Covid-19 shows boards need to look through the windscreen, not only rear-view
Strategy, normally the preserve of the executive, will intersect more with directors duties to plan for disruption
Inventor and business person Charles Kettering once wrote: “My interest is in the future because I am going to spend the rest of my life there.”
His words ring especially true at a time when the future seems to be hurtling towards us at breakneck speed. Truly, disruption has become the real “new normal” we hear so much about.
As Covid-19, particularly the response to it, has shown, even long-expected events can morph in utterly unexpected ways. If we didn’t know it before, we know now that organisations that have been thinking (and preparing) for what might come found themselves at an advantage. Even if they did not precisely foresee the future, their future orientation gave them the edge in responding to it.
For company boards this all means their traditional focus on monitoring — an orientation towards the past and present — urgently needs to be complemented by scanning (the process of looking into the future in an attempt to understand what may happen). This obviously intersects with strategy, long considered a board responsibility, but the creation of strategy is often seen as primarily the responsibility of the executive. Given the velocity of change and the certainty of disruption, it’s clear that boards need to spend as much time looking through the windscreen as in the rear-view mirror.
It’s no accident that the King IV report defines strategy as “the setting of the organisation’s short-, medium- and long-term direction towards realising its core purpose and values”. Safety and sustainability are no longer associated with maintaining the status quo but rather anticipating and preparing for change.
An excellent tool for driving future focus is the integrated reporting framework, with its emphasis on the long-term view. This framework requires the organisation to report on its ability to create value, not just in the short term but also the medium and long term. As such it forces boards and organisations to look at all the various relationships on which they rely to create value across this expanded timescale, including the dependencies and connections within the organisation and between it and the six capitals (financial, manufactured, intellectual, human, social and natural) it uses. These are essentially the tools and environment in which value has to be created over time.
The argument that boards should be as much concerned with the future as the present is unanswerable, but how to achieve that future focus might be less clear. Here are some things they should be thinking about:
- Ensure the board agrees about the need to focus on the future. If it is not already spending time thinking and talking about the future the first step should be to reach consensus on this issue. If necessary, an outside adviser could be used to help convince the board;
- Create time for future-focused thinking. Once convinced, the board needs to find the time to act on its convictions. Ways to do this would include putting strategy items at the beginning of board meetings, and shifting more monitoring work to board committees so the board simply receives a report. Another tactic could be to convene special meetings for future-orientated thinking — the SA obsession with bosberade or lekgotlas will help here! The point has also been made that the board needs to distinguish strategic thinking from strategic planning — the latter being an important annual cycle of planning documents as opposed to a change in the organisation’s mindset;
- Foster a culture change. Following on from the preceding points, the board will need to set about intentionally changing not only its own culture but also that of the organisation as a whole. Needless to say, board culture must be conducive to active participation and blue-sky thinking; and
- Pay attention to board composition. As we’ve argued over the years, board composition is vital in providing a board that can help the organisation understand its stakeholder universe and a complex global business environment. It’s equally important that the board ensures it has the skills and perspectives among its members to understand the competitive landscape and developing market trends. Having members who are up to date on technology is becoming critical.
Boards have always played a critical role in monitoring and governing organisational performance and strategy. It’s increasingly clear that their role in positioning the organisation to prosper in an uncertain future is growing in importance.
• Natesan is CEO and Dr Du Plesis is facilitator at the Institute of Directors in SA.
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