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Posts Tagged "Board Assessment in Kenya"

Many directors are feeling outmatched by the ferocity of changing technology, emerging risks, and new competitors. Here are four ways to get boards in the game.

Today’s boards are getting the message. They have seen how leading digital players are threatening incumbents, and among the directors we work with, roughly one in three say that their business model will be disrupted in the next five years.

In a 2015 McKinsey survey, though, only 17 percent of directors said their boards were sponsoring digital initiatives, and in earlier McKinsey research, just 16 percent said they fully understood how the industry dynamics of their companies were changing.1 In our experience, common responses from boards to the shifting environment include hiring a digital director or chief digital officer, making pilgrimages to Silicon Valley, and launching subcommittees on digital.

Valuable as such moves can be, they often are insufficient to bridge the literacy gap facing boards—which has real consequences. There’s a new class of problems, where seasoned directors’ experiences managing and monetizing traditional assets just doesn’t translate. It is a daunting task to keep up with the growth of new competitors (who are as likely to come from adjacent sectors as they are from one’s own industry), rapid-fire funding cycles in Silicon Valley and other technology hotbeds, the fluidity of technology, the digital experiences customers demand, and the rise of nontraditional risks. Many boards are left feeling outmatched and overwhelmed.

To serve as effective thought partners, boards must move beyond an arms-length relationship with digital issues (exhibit). Board members need better knowledge about the technology environment, its potential impact on different parts of the company and its value chain, and thus about how digital can undermine existing strategies and stimulate the need for new ones. They also need faster, more effective ways to engage the organization and operate as a governing body and, critically, new means of attracting digital talent. Indeed, some CEOs and board members we know argue that the far-reaching nature of today’s digital disruptions—which can necessitate long-term business-model changes with large, short-term costs—means boards must view themselves as the ultimate catalysts for digital transformation efforts. Otherwise, CEOs may be tempted to pass on to their successors the tackling of digital challenges.

At the very least, top-management teams need their boards to serve as strong digital sparring partners when they consider difficult questions such as investments in experimental initiatives that could reshape markets, or even whether the company is in the right business for the digital age. Here are four guiding principles for boosting the odds that boards will provide the digital engagement companies so badly need.

Close the insights gap

Few boards have enough combined digital expertise to have meaningful digital conversations with senior management. Only 116 directors on the boards of the Global 300 are “digital directors.”2 The solution isn’t simply to recruit one or two directors from an influential technology company. For one thing, there aren’t enough of them to go around. More to the point, digital is so far-reaching—think e-commerce, mobile, security, the Internet of Things (IoT), and big data—that the knowledge and experience needed goes beyond one or two tech-savvy people.

To address these challenges, the nominating committee of one board created a matrix of the customer, market, and digital skills it felt it required to guide its key businesses over the next five to ten years. Doing so prompted the committee to look beyond well-fished pools of talent like Internet pure plays and known digital leaders and instead to consider adjacent sectors and businesses that had undergone significant digital transformation. The identification of strong new board members was one result. What’s more, the process of reflecting quite specifically on the digital skills that were most relevant to individual business lines helped the board engage at a deeper level, raising its collective understanding of technology and generating more productive conversations with management.

Understand how digital can upend business models

Many boards are ill equipped to fully understand the sources of upheaval pressuring their business models. Consider, for example, the design of satisfying, human-centered experiences: it’s fundamental to digital competition. Yet few board members spend enough time exploring how their companies are reshaping and monitoring those experiences, or reviewing management plans to improve them.

Board members also should push executives to explore and describe the organization’s stock of digital assets—data that are accumulating across businesses, the level of data-analytics prowess, and how managers are using both to glean insights. Most companies underappreciate the potential of pattern analysis, machine learning, and sophisticated analytics that can churn through terabytes of text, sound, images, and other data to produce well-targeted insights on everything from disease diagnoses to how prolonged drought conditions might affect an investment portfolio. Companies that best capture, process, and apply those insights stand to gain an edge.

Engage more frequently and deeply on strategy and risk

Today’s strategic discussions with executives require a different rhythm, one that matches the quickening pace of disruption. A major cyberattack can erase a third of a company’s share value in a day, and a digital foe can pull the rug out from a thriving product category in six months. In this environment, meeting once or twice a year to review strategy no longer works. Regular check-ins are necessary to help senior company leaders negotiate the tension between short-term pressures from the financial markets and the longer-term imperative to launch sometimes costly digital initiatives.

