Data reveals how leading boards are embracing agility, bold decision-making and candid debate to help their companies thrive amid uncertainty
How do boards stay ahead of the curve in a constantly evolving business landscape? The answer lies in their ability to adapt, innovate and lead with confidence. Effective boards are doing just that.
To see how boards are guiding their companies to be more resilient, the EY Americas Center for Board Matters conducted a survey with corporate board members of nearly 200 public company directors. What we uncovered are four strategies to help boards steer their companies through uncertainty.
1. Embrace dynamic strategy setting
Gone are the days of an annual strategy retreat. The business environment is changing at breakneck speed, and boards realize that the strategies that made their companies successful in the past are unlikely to do so in the future. Boards are embracing a much more dynamic approach to strategy setting and embedding strategy into conversations year round. In our survey, nearly three-fourths of directors (73 percent) said that because of the constant state of unpredictable change, their strategy is constantly evolving and six in 10 tell us that their strategy will need to change within 12 to 18 months.
2. Align on risk appetite and enable management to be bold
Getting strategy right hinges on a strong alignment between the board and management regarding the company’s risk tolerance. This harmony is essential for leaders to balance caution with bold moves. While 87 percent of board members believe they are aligned with management regarding risks, a third of directors want management to take more aggressive actions in line with the company’s risk appetite. Boards can play a pivotal role in encouraging management to take bolder steps that pave the way for sustainable future success, even if the benefits may not be realized in the near term.
3. Challenge assumptions and scenario plan to tackle barriers to resilience
Boards must tackle and overcome resilience barriers head-on. Our survey reveals that industry disruptions (50 percent) and economic challenges (45 percent) are the top hurdles. To navigate these, boards need to oversee scenario planning that prepares the company for a wide range of changes and developments. It is also crucial to pinpoint what must be true for a strategy to succeed, allowing the company to quickly spot threats to success. For example, if a company’s growth strategy hinges on rising customer demand, changes in consumer preferences, market shifts or new competitors could derail it. By understanding and preparing for these assumptions to change, boards can enable management to act with agility.
4. Foster a board culture of constructive challenge
Most of the directors (72 percent) believe that having the right skills and experience on the board is the key to staying agile and responsive to change. Ranking second in importance (55 percent) is fostering a boardroom culture that encourages constructive challenge and debate. It is not just about having a board that is fit for purpose; it is about creating an environment where every director’s voice is heard and respected. Collegiality should never come at the expense of healthy dissent and robust discussion.
By focusing on these four strategies – dynamic strategy setting, aligning on risk appetite, tackling barriers to resilience and fostering a culture of constructive challenge – boards can better navigate the complexities of today’s business environment and guide their management teams to find opportunity in challenge.
Jamie Smith is director, board matters investor outreach and corporate governance at EY Americas Center.
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