Why boards must focus on insight and foresight in today’s volatile world

While operating in volatile times it’s become increasingly challenging for boards to steward the creation of value and navigate their organisation through to business success. By John Harte (pictured) , Managing Partner at Integrity Governance

This poses the question – how can boards effectively undertake future planning and decision-making, which includes identifying new opportunities for business growth? The answer is to have foresight and insight at the heart of the decision-making process.

Foresight

Looking at foresight in more detail, it’s the ability to anticipate what is coming and the future forces that will impact on the competitiveness and sustainability of the business. It requires looking forward analytically, logically assessing options for action and evaluating the impact of them, before setting out the future strategy for the organisation. In fact, it’s the board’s role to look further into the future than anyone else, including the CEO. In today’s challenging world foresight and future gazing needs to be live in the boardroom at all times, and not something to be discussed once a year.

 Insight

Insight is about having understanding of the company, the drivers of financial performance and the organisation’s competitive advantage, including the context of the external business environment and the marketplaces where the company sells its products and services. Insight drives a more objective and enabling assessment of performance and strategy, and is developed by directors over time in the course of their work. Directors with insight bring compelling wisdom to the board, encourage critical thinking and help join the dots to support the board in seeing the bigger picture. Effective boards are driven by insight, therefore it needs to be live in the boardroom too.

Boards with foresight and insight front of mind will be well positioned to spot and deliver on new opportunities to grow their business, for example around ESG, with ESG remaining such an important issue for organisations.

Other lines of sight: Hindsight and Oversight

While foresight and insight remain the main focus for boards, it’s important that they factor in two other lines of sight when making decisions. These include hindsight: the ability to remember previous initiatives and reflect on the good, bad and ugly learnings from the past. The other is oversight. This requires boards to have the right processes in place to oversee and be accountable for following all legal and ethical standards. It ensures that the business is appropriately stewarding the resources entrusted to it.

Challenge assumptions

When it comes to foresight and insight, and making decisions about the direction of the business, it’s important assumptions by any director, or the CEO, are challenged to validate their relevance. It’s a big issue with the interplay between the three critical elements of risk, strategy and return often based on assumptions at board-level. By challenging assumptions you have assurance that the right path is being taken – something that is particularly important when quick decisions are required during challenging times.

Diverse boards are more effective

 How do you know if your board has the capability to focus on foresight and insight? The answer is to ensure that you have diversity on the board, with more directors with a personality inclined to future gazing than looking back. It is widely recognised that diverse boards are more effective than those that aren’t. Therefore, to ensure they deliver good governance and decision making boards must consider whether their current composition is appropriate to take the organisation forward. To accomplish this they should look at the board through the prism of the five drivers of diversity™ – demographics, skills, experience, thinking styles and circles of influence – and contemplate how well the current line up matches up.

Appropriate culture

For foresight and insight to be live on the board there needs to be the right culture in place. As part of this boards need to foster a culture of agility and adaptability. This releases an entrepreneurial spirit and the potential of directors to provide new ideas to help take the business forward. It also requires that boards generate a culture of curiosity and fearlessness to inspire creativity, innovation and continuous improvement. It’s a culture which will furthermore foster general good governance.

In these volatile times it can be difficult for boards to deliver effective future planning and decision-making. With foresight and insight live in the boardroom they will be well positioned to deliver successful decision-making and identify and act on new opportunities to provide long-term growth.