, or even better, taken care and protected your change agents?

Navigating the unknown

Navigating the unknown is about prototyping the future. You need to construct as best you can an artifact trail from the future and backwards, and try to map them out in as tangible actionable steps as possible. You also need metrics, so you know what outcome you are trying to get, and measure the progress. And to ensure that you have bias for action, and start acting today. Get going and make sure you allow for experimentation, as not all insights and solutions will be there from the beginning.

Keep your eyes on

Professor Nathan Furr believes there are many organizations to get inspired by.

He points out Amazon as one example, for the reason that innovation is about, people, process and philosophy, and that Amazon have ´managed to implement both impressive culture as well as governance structure to make innovation happen. This means that they are not dependent on individual top leaders for either facilitating new ideas, nor for evaluating the ideas.

Nathan also points to Pepsi, which through their purpose and sustainability focus has managed to start their shift to healthy foods.

Roles of boards and leaders

We discussed specifically the roles of board members and leaders. Nathan’s view is that the role of boards and leaders are very important, as they need to give the guidance and help the organizations to see further, get outside of their short term mindset and operational issues.

Nathan believes boards and leaders need to help push the organization by asking:

What else is possible? Where else can we go?”

Boards and leaders need to know that there are new toolkits for innovation, to innovate in a digital world is different, and that you can get more innovation with higher throughput of valuable ideas to a lower cost.

Advice to Board Members and Leaders

Nathan believes all leaders need to be a bit more of a Chief Experimenter. To help create the environment in the organization where you can discover and nurture new opportunities. And to do the same for yourself.

Where in your own environment can you discover and test new insights?”

Learn more

Read the books published by Professor Nathan Furr:

Innovation Capital (Harvard Business Review Press, 2019),

Leading Transformation, (Harvard Business School Press, 2018),

The Innovator’s Method (Harvard Business School Press, 2014) and

Nail It then Scale It: The Entrepreneur’s Guide to Creating and Managing Breakthrough Innovation (NISI Institute, 2011).

 

You can also read related articles authored by Professor Furr

Growing resilience in uncertain times (INSEAD Knowledge 06/20)

Looking to boost innovation – partner with a startup (HBR 05/20)

Innovation Capital the secret ingredient behind the worlds most innovative leaders (Forbes 09/18)

 

INSEAD Corporate Governance Centre Executive Director Sonia Tatar shares insights on Corporate Governance Paradigm Shift.

This blog was originally posted here

With more women as board chairs, business can better serve society

With more women as board chairs, business can better serve society.

“Companies should benefit all their stakeholders. This is increasingly on the minds of regulators, activists, politicians, pension investors and individuals of this world.

If we want boards to deliver benefits for a wider stakeholder group – and stop focusing on short-term profits – we need to shift the dial on women becoming chair of these boards. Failing that, the corporate landscape won’t change.”

INSEAD Directors Network President Helen Pitcher OBE, Chair of Advanced Boardroom Solutions (INSEAD IDP-C), shares more insights at the INSEAD Blog in the article Women Chairs: The Time is Now“.