Enhance board effectiveness to acquire a competitive advantage

livemint.com:

The word ‘board’ traces its origin to the large table around which people would gather for important meetings, but of course now refers to the people who have been ‘elected to manage a company by its shareholders.’ Traditionally, boards have focused on compliance and regulatory adherence, and in recent times, on transparency and corporate governance. The focus of this article is on how boards can become a source of competitive advantage in today’s ‘VUCA’ environment of volatility, uncertainty, complexity and ambiguity.

It is important at the outset to note that all boards are unique, and so while there are common themes, answers are specific to the company in question and its board context. While most of the discussion is related to boards of publicly traded companies, these themes are equally relevant to boards of privately held companies.

We believe that there are four ingredients that are critical for enhancing the effectiveness of a company’s board—the four Cs. Contextual familiarity: To begin with, for a board member to add value to the company, it is crucial for the individual to have contextual familiarity with the business.

A structured induction plan for board members, with the operating team taking them through the purpose, strategy and values of the company, is a critical building block. It is also important for the board to understand the firm’s performance relative to its competitors and interact with experts in the sector/industry.

This exercise enables board members to acquire the right backdrop for company discussions and deliberations, and to use their experiences in the appropriate business context. Clarity of role: The role of a board (beyond its fiduciary and compliance role) is typically described as