How provocative is your board?

This is the second in a series of articles by Sally Freeman, Partner in Charge of KPMG’s Risk Consulting and Peter Nash, KPMG’s Australian Chairman, that looks at the changing context of governance, and how to be a board of tomorrow, today.

Being provocative can sound to some like causing trouble. It implies ‘rocking the boat’, provoking or antagonising someone or something in order to get a reaction. And, according to the Oxford English dictionary, provocative IS defined as “something that provokes an action, reaction or condition – an incentive or stimulus”.

But that doesn’t always mean trouble.

You could say that a scientist ‘provokes a reaction’ when they conduct an experiment. Searching for insights into how things work, seeking to understand the catalysts for a reaction, looking for weaknesses and strengths in the subject – finding its breaking points and testing different scenarios to test a hypothesis, simply to see “what happens if…?”

Scientists are often considered cutting edge. They test boundaries. They test long held beliefs. They dare to challenge that status quo and ask “what if…?” No cure for cancer? What if we found one? No life on Mars? What if we’re wrong…?

Science is the birthplace of innovation. Scientists dare to test, dare to be wrong, dare to understand things differently and dare to look for new ways. Without them, we would not progress. But why should this approach be limited to the realm of science? Imagine what might happen if boards took on this more ‘provocative’, ‘disruptive’ or ‘curious’ approach to governance.

The role of the board

Is it the role of the board to provoke? To disrupt? To throw the cat amongst the pigeons or be the devil’s advocate?

What are the benefits of doing this?

What are the risks?

Disrupting management or distracting management?

Often boards spend time developing crisis management plans, reviewing risk registers and developing strategies – in other words, building mechanisms to protect an organisation or strengthening the organisation’s ability to respond to threatening events. This is absolutely the role of the board. Directors have a fiduciary duty to act in the interests of the organisation and its shareholders – value protection is a key part of meeting this obligation.

But how often do boards really stress test these plans and strategies? Boards are well equipped and well experienced at challenging strategies on the annual strategy development day. Perhaps they implement an internal audit plan to test the controls in place over key risk areas, but how many boards would actively test their organisation’s strategy on an ongoing basis without being perceived as trying to change or reverse decisions the board has already made?

Perhaps this is where real innovation and real value creation can occur.

In meeting the ‘best interests of the organisation’, it is the responsibility of directors to navigate the organisation through a range of issues and develop a strategy for building a business that is resilient to shocks. Finding the right course can often mean changing routes along the way when unexpected events or storms, occur. Boards have traditionally built mechanisms to help the organisation through those unexpected events, but what if they actually introduced them to really test the water?

The intention here is not to ‘rock the boat’, or to be a distraction to management. The intention is instead to look for pain points and highlight these to management. To challenge long held perceptions and beliefs, moving beyond the usual assumptions and ask “what if the world wasn’t flat?”

It is easy to be complacent. It is easy to think “if it ain’t broken, then don’t fix it”. However as we explored in the first blog of this series, complacency can really hinder innovation. A narrow focus can limit the strategic and operational agility of a business.

As a director, how much time do you or your board spend actively disrupting long held beliefs, assumptions and practices?

What does this disruption look like and is it positively perceived?

And how do you find the balance between being disruptive versus being a distraction?

What is the answer?

The answer is – don’t overdo it.

1. Seek ways to constructively challenge. Look beyond your normal frame of reference. Consider what other industries are doing. Take a longer term view. Consider a future in which what is seemingly impossible might actually be possible. Using Futurists (yes, it is a profession) can be good for this.

2. Apply these to your own business, especially during the strategy development phase, where the business model and strategic objectives are under review. In day to day operations, think about the impacts of disruption on existing processes. Test the strength of these processes by running different scenarios within the organisation.

As a director, your role is to be more than an overseer of strategy development and implementation. It is more than ensuring that risks are managed. Directors should always constructively challenge. To do that they must be curious. Think laterally and independently. Be comfortable moving the business away from the status quo towards a more creative and innovative future.

The best way to ensure that the status quo is challenged is to be ‘provocative’, acting as a stimulus or incentive to be ‘unreasonable’ (in a constructive way) and refuse to accept the norm simply because that “it is how things have always been done around here”. There is an important role for diversity of thought in any board. The trick is to be positively provocative.

Getting the balance right between being disruptive and distracting is a critical part of this process, and an important skill set for any director or board.

First published on kpmg.com.au on 30 November 2016.

Sally Freeman spoke at the ‘How future-proofed is your board’ session on Day 1 of the Summit, and Peter Nash spoke at the ‘Policy making for the long-term’ session on Day 2 of the Summit.