The top challenges for boards in 2023 and how to address them (2023)

If you're looking to increase diversity or better fulfill your board's mission, implementing new ways to improve your organization isn't possible without effective leadership and governance. Today's boards operate in a more dynamic environment than ever before. Here we offer a simple but non-traditional view of governance and explain why it is important to embrace change and adaptability.

Realize that good leadership equals good decision-making

Trying to define "governance" can leave many seasoned professionals scratching their heads. At the board effect researcherMatt FullbrookWhen he was explicitly asked about definitions of governance during his research, he often received incomplete answers laden with technical jargon.

"Many would come back with something like 'Corporate governance is running companies,' which obviously doesn't help," says Matt. "But it makes it clear that we're using the word governance without really having a clear idea of ​​what we mean."

That's why Matt, founder ofEffectiveness of the Fullbrook CouncilmiBottom-up-Governance, presented his own definition of laser-focused governance:

Corporate governance is the way decisions are made in a corporation. Good governance means actively creating conditions that are likely to lead to effective decisions.

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The above definition excludes words such as directors, officers, policies, processes, bylaws, compliance, disclosure and executive compensation.and that is intentional.

While things like your board of directors, your commitment to diversity, and other factors can help youto reachEffective decisions shouldn't be viewed as governance checkboxes that you need to tick, Matt says. Instead, your focus should be solely on enabling good decision-making.

Common decision obstacles

If governance means enabling good decisions, what factors stand in the way? While Matt's definition of good governance is simple, making good decisions isn't, for many reasons. Below are four of the most common obstacles:

  1. confirmation bias: We tend to accept information that supports what we already believe and reject information that contradicts what we already believe.
  2. narrow frame: Sometimes we enter the boardroom with a preset binary mindset on an issue for decision or voting.
  3. short term excitement: Shame can prevent us from speaking out and expressing ourselves in the boardroom.
  4. hubris:We tend to rely too much on our own experience or the experience of other people.

Many of the above factors are the product of ingrained or unconscious behaviors. But that doesn't mean it's impossible to foster a good decision-making environment in the boardroom. Conditions that help make good decisions include the door to multiple opinions and options. Subtle changes create the conditions that help all to thrive.

Use effective leadership to facilitate necessary changes

Changing things might seem easy on paper, but it's hard in theory. This is precisely why you need strong leaders who are willing to persevere for the greater good.

Coronel David FivecoatHe saw this firsthand in his role as commander of the US Army Ranger School, overseeing the elite Ranger School's gender integration in 2015. Today, David believes courage and determination are key traits of any effective leader, whether on the battlefield or in the boardroom.

maintain transparency

Ranger School is one of the Army's notoriously toughest programs, accepting only 5-10% of military personnel. By 2015, all participants were men.but by the end of the year three women had graduated from Ranger School. Since then, more than 100 have received this award.

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Opening ranger school to women has proven to be a high-profile endeavor. Even members of Congress sat up and paid attention to this seismic shift in inclusion. David felt that the first key to success was having complete transparency at every step.

"It wasn't just a 'black box' of women who went to ranger school and either graduated or didn't," says David.

Clear transparency took the form of speaking frequently to reporters and providing members of the military and the American public with the updates they craved.

overcome resistance

Transparency alone did not lead to a smooth process. Like the experience of David's army, a change in the status quo will inevitably lead to resistance and criticism. The first step is to identify the types of reactions you will encounter.

Reactions are not always in the form of “for” and “against”. David divided the most common answers into four different categories:

  1. Active resistors:Those who are actively trying to stop the change.
  2. Passive resistors:Those who are against change, waiting to see what happens
  3. Passive Supporters:Pro-changers waiting to see what happens
  4. Active supporters:Those who are actively taking action to support change

Your goal should be to bring the active and passive resistance fighters into the active support group. One way to influence your audience is to hold meetings at the beginning, middle, and end of the project or initiative. For David, this was an opportunity to spread his message and listen to the challenges and frustrations at grassroots level.

Applying this to the boardroom environment, it's clear that jumping head-on into significant change can backfire. Instead, prepare the change for positive acceptance by providing ample opportunities to listen and address concerns.

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According to David, determination is the secret to conquering and overcoming challenges, a fact to which he has devoted an entire book, aptly titled:raise your claw.

The courage to persevere is crucial when leading change, especially when faced with active resistance on multiple fronts. Standing your ground and communicating clearly and effectively will often even persuade some critics to support your cause.

Adaptive tables are success tables

If drive and determination are a lever for successful leadership, the counterbalance is adaptability.In accordance with donna hamlin, Ph.D., Founder and CEO of BoardWise,It's important to stay current and in context as the business landscape can change overnight.

"We need to understand the forces that are going to be affecting us and understand the broader context of our work," says Donna.

Boards should always be aware of trends.

Keeping track of general forces takes more than memorizing facts. It means gaining a thorough understanding of the current forces shaping the business landscape and predicting how they could impact your business.

Several major headwinds are shaping the current business landscape, including:

  • Meeting the expectations of discerning shareholders and stakeholders (including the planet)
  • Slowest speed to market
  • Stricter requirements for access to funds from institutional investors
  • Fuller Formal Transparenz
  • Stricter regulations and compliance
  • Data management related toESG
  • Expansion of governance responsibility

"We have to look at things in a much larger context than we have in the past," says Donna.

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If after a lot it seems to understand, that's probably because it is. But that shouldn't stop board leadership from looking ahead and preparing for quick responses.

Steps to achieve good governance and board leadership

Good governance and intelligent leadership involve actively creating conditions that are likely to lead to effective decisions. But what exactly are these conditions? Matt Fullbrook shared his top 5.

1. Deal with confirmation bias

People tend to prefer and remember information that supports their beliefs or theories. Board members are not immune to this bias. Because of this, boards must actively eliminate and manage confirmation bias to make effective decisions.

2. Generate multiple options

Instead of formulating decisions as “yes or no” scenarios, it is important to listen to everyone involved and consider all options. Avoid binary optionsin other words, choose A or choose B whenever possible.

3. Limit emotional influence

Because emotions can unintentionally influence decision-making, take steps to slow down the process of important decisions so that each member has time to process their thoughts and space to voice their opinions. The goal is to prevent members from just joining in because they can't find a comfortable window to talk to.

4. Manage the experts in the room

It sounds counterintuitive, but just because you have experts in the room doesn't mean your decisions and predictions are correct. An expert's overconfidence can kill or destroy the strategic thought process. The answer? If you have experts in the room, try to encourage them to ask questions instead of making predictions and claims.

5. Emphasize inclusion

There are no meeting room conditions that optimize the inclusion of all people at the same time. Because of this, panels should strive to create conditions that allow everyone to actively participate and reflect on who is in the room, what styles they have, and how best we can hear them.

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When it comes to governance and leadership, it's important to know when to confidently break the status quo so you can improve your organization. From pioneering new waters to fostering the best environment for decision-making, the key is to keep an open mind and be willing to experiment.

Even if your current meeting routine is working "okay," try something 1% different at your next meeting and see what happens.


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