The New Year’s Resolutions the Chairman of the Board Should be Making for 2023
As we move into 2023 one thing we can be confident about is the world remaining a volatile place. It’s the ‘new normal’.
High inflation, recession in many markets, conflict in Ukraine, supply chain issues and the possible resurgence of COVID, are all factors driving this uncertainty. This makes it a very a challenging time for boards.
As a result, there is huge pressure on the chairman, as the leader of the board, to ensure an effective board – one that can navigate their way through these volatile times to business success.
Engender a culture of agility and adaptability
A good place to start to ensure board effectiveness is for the chair to foster a culture of agility and adaptability on the board and throughout the organisation. Achieving this requires the chair to promote an entrepreneurial spirit both on the board, and beyond (with the help of the board), to the management and the wider workforce. This releases the potential of directors and employees to provide new ideas to help take the business forward. It also requires that boards engender curiosity and fearlessness to inspire creativity, innovation and continuous improvement. To accomplish this boards must lead by example in demonstrating diversity of thought and ideas in the boardroom, as this will give confidence to the rest of the business to follow suit. However, it’s important to realise that it’s only those boards that are themselves diverse which will have true diversity of thought.
Focus on board diversity while engendering a culture of inclusion
It’s widely understood that diverse boards are more effective than those that aren’t. Therefore, chairmen need to consider whether the current composition of their board is the right one to take the organisation forward. To do this they should look at the board through the prism of the five drivers of diversity – demographics, skills, experience, thinking styles and circles of influence – and consider how well the current lineup matches up.
Diversity without inclusion is an illusion. Therefore, a key task of the chairman must be to enable the culture on the board to be one of inclusion to gain the benefit of the different perspectives brought to decision-making by a diverse board.
Understand cash is king
It may seem obvious that cash flow is the lifeblood of business. However, distractions during volatile times can take the mind of the board off this important focus. The chair needs to ensure directors are clear on understating the diversity of financial performance at the organisation and keep a keen interest in the cash flow.
It’s all about the people/talent
The great work re-evaluation that has occurred in the wake of the pandemic has seen people rethink their relationship with their work and career, along with other aspects of their life. This has resulted in a shortage of talented directors and staff members who give an organisation its competitive edge.
To help reduce turnover, the chair needs to have effective relationships with those on the board. This means they must have emotional intelligence, so are empathetic and have self-awareness when communicating; enabling them to build engagement, generate trust, respect, and provide leadership. This will help nurture a board culture of psychological safety, something that allows bad news to travel to the board faster than good, empowers directors to have the courage to constructively challenge, and is one where it is fine not to have all the answers, particularly during these uncertain times.
The chairman must also ensure succession planning takes place on the board for the CEO and directors at least once a year. Only then is it possible to deliver a smooth transition in the leadership of the organisation with minimal disruption and business continuity. It’s something that’s even more important during volatile times.
Understand the board’s vital role in cybersecurity
The acceleration of digitisation in the ‘new normal’, the spike in cyberbreaches, the war in Ukraine and the recent regulatory requirements reinforce the importance of those on the board understanding cyber risk. The chairman, if not already done so, needs to highlight to the board the issue of cyber risk, help set the risk appetite for the organisation accordingly and make sure that there is a cyber security strategy, programme and clarity of accountability to manage the risk to the acceptable level set by the board.
Due to the evolving and dynamic nature of cyber risk, it is imperative that the chair ensures the board has ongoing and active cyber security conversations in the boardroom and benefits from regular cyber briefings, a couple of times per year, on the emerging and current cyber trends and risks in their sector.
Those that don’t could have their business compromised by a successful attack, leading to big ramifications for their organisation. Not only in monetary cost to the business, such as in disruption to revenue, cost of rectification and loss of critical data, but in the damage to brand reputation and community trust.
Think about risk and the opportunity it presents
The pandemic, along with the uncertain times we live in today, have exposed the failure of many boards to effectively understand and predict risk. As a result, many organisations have suffered losses or have had serious problems and are in danger of failing or have even gone under.
The chairman needs to focus the board not only on properly planning for risk but understanding that effective risk management is not solely about avoiding losses but in enabling value creation through improved business planning, organisational efficiency and enhanced social licence. Effective risk planning can provide a new opportunity, a competitive advantage, to drive long-term business success. It’s up to boards to be at the forefront of identifying, planning and reacting to risk. After all, they are charged to generate the best return from the capital of the company which demands forward thinking and the ability to anticipate the impact of uncertainty on outcomes.
Those chairmen who want to preside over a highly effective board to which they add significant value in 2023 must recognise these factors and make them their resolutions for the new year.