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When it comes to attracting and keeping the best people, money matters. You can give employees all the free snacks, happy hours and wellness perks imaginable, but if they feel they’re being unfairly paid? They’re not likely to stick around for long. With the ongoing Great Resignation causing a mass exodus of talent and salary data becoming increasingly accessible, getting remuneration right is more important now than ever. So, in this post, let’s deep dive into how compensation strategies can help you attract and retain your most valuable asset – a top team.

Attracting Top Talent

We can’t undermine the role of compensation strategy in attracting and hiring the best talent. With pay transparency laws cropping up across the globe and the rise in salary-comparison sites like Glassdoor, potential candidates are screening salaries before even clicking on ‘apply’.

In fact, in a recent survey conducted by LinkedIn, 91% of U.S.-based respondents said that they wanted to see salary ranges in job posts. To do this, organizations need to establish a watertight remuneration structure that they’re happy to have out in the open. Carefully assessed pay bands are essential if – or perhaps when – salary ranges become mandatory in your region.

As well as getting people into the interview room, compensation also comes into play to seal the deal on a fantastic candidate. When a candidate is weighing up multiple job offers, compensation packages are going to play a huge role in their decision making process. For some, money is the deciding factor.

And it’s important to remember that compensation is about much more than the figure that appears in an employee’s account each month. Potential applicants are also going to be weighing up bonuses, incentives and other perks that will impact their finances. 

Ultimately, attractive, competitive compensation demonstrates that a company recognizes and values the skills, experience, and contributions of its employees. It sends a clear message that the organization is willing to invest in its workforce and reward them for their hard work.

Retaining Your Best People 

If you want your organization to thrive, you need to keep hold of your best people. In 2023, retention is more difficult than ever. In fact, three-quarters of nearly 7,000 respondents said they planned to look for a new job over the next 12 months. The primary reason why 67% of these respondents were looking to jump ship? Unsatisfactory pay.

The bottom line is, when employees feel well-compensated, they’re less likely to explore other job opportunities. This means that organizations must make sure they’re regularly benchmarking their own compensation packages against competitors, as well as ensuring that they’re maintaining equity within their own organization.

Talking about what we earn is becoming noticeably less hush hush, whilst platforms like Glassdoor make it easy for employees to see what they could be getting paid elsewhere. Armed with this knowledge, even the most engaged employee will feel disgruntled if they discover that they’re being paid below market value.

Equally, a consistent, equitable salary structure is vital to avoid employees feeling like they’re being shortchanged or undervalued. An objective job evaluation system will ensure fair pay across the board, as well as providing an objective framework that can be openly and easily explained to staff if questions arise.

As organizations know all too well, high turnover is disruptive and eye-wateringly expensive. To thrive long-term, it’s essential to retain the expertise that comes from investing in training and development.


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Employee retention has always been an important topic. However, lately, with the fallout from the pandemic, the great resignation, and the great reshuffle, the topic of employee turnover and how to retain employees is on the mind of every leader.

Staying up to date on the latest research and statistics regarding employee retention will leave you better informed and equipped to pull the right levers to ensure your talent remains at your organization, and this article will help you do just that. In it, you’ll find information on what employee retention is, why it is important, the state of employee retention, and what can be done to fix it.

Willam F. Xiebell, CEO of Gallagher’s Benefit & HR division, summed up for HDR why employee retention is so important. He said, “An organization’s ability to retain employees ultimately impacts its bottom line because hiring and training a new employee usually costs much more than retaining someone who is already on the payroll.”

The State of Employee Retention in 2024

As we enter another year of VUCA (volatility, uncertainty, complexity, and ambiguity), it will be crucial for leaders across all industries to understand shifts in the workforce to develop strategies to keep talent from leaving.

