Corporate Governance,Leadership,Risk Management,Strategy
October 11, 2016
Help Your Company to Face Its Future Confidently
October 11, 2016
The uncertainty of looking to the future presses boards to consider how confident their senior executives and supporting teams are in executing strategy. How can the board help the companies they oversee to face the future with a greater sense of confidence?
Confidence is neither a cliché nor an assertion of mere optimism. Rather, it is a quality that drives leaders and their companies forward. The Oxford English Dictionary defines confidence as “the state of feeling certain about the truth of something” and “a feeling of self-assurance arising from one’s appreciation of one’s own abilities or qualities.” This definition focuses on the board and management’s appreciation of the collective capabilities of the enterprise, including the ability to carry out a company’s vision. It raises three fundamental questions:
- Do we know where we’re going directionally and why? Are our people committed to achieving a common vision that is clearly articulated, meaningful, and aspirational?
- Are we prepared for the journey? Does our staff have the capabilities to execute our strategy? Do we have a great team, a strong roadmap, and the required processes, systems and alliances, and sufficient resources to sustain our journey?
- Do we possess the ability, will, and discipline to cope with change along the way, no matter what happens? Does our board have the mental toughness to stay on course? Is our management team agile and adaptive enough to recognize market opportunities and emerging risks, and capitalize on, endure, or overcome them by making timely adjustments to strategy and capabilities?
Definitive, positive responses to these questions from the board will enable confidence across the organization.
Looking back on experiences working with successful companies, seven attributes were identified that organizations must have when facing the uncertainty of future markets.
How to Build the Foundation for Confidence
- Confident organizations share commitment to a vision. Commitment to a vision provides a shared “future pull” that is both inspiring and motivating. This perspective fuels enterprise-wide focus and energy to learn, which encourages participation and altruistic camaraderie. An effective vision crafted by the board and executive team leads people at all levels of a company to recognize that the enterprise’s success and their personal success are inextricably linked.
- Confident organizations have a heightened awareness of the environment. A confident organization constantly reality tests its market understanding by facilitating effective listening to customers, suppliers, employees, and other stakeholders. Boards should encourage companies to generate sources of new learning, encouraging systemic thinking in distilling and acting on the environment feedback received, with the objective of driving continuous improvement. The confident organization fosters a culture of sharing and supports formal and informal continuous feedback loops to flatten the organization, get closer to the customer, and promote a preparedness mindset.
- Confident organizations align their required capabilities. It is a never-ending priority of the board to ensure that the right talent and capabilities are in place to achieve differentiation in the marketplace and execute strategies successfully. Capabilities include an enterprise’s superior know-how, innovative processes, proprietary systems, distinctive brands, collaborative cultures, and a unique set of supplier and customer relationships.
How to Sustain Confidence
Achieving a foundation of confidence is necessary, but alone is not enough without concerted efforts to sustain confidence. Astute directors and executives know that the ability, will, and discipline to cope with change are also needed to sustain their journey. Those winning traits are enabled by the attributes below.
- Confident organizations are risk-savvy. The confident organization is secure in the knowledge that it has considered all plausible risk scenarios, knows its breakpoint in the event of extreme scenarios, and has effective response plans in place (including plans to exit the strategy if circumstances warrant). Most importantly, the confident organization should have an effective early-warning capability in place to alert decision-makers of changes in the marketplace that affect the validity of critical strategic assumptions. In a truly confident organization, no idea or person is above challenge and contrarian views are welcomed.
- Confident organizations learn aggressively. Confident organizations improve their learning by: creating centers of excellence; embracing cutting-edge technology to drive the vision forward; fostering an open, transparent environment of ongoing knowledge sharing, networking, collaboration, and team learning; perceiving admission of errors as a strength and requiring learning from the missteps; and converting lessons learned into process improvements. Aggressive learning stimulates the collective genius of the entire enterprise.
- Confident organizations place a premium on creativity. Innovation should be an integral part of the corporate DNA of the confident company, and should be evidenced by setting accountability for results with innovation-focused metrics at the organizational, process, and individual levels to encourage and reward creativity. Companies committed to innovation have the creative capacity to take advantage of market opportunities and respond to emerging risks. When innovation is a strategic imperative, companies empower and reward their employees to take the appropriate risks to realize new ideas without encumbering them with the fear of repercussions if they aren’t successful.
- Confident organizations are resilient. Confident organizations have adaptive processes supported by disciplined decision-making, and are committed to adapt early to continuous and disruptive change. They have the will to stay the course when the going gets tough, and are prepared to act decisively to revise strategic plans in response to changing market realities. They do not allow competitors to gain advantage by building large capital reserves, having great relationships with their lenders, and by cultivating trusting relationships with their customers, vendors and shareholders. The strategies that their boards approve include triggers for contingency plans that directors and management will implement if certain predetermined events occur or conditions arise.
In summary, the speed of change continues to escalate, creating more uncertainty about future developments and outcomes. If there was ever a time for a board to assess an organization’s confidence, we believe it is now. It’s one thing to have a confident CEO, but if the people within the entity lack confidence, the organization itself may not have the creativity and resiliency needed to sustain a winning strategy.
Jim DeLoach is managing director with Protiviti, a global consulting firm.