Effective virtual boards
- Date Published
As part of our Growth Series, we recently held an event for our portfolio CEO and non-executive directors covering ‘Effective Virtual Boards’. Co-hosted by Board Intelligence who have over 15 years’ experience driving boardroom best practice, and with expert input from Colin Tenwick, who has a range of non-executive appointments including Addison Lee and SEP backed Intelligent Reach, we discussed board engagement and decision making in a digital environment.
Covid-19 has forced us to challenge whether traditional board meetings are fit for current purpose. When the pandemic hit, many management teams had to shift their focus to preserving cash, obtaining government support, furloughing staff, strengthening the balance sheet, and protecting the health and wellbeing of employees. These decisions could not wait for a formal monthly structure. A more agile and responsive method of assessment and determination was required – hence the rise of the virtual board.
With the move now away from short-term crisis management, to rebuilding growth and restoring confidence across teams, customers, and the broader market, how has the board dynamic altered, and will this change be permanent?
Decision making has accelerated
Board meetings have typically halved in duration, now lasting on average two hours. They have also become more frequent – convened to deal with issues as they arise rather than confined to a set day each month. Non-executive directors (NXD’S) are working harder than ever with more pre-meeting preparation and more interaction outside of the monthly board meeting.
The board dynamic has become more fluid and less formal, and board packs have become more succinct. Some key decisions have moved out of the boardroom and instead been delegated to executive and NXD subgroups. Communication between the board and management has improved with all members contributing at short notice and making decisions faster.
Collaborative, energetic, digital savvy, non-execs are thriving in this virtual environment and are likely to be in high demand going forward.
Need to differentiate between supervision and steering
Board agendas are now more finely tuned, even as far as covering single rather than multiple topics. To make the most of a virtual board there is a need to focus on key strategic wins and away from operational matters. Effective boards are separating ‘supervision’ (quality assurance and checking), which can be considered outside the formal board, from ‘steering’ (strategic planning and decision making) which is a matter for the board.
Tony Robison, Partner at SEP comments: ”The onset of Covid-19 brought greater focus on supporting management teams to accelerate strategic opportunities through greater innovation across all aspects of the business. Our experience from our high growth portfolio, is that teams have embraced this change and recognise that each board member has a part to play in driving the business forward”.
Strategy should not be sacrificed
Staff safety, operational and supply chain challenges, customer engagement and liquidity issues have taken priority for many boards, but it is vital that strategy is not sacrificed. To ensure good corporate governance there still needs to be time set aside for strategic planning. Operating the “Strategy Away Day” in a virtual context may be a challenge but adopting an innovative approach, for example posing the big questions or problems to be resolved, can help focus discussion and ensure that strategic priorities are agreed.
Collaboration and culture are key
Maintaining cultural values across a remote team and through zoom fatigue can be difficult. Pulse checks have been usefully deployed by many companies to assess employee happiness and engagement scores. The last six months have been exhausting for many teams and with concerns about burnout and productivity rising, innovative working methods such as project sprints following by rest days are being trialed by some to maintain motivation.
While much of the face to face social interaction across functional teams has been replaced by hack days, virtual fitness challenges and online gatherings, the relationship building of the board dinner has been missed, particularly for those companies seeking to recruit and integrate new board members. However, the flexibility of virtual engagement has its benefits as the time and cost of travel can be eliminated. More importantly inclusion of overseas executives and non-executives becomes easier with careful cross time zone scheduling. Many businesses have multinational management teams and board members and physical meetings have traditionally been a challenge however the new virtual world is helping to unlock this. We may see more international NXD recruitment as a result.
Good governance matters
Directors’ responsibilities, especially as regards future trading, have come under increased scrutiny as the economic ramifications of Covid-19 have hit home. The improvements in efficiency and engagement are clear, however the focus on governance and security remain key factors. The obligations on directors around reporting and compliance are unchanged whether boards are operating virtually or convening in person.
Interestingly, many boards are using Covid-19 as lever to focus on broader stakeholder issues, following the lead of many FTSE companies. The ‘S’ of environmental and social governance is gaining much greater traction at board level with the social and community impact of company operations being regularly considered alongside employee engagement and health and wellbeing.
With recent announcements by the UK and devolved Governments stating that those that can work from home should, it appears that virtual board meetings will be the default for the foreseeable future. We regard this as an opportunity to move away from the traditional board format and to create a more responsive and effective board format across our portfolio companies.
As Pippa Begg, co-founder of Board Intelligence comments: “The shift to virtual meetings creates opportunities to improve the diversity of board opinion, debate, and composition. Many boards have embraced new agile ways of remote working, with effective single topic board meetings, more pre and post-meeting collaboration and a more balanced stakeholder conversation. This has been afforded by breaking the habit and convention on 3hr monthly physical board meeting and is here to stay even when we revert to a hybrid model of being able to physically meet on occasion too.”
Without exception, we have been impressed by the agility, energy and commitment of our portfolio boards as they have responded to the challenges presented by Covid-19. These last few months have demonstrated that talented leadership teams with diversity of thought and ambition for growth will thrive in any environment – virtual or otherwise.