Ideas for Non-Executive Directors to Navigate Unpredictability
How can non-executive directors get through this unprecedented time?
We took specific, stable, and predictable decisions, most of which have changed in less than 12 months. From the unprecedented bushfires to the COVID-19 global pandemic, extreme climate events are changing geopolitical issues and alliances and significant economic challenges. It is difficult for organizations to speculate and project what the future holds and make plans accordingly, especially for non-executive directors.
Though there is so much to learn from the past, immediate individual and organizational responses to such crises have often surprised on the upside. We cannot put off decisions for the medium and long-term indefinitely.
The extreme uncertainty of 2020 is not a reason to desert the rigor of the traditional strategic planning processes. Instead, boards and leadership teams can be encouraged to foresee a range of futures and examine a series of scenarios.
Boards must embolden their management teams and help them become confident to do more extensive thinking instead of plunging into risk-averse planning. But they have to be inquisitive and creative and think about the ‘what ifs.’ Directors who constructively challenge management to have clear-eyed goals are ambitious about their organizations. They are also concerned about how they can shape the future.
A growth mindset is required for the boards to have this change. A reasonable portion of non-executive directors from outside the industry can aid this movement and bring external views and perspectives. Boards get benefitted from thoughtful directors who invest their time to help them:
- To be eager to know about emerging technologies and other forces and trends
- What organizations across the world are doing
- How humans are embracing and behaving differently or probably behaving more predictably than ever.
- Ask thoughtful ‘what if’ questions to lift management’s eyes beyond the horizon and ask constructive probing open questions.
It will be more productive if directors are well-aware of two fundamental behavioral biases. One is loss aversion, and the other one is narrow framing. People generally fear losses more than they value equivalent achievements. And they weigh potential risks as if there was only one potential outcome instead of viewing them as part of a broader portfolio of outcomes. This is where larger-level thoughtful organization-wide discussions and assessments can act as an enabler of practical, well-thought, and a larger organization-wide perspective is taken. As a non-executive director, one should daily ask oneself:
- If s/he has clarity on the organization’s mission and value drivers
- Does s/he have the organization’s mission and values in the center to frame his/her thinking and questions?
- How much is s/he reading or listening to things that are talking about trends and external forces and bringing an external perspective to the discussion?
- Is s/he alive to the behavioral biases which may creep into thinking, specifically given the trauma of 2020?
- Is s/he asking questions in a way that opens up discussion and makes it permissible to have the ‘what if’ conversations?
Truly value-adding strategic conversations need directors to brainstorm about these issues as there is no time more pressing for this than now.