Against the backdrop of increased expectations, it’s counterintuitive that the tools that support directors, chairs and co-secs haven’t substantially evolved for the past decade. Boards have the most complex oversight task in the modern organisation, yet, outside of basic paper/PDF sharing, there are almost no tools that have been built specifically to help directors deliver on their role.
As Benjamin Franklin said, “The best investment is always in the tools of one's own trade” but for too long, directors have been forced to build their own tools for the critical processes that give the board confidence it is meeting the expectations of regulators, shareholders and the broader community.
After speaking with a number of directors and chairs, it is clear that the next evolution of board tools is a category of technology called ‘Board Performance’. This covers the automation of processes like Board/Committee Evaluation, Skills Assessments, Strategy, Risk and CEO Evaluation.
As we look at the boards that get the most out of this new approach to technology in the boardroom, we see three practices that drive the greatest impact.
1. High performing boards are using technology to stay accountable on the issues that matter most
High performing boards start with high-performing individuals with strong self awareness. As a rule, when conducting board reviews and performance processes, these individuals generally want to move away from a regulatory, tick the box experience to a true development exercise.
“Board reviews can sometimes feel like a great deal of busy work and just a tick the box exercise” notes one Director on the board of two large, listed organisations.
To deliver a rigorous review that drives meaningful conversations, a review process must force consideration of which areas are most critical. It is not enough to simply identify the issues, which is generally a straightforward part of any review process. The critical task that the board needs most support on is the prioritisation of identified issues to ensure that these areas receive the appropriate focus, at the appropriate time.
Technology generally has great benefits in allowing boards to dynamically prioritise issues and also to stay accountable to progress against these topics. Done manually, it can be an arduous process for the board to agree on which areas require immediate action and which need to be identified for deeper discussion. As a result, almost every director can think of important conversations identified through board reviews that never eventuated.
The benefit of technology using a consistent framework is that key issues can be identified, prioritised and tracked from the perspective of both the board and management. For example quick wins are often tracked for progress over three months and deeper discussions will typically be tracked over a six month window. The Board can automatically receive reporting to ensure that key tasks allocated to management over these periods have happened. In this way, the board builds confidence that the technology is providing a safety net against the risk that the same issues come up again in 12 or 24 months' time, with almost no progress.
High performance directors frequently tell us about their concerns around whether the most important issues are getting sufficient attention and progress. Board performance tools that drive both prioritisation and accountability are increasingly the preferred option for directors keen to ensure continual improvement.
2. High performance boards are using time series data to measure board improvements over time
By moving board review processes online, boards are benefiting from powerful time series data that allows tracking of progress, performance and thinking over time.
“Progress on a board is not linear. You have new directors which brings a new dynamic to the board and the needs of the business change over time. Something that is critical right now, may not be as important in a few years time. We need to be able to see how our thinking evolves over time” Chair, ASX300
Historically there are a number of reasons that it has been very difficult to pull together comparative data to see how the board has been performing over time. Three major reasons include:
- Different consultants and company secretaries use bespoke questions and approaches
- Much of the data is subjective and hard to compare with any analytical rigour
- Reporting is generally unstructured and generally only comparable by review of two standalone reports
As one ASX50 Chair noted: “If your aim is high performance, it’s important to know how different areas are tracking over time. It’s necessary but not sufficient to know if something like the board-management relationship is materially broken. What’s much more powerful is understanding when it has moved from exceptional to just average so you can get ahead of the issue before it becomes major”
The real power of a consistent framework is the depth of insights across all major areas of board performance that enables chairs and directors to proactively get ahead of issues. This is a key differentiator of high performance boards, and one that is only possible with the newest generation of board performance technology and tools.
3. High performance boards are using technology to ensure board performance data is both secure and accessible
Data about the board is some of the most sensitive and valuable data collected by the organisation - but too often it’s inconsistent and owned by a patchwork of consultants. When it comes time to find this data in future, it generally involves the company secretary trawling through last years’ board papers and emails to find the relevant reports.
This approach has both substantial costs and risks. From a risk perspective, it exposes the board to the risk of inadvertent confidentiality and data breaches. But perhaps more importantly, it comes at the cost of never easily being able to easily find and compare data in the future.
The cost of inaccessibility:
Board performance data becomes most valuable when it’s used over time to guide, track and assess improvement. To fulfill all of these needs, it must actually be accessible in the future, to support any discussion at the board. For directors, this means knowing that all board data is located in one place, rather than an array of emails, bespoke spreadsheets and powerpoint documents.
‘As a director I like to compare my individual reviews and feedback across all my boards to understand where the feedback is consistent and where I might need to focus. Using a single platform means that I always know where all my feedback is located and can access it in one spot, rather than having to constantly dive through my emails and last year’s board papers ’ Director, ASX50
High performance as a board is a process of continuous improvement. Getting this right is difficult and requires easy access to data and insights at any time, rather than a once a year lock box of performance data. Whilst a rigorous review is important, the ability to bring the lessons, insights and data to the fore in any conversation at any time is where greatest leaps forward happen. For both directors and boards, there are substantial benefits in moving to an approach that makes data more available and consistent.
The risk of confidentiality and data security:
Whilst a single platform approach to board performance has great benefits for performance and continuous improvement, there are also substantial benefits around cyber risk and confidentiality. In the current cyber security environment, it’s becoming untenable to have sensitive data about the board’s performance sitting in an array of survey tools, spreadsheets and word documents. These uncontrolled / unencrypted digital and physical artifacts substantially increase the risk of inadvertent confidentiality and data breaches.
Boards are also increasingly realising that no matter how secure internal systems are, there is board and individual performance data (such as individual director or CEO performance feedback) that is too sensitive to have on any internal system with the oversight of any employees of the organisation. The benefit of an external best practice platform is clear segregation and rigorous access controls that prevent employee access to any board data without strict board approval.
For all these reasons, high-performing boards are increasingly using technology to store their data in the one place with the protection of end-to-end security and encryption and access controls. Whilst this sounds like table stakes for a modern enterprise, the benefit to board performance is directors and management can participate fully in every process knowing that there are no risks of ‘who said what’ being revealed. This confidence is a critical foundation of all board performance activities.
In conclusion
High-performing boards utilise tools and processes that have been designed specifically for the challenges of boards. Such tools support complex data collection and prioritisation, provide time series benchmarking metrics and produce interactive reporting to ensure that board members can keep up with the complexity of the job.
Just as importantly, modern board performance tools are built for purpose around the specific needs of boards, with a deep understanding of the confidentiality and performance requirements of the modern director.
If this is of interest to you and you’d like to learn more about how high-performing boards are utilising data and benchmarking to track their progress over time, we’d love to hear from you.