For CEOs, whether they run companies the size of Amazon or just a small start-up, it means they must deal with the rapid pace of change, especially technological change, at the same time as instilling a good governance framework. As a CEO of a start-up, having the right Board mix is as important as building a strong management team. Good CEOs will manage up and down - allowing leadership from the Board to guide the strategic vision and then implementing it via capable management.
For a start-up, let me highlight the key role a board can play in guiding the CEO.
Innovation might take some time to establish a beach-head, but once it does its impact can be as rapid as it is transformational. This is creating a fresh set of demands for CEOs and boards as they are being asked to step outside the traditional prism in which they once viewed their responsibilities and are having to understand that the pace of change is demanding a different approach, both corporate and civic, with the Haynes Royal Commission a curt reminder of what can happen when boards fail to do so.
Certainly, the day of CEOs and boards just making their decisions on what’s happening today is not enough. Nor is it enough to be solely focussed on the bottom line. No, it’s about having a long-term awareness that must extend beyond the immediate corporate demands to embrace the social, political and environmental worlds in which the business operates.
It means there is a need to ask the right questions – and not just regulatory or compliance or risk – that not only improve corporate performance but helps inculcate a culture that improves leadership from the top down. By doing this, diligent boards are giving CEOs a different lens by which to view how they run the business.
Boards need to wary of information overload. In the past, acquiring information of any description could be a huge cost for business. Today, it’s quite the reverse. Information is not only cheap but plentiful. Today, the real questions are: what does the information say and what does it mean? Boards need to know how to sort the wheat from the chaff and CEOs need to rethink their board presentations to ensure good decision-making.
Where good boards can really contribute is in a crisis, be it big or small. And start-ups invariably have them. Alert directors constantly ask questions during a crisis, knowing when to give good management the necessary autonomy to handle it, but also being prepared to step into the breach to help a management that is floundering.
In these situations, good boards never forget they have dual responsibilities: to the company’s owners, the shareholders, to ensure the organization not only survives but remains profitable; and to their public stakeholders, to reassure them organisation will address the issue in an ethical, responsible way.
Indeed, it’s post-crisis that the CEOs and boards can duly reflect on recent events. Could they have anticipated the crisis? Was there the genuine diversity in the boardroom to create that inquisitive mindset that might have foreseen the crisis? How did management respond? Did it have a strategy in place before the crisis erupted? Where there established levels of communication between board and management, and management and shareholders, employees, customers, and stakeholders? The answers will provide an excellent sounding board for the board and management.
Today’s rapidly changing business world is occurring at a time of tougher regulatory scrutiny and growing public cynicism of the corporate world. It means that boards and management must create value, develop long-term strategies, and, most importantly, ensure they have the right leadership framework in place to make the pivotal decisions on which the company’s profitable and ethical survival depends.