Boardroom dialogue shifts considerably when corporate boards start asking management questions such as, “What are the handful of signals that tell you that an innovation is catching on with customers? And how will you ramp up customer adoption and decrease the cost of customer acquisition when that happens?” By encouraging such discussions, boards clarify their expectations about what kind of cultural change is required and reduce the hand-wringing that often stalls digital transformation in established businesses. Such dialogue also can instill a sense of urgency as managers seek to answer tough questions through rapid idea iteration and input gathering from customers, which board members with diverse experiences can help interpret. At a consumer-products company, one director engages with sales and marketing executives monthly to check their progress against detailed key performance indicators (KPIs) that measure how fast a key customer’s segments are shifting to the company’s digital channels.

Fine-tune the onboarding and fit of digital directors

In their push to enrich their ranks with tech talent, boards inevitably find that many digital directors are younger, have grown up in quite different organizational cultures, and may not have had much or even any board experience prior to their appointment. To ensure a good fit, searches must go beyond background and skills to encompass candidates’ temperament and ability to commit time. The latter is critical when board members are increasingly devoting two to three days a month of work, plus extra hours for conference calls, retreats, and other check-ins. Board members need to increase their digital quotient if they hope to govern in a way that gets executives thinking beyond today’s boundaries. Following the approaches we have outlined will no doubt put some new burdens on already stretched directors. However, the speed of digital progress confronting companies shows no sign of slowing, and the best boards will learn to engage executives more frequently, knowledgeably, and persuasively on the issues that matter most.

“For me, eBoard has been an amazing experience. Using it has made it easy for me to manage the process of preparing for board meetings, distribution of board packs, capturing minutes and monitoring who has read the board pack”

Mr. Peter Rotich, Administrator / Trust Secretary, TelPosta Pension Scheme

The TelPosta Pension Scheme was constituted vide a Trust Deed dated 1st July 1997 by then Kenya Posts and Telecommunications Corporation. Its main purpose is the provision and custody of Pension and other retirement benefits of the employees and former employees of Kenya Posts and Telecommunications Corporation (now defunct) and Telkom (K) Limited.

The Challenge

“As the Trust Secretary, I am primarily in charge of the board meeting process. For every board meeting, I had to put together board packs; print, assemble and distribute hard copies. Factoring in last-minute updates and amendments to meeting materials after board pack has been released -where a change in one agenda item affects several pages – board meetings were very stressful situations.”  Mr. Rotich recalls

Why Software Technologies

Software Technologies has excellent customer service. It’s not a one-time thing where you get the system and never hear from the company again, it is a consistent and empowering journey. They promptly respond to any queries I may be having and are constantly improving my experience as a client through the continuous development of the system.” Mr. Peter Rotich profoundly states.

The Results

Seamless board evaluations and easy report tabulation: With eBoard, TelPosta Pension Scheme’s Board of Trustees now has an effective, online and dynamic way of carrying out the assessment together with an automatic report generating system. “When we got an external performance evaluation expert, he stated that your evaluation module adheres to set regulated policies by the Law.” Mr. Rotich recalls.

Easy updating and sharing of board papers:  By providing directors with a central document repository, TelPosta Pension Scheme has seen an ease in the sharing of board papers. Mr. Rotich is now able to share corrected documents from any board pack at any time.  “I don’t have to worry when I have to send a corrected document, because I am sure everyone will be notified and it will be displayed on the homepage and stored in the briefcase.”

Ensured 24/7 secure access to data from anywhere in the world: Board members have all time access to the meeting pack. “We upload everything on eBoard and board members can access the details wherever they are, whenever they want, 24 hours a day. The board members can review and annotate from wherever they are. It’s saved us so much time,” said Mr. Rotich. “I regularly see our Board Trustees viewing documents at any time, day or night.”

Savings on time, money and resources: Previously, the company’s time, printers and paper reams were all excessively used in preparation for board meetings.  With eBoard, TelPosta has saved close to 40,000 USD in printing and distribution costs. They also continue to make an environmental impact by using less paper and saving more trees.

Access to previous board papers: It is easy for members of the board to refer to board documents from previous years as they are conveniently stored in the Resources. “We don’t have to interrupt a meeting so as to get a previous board paper as it is readily available in the Resources module.” Mr. Rotich states

 

Board evaluation typically examines the roles of the Board and the entailing responsibilities while assessing how effectively these are fulfilled by the Board.

Mounting stakeholders’ expectations, fluctuating economic conditions, pressures of globalisation and increased regulatory requirements have brought the quality of performance of the Boards of Directors under greater scrutiny.

In Kenya, the Code of Corporate Governance 2016 requires a formal annual assessment of the effectiveness of the Board, its committees and that of the contribution of each individual directors, the Chairperson, Chief Executive Officer and company secretary to that effectiveness (Capital Markets Authority). In addition, a write-up of the evaluation process should be provided in the annual report.