The #1 operational priority for organizations is retaining their talent (this is even above revenue) – Organizational Wellbeing Report 2023, Gallagher
The current cost of employee turnover is, on average, 1-2 times the employee’s salary. – Integrated Benefits Institute Study 2023
61% of employers are having difficulty retaining employees. – Integrated Benefits Institute Study 2023
Today, 1 in 2 organizations has a turnover rate greater than 15%, and 1 in 5 has a rate greater than 30%. – Organizational Wellbeing Report 2023, Gallagher
The group most likely to leave their job are Gen Z or Millennials in the United States (53%) and working in the technology/hardware industry (60%) – EY 2023 Work Reimagined Survey
20% of frontline employees are planning on leaving their current job within the next three to six months. – Frontline Workers: How to Connect, Enable, and Support Them in the Modern Workplace, Workday 2023
57% of Canadian employers believe that slowing economic growth is reducing employees’ likelihood of leaving their current employer – EY 2023 Work Reimagined Survey
50% of respondents agreed they accepted a job offer but backed out prior to starting. – Gartner HR Survey, 2023
4.1 years is the average time an employee stays with an employer. – Bureau of Labor, 2022.

9 Employee Retention Strategies

To help leaders and the organizations they work for retain their employees, we’ve compiled nine employee retention strategies that thought leaders recommend and that the latest research backs up.

  1. Develop a Strong Onboarding Process
  2. Prioritize Inclusion 
  3. Embrace Flexibility
  4. Focus on Company Culture
  5. Provide Employee Development Opportunities
  6. Develop Strong Leaders
  7. Find Ways To Show Appreciation
  8. Offer Additional Benefits 
  9. Ask For and Use Employee Feedback 

Develop a Strong Onboarding Process

Onboarding is the employee’s first impression of their new workplace, for better or worse. Alison Stevens, Director of HR at Paychex, shared the benefits of strong onboarding with Fortune, “As organizations look to improve their onboarding process, creating a welcoming, engaging, and clear onboarding experience can vastly improve employee retention and morale.” 

  • 82% of employers have seen improvement in retention by implementing a robust onboarding program. – Integrated Benefits Institute Study 2023
  • 80% of new hires who receive poor onboarding plan to leave, especially those who work remotely. – The Effect of Poor Onboarding on New Hires, Paychex, 2023

Embrace Flexibility
Flexible working, autonomy, and work-life balance are significant considerations for employees if they remain at their current workplace or find one that offers more flexibility. In a recent study conducted by Kathryn Minshew’s company, The Muse, she shared that they found that “Flexibility and work-life balance is coming up as the number one thing that employees and job seekers are looking for, above compensation.”

88% of leaders globally agree that flexible working positively impacts employee retention. – 2023 Global Workplace Study, Targus
47% of employees actively seek a new job because they want more flexibility. – Gartner HR Survey, 2023

Focus on Company Culture
A company’s culture can retain employees or have them looking for their next opportunity. Tommy Loh, Partner at Hendrick & Singapore, shares with HR World the impact of a great culture. He said, “It is clear that culture has a positive influence on business and talent management strategies, employee retention, and financial performance. All thriving cultures begin at the top with purposeful leadership, as the model of the leader affects the entire organisation.”

Toxic company culture was the top predictor of employee attrition and is 10 times more important than compensation in predicting turnover. – Toxic Culture Is Driving the Great Resignation, MIT Sloan Management Review 2022
34% of CHROs plan to strengthen company culture to retain talent. – The Conference Board 2023

Provide Employee Development Opportunities
Employees want their organizations and leaders to take an interest in their careers and help them grow and develop. Kirt Linington, Owner of Linear Roofing and General Contactors, seconds this notion in his comments to Forbes, “Prioritize training, mentorship programs and clear career advancement paths. This shows employees that the company is invested in their professional growth and development, which can increase job satisfaction and reduce turnover.”

