The art and science of involving boards in embracing AI

January 9, 2018

 

A.I. is creating deep structural shifts in business models as it permeates legacy structures and uncovers efficient ways to solve cumbersome and longstanding inefficiencies. AI is a pivotal element of any future strategy of any organisation. However, any Chairman and member of a board can provide evidence that there are always more immediate pressures on the board, the board agendas already more than full and there does not appear to be the time to discuss strategic issues that appear to be further away. 

 

What is more the people on boards do not have the know-how and insights into AI and technology to understand what is possible, how it can be implemented and the impact it will have on the organisation and its bottom line. Behind closed doors many Chairmen feel free to admit that their boards are ill-equipped to deal with AI and simply are wrong-footed by its pace and complexity.  What is more, they also admit that they do not know what to do about it. 

It does not help to point out that AI is a strategic capability boards need to take seriously, “really must” and “should” make time for and integrate it into the future strategy. On the contrary it is a natural part of human nature to protect the own known territory. The pushback enthusiastic AI Consultants and evangelists experience is only natural. 

 

We experience in our work that it is necessary to take a step back and start at a different place. The place that proved to be an excellent starting point are board effectiveness reviews. Board effectiveness reviews have become an integral and accepted part of good board practice. Listed companies in the UK are encouraged to conduct an external board review every three years. If they do not comply they have to explain why this was the case. It is no surprise that now the majority of boards of listed companies conduct board reviews on a regular basis and the practice has spread to larger non-listed organisations and family businesses. 

 

Why are board effectiveness reviews a good place to start? The equation is quite simple. Only effective and forward-looking boards that are on the top of their game have fruitful discussions about strategy and AI. All other boards will be entangled in firefighting more immediate issues, discuss operational and financial issues and simply do not have the time to adequately discuss and dive into AI. 

 

So what makes a board effective?

 

There are a lot of anecdotes of issues that make a board more effective and any seasoned board member can tell what she has seen working in a specific context. We did not deemed this to be good enough and started in 2013 a large scale research project that encompassed: a review of academic studies that were published on the subject in the Anglo-Saxon and German speaking literature, combined the two bodies of literature,  initiated fifty interviews with members of boards, consolidated the findings and started working sessions with Opera

 

ting Partners of leading Private Equity firms to understand the investor perspective and bring the academic concepts into the real world, refined our academic findings, started pilot projects and created an online tool that is considered to set the standards for board reviews in the future. 

Our findings are peer-reviewed and published globally. The hallmarks of effective boards are: 

  • Team composition

  • Ability to use the strengths of all members

  • Clarity of roles and responsibilities

  • Joint vision

  • Ability to resolve conflicts between the board and the management team

  • Structure and organisation of the boards work

  • Regular reviews and reflection about the boards work

 

Chairmen and members of boards that go through a carefully choreographed review that takes them through the seven hallmarks of effective boards learn in the process about how their contributions at the board are perceived, what their strength are and how their view of themselves differs from that of their peers, who is best placed to take ownership of specific issues, what is right about their working processes and what specifically deserves their attention to improve their individual and the collective effectiveness. Chairman understand how they can best leverage and orchestrate the talent in the boardroom as well as what know-how, characteristics and behaviours any additional board members will need to have to best complement the existing board. 

 

Any “really must” and “should” become necessary as the evidence-based approach provides data on which basis the Chairman and members of the board can draw their conclusions. Few are satisfied with the status quo and are eager to strengthen their impact in the boardroom, collectively become more effective and make a greater contribution to the value creation process. AI is almost naturally embraced as it permeates legacy structures, uncovers efficient ways to solve cumbersome and longstanding inefficiencies and has a positive impact on the competitive positioning of the organisation and its financial status. 

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