Why have Board Evaluations

Simply having competent people of goodwill around a boardroom table does not necessarily result in an effective functioning board. Issues of structure, processes, and behaviour can detract from or add to the effectiveness of a board. According to a study by Delliote, 2014 on Performance and Evaluation for Boards and Directors a properly conducted board evaluation will help to flush out these by assessing matters such as:

  • Does your board meetings allow enough time for governance review, or if governance tends to be squeezed out of the discussion by ongoing business issues?
  • Are discussions open, frank and constructive, with all views considered, or are they dominated by key players?
  • Is the information provided to the board by your management is timely, appropriate, and sufficient and in a format that will foster a healthy review?
  • Do the board committees work efficiently?
  • Is the composition of the board optimal in terms of members’ skills, knowledge and diversity of experience, and outlook?
  • Would training help to remedy any identified weaknesses?

The Board Evaluation Process

In the conduct of their board assessments, the majority of companies in Kenya use internally prepared questionnaires or open boardroom discussions, and the chairman’s or nominating committee’s evaluations of board effectiveness. These methods do not offer confidentiality in Director’s responses hence lack transparency. More so, the whole process is labour intensive, time-consuming for board administrators costing the companies hundreds of thousands of dollars annually in resourcing; printing, distribution and labour.

Using an External Facilitators

A survey by the Institute of Directors (IOD) Kenya, 2015, shows that most boards continue to rely on internal assessments. Only 28 per cent of responding companies engage an external facilitator or consultant to help coordinate the process. An even smaller percentage use external support for assessment of board committees.

While external consultants can be seen as independent, using one consultant over a period raises objectivity questions due to possible internal interferences. Considering that these companies spend two months from the time they engage a consultant to draft questionnaires, administering them through to submitting a final report, this process costs companies between of $10,000 to $25,000.

Targeting Areas of Assessing Your Board Effectiveness

The Board performs three major roles in a company – it provides direction (i.e. sets the strategic direction of the company), it controls (i.e. monitors the management) and provides support and advice (advisory role). Board evaluation typically examines these roles of the Board and the entailing responsibilities and assesses how effectively these are fulfilled by the Board. The effectiveness of the Board depends on a variety of factors, some of which are:

  • Board Structure: its composition, constitution and diversity and that of its Committees, competencies of the members, Board and Committee charters, frequency of meetings, procedures;
  • Dynamics and Functioning of the Board: annual Board calendar, information availability, interactions and communication with CEO and senior executives, Board agenda, cohesiveness and the quality of participation in Board meetings;
  • Business Strategy Governance: Board’s role in company strategy;
  • Financial Reporting Process, Internal Audit and Internal Controls: The integrity and the robustness of the financial and other controls regarding abusive related party transactions, vigil mechanism and risk management;
  • Monitoring Role: Monitoring of policies, strategy implementation and systems;
  • The Chairperson’s Role; and
  • Supporting and Advisory Role

The evaluation of the performance of the Boards is essentially an assessment of how the Board has performed on all these parameters.

eHorizon eBoard Evaluation Assess Your Board’s Effectiveness

Examining so many areas of competence can be labour intensive and time-consuming experience, but it doesn’t have to be. Board management software solutions create a process for board evaluations that is far less time-consuming than manual processes. Board assessment tools like eHorizon eBoard Evaluation allow boards to save questions from year to year to evaluate and compare effectiveness progress over time. The whole board evaluation process is standardized making it easy to compare and contrast results.

eHorizon eBoard simplifies board evaluations process by allowing board administrators to use pre-designed templates that can be customized to various formats for the questions.  It’s easy to use features allow the board administrator to pull up readymade questions, review them for relevancy and once ready simply click on the names of board directors and shares with them all at once

The evaluation tool is intuitive and mobile-friendly. Board directors have the option of starting the evaluation at their own time, saving it and completing it later from anywhere then submit their responses at a click of a button. What’s more, the increased confidentiality of eBoard brings transparency to the director’s responses.

Administrators can easily track who has opened their questionnaires and get notifications when evaluations are completed and submitted.

Insightful Board Evaluation Results 

Once all the results are in, board administrators can pull all the information together in a few clicks. The program automatically creates charts, graphs and other visuals so the information is easier to digest and analyze. Board administrators can even download the results in various formats to use during presentations. eBoard Evaluation tool has been used by over 3,500 trusting board directors and executives across Africa and the Middle East since 2012.

The writer is the Marketing Communication Manager at Software Technologies Ltd.

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