Employees who expect daily or weekly feedback from their direct leader but only receive it once a month or less are 2.5 times more likely to leave their current employer. – Frontline Workers: How to Connect, Enable, and Support Them in the Modern Workplace, Workday 2023
The #1 way companies try to improve retention is by providing learning opportunities, followed closely by upskilling and creating a culture of learning. – LinkedIn 2023 Learning Report
56% of leaders cited concerns over career growth opportunities as the top cause of voluntary resignation at their company – 2023 Global Operation Leaders Insight Survey, Centrical
When leaders or organizations support employee skill building, employees are 4x more likely to work for their company one year from now; when both leaders and organizations support skill building, odds jump to 9x. – O.C. Tanner 2024 Global Culture Survey

Develop Strong Leaders
It’s no surprise that your direct leader greatly impacts your likelihood of staying with your current organization, which is why people leaders need to build their leadership skills. In fact, Hali Vilet, partner with BDO, shared with HDR magazine that “[Effective leaders] help retain talent because those leaders will motivate staff, will have them engaged and staff will want to work for them, and that’s the spot you want to get to. They don’t have to work for you, they want to work for you, and I think it really boils down to leadership. It’s also important for managers to be properly trained, coached and checked in with to ensure that they are able to effectively manage employees and create a good employee experience.”

30% of CHROs are focused on the development of leader’s capabilities to retain talent. – The Conference Board 2023
80% of employees who say their direct leader understands and supports them said they’re happy in their job with no intent on leaving. In addition, a supportive manager can improve an employee’s likelihood of retention by 300%. – Frontline Workers: How to Connect, Enable, and Support Them in the Modern Workplace, Workday 2023

Find Ways To Show Appreciation
Implementing recognition programs and ensuring leaders appreciate and celebrate their team member’s efforts can help employee retention. Dr. Natalie Baumgartner, Chief Workforce Scientist at AWI, explains that “Employees who receive frequent recognition – at least monthly – are more likely to report being engaged, committed, and productive, compared to those recognized less frequently. A simple, meaningful ‘thank you’ can move the needle on engagement and retention as much as a recognition that comes with money.”

76% of American workers agree that employee retention would be higher if their company celebrated personal milestones. – Snappy 2023 Study
64% of employees agree that being recognized would reduce their desire to job hunt. – 2023 State of Recognition Report, Achievers Workforce Institute

Offer Additional Benefits
Employee wellness programs and additional benefits can be a linchpin to retaining employees. Puralator’s CEO, John Fergeson, recognizes the importance of focusing on the well-being of their people and how investing in employee wellbeing initiatives is a proactive step to retaining talent. He explains, “How you treat people can define you as a company. It can differentiate you and build long-term success.”

84% of organizations surveyed agree that offering financial wellness tools in their benefits and wellness programs helped reduce employee turnover. – Bank of America 2022 Workplace Benefits Repor
Organizations see the need to improve their employees’ mental wellness, recognizing that it plays a major role in retention. In 2023, employers will increase investments in these benefits: mental health (91%), stress management and resilience (77%), mindfulness (74%), financial wellness (65%), and telemedicine (65%). – 2023 Employee Wellness Industry Trends Report, Wellable

Ask For and Use Employee Feedback
Everyone wants to be heard, and your employees are no exception. Antonine Andrews, Chief Diversity and Social Impact Officer at SurveyMonkey, agrees. He said, “By giving employees a voice, satisfaction is increased, resulting in a happier workforce with a better sense of belonging. This positive attitude can boost morale and increase retention.”

Organizations and leaders who solicit, use, and acknowledge employee feedback reap the following benefits in a change in their one-year retention, according to the O.C. Tanner 2024 Global Culture Survey. When employees agreed with the following statements, these organizations saw the following positive impacts on retention.
+326% “Organization took my feedback into account”
+337% “Organization communicated how they used employee feedback”
+368% “Organization acknowledged me for giving feedback”
+322% “Organization appreciated me for giving feedback”


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McKinsey conducted a global survey of more than 1,000 directors and found that “boards with better dynamics and processes, as well as those that execute core activities more effectively, report stronger financial performance at the companies they serve.” This shows how important an effective board is to a business and why you should invest in your board of directors’ development.

The more your board develops, the better equipped it is to face the challenges of a fast-moving business landscape. The way directors tackle the challenges and emerging compliance issues is key to gaining that competitive edge over your peers.

Furthermore, Karen Brice, director of governance and board advisory at Grant Thornton remarks “executive and non-executive directors alike tell us that, if their board isn’t adapting fast enough to provide the kind of leadership that is needed to protect and grow the organisation, they could face an increasing sense of isolation from management teams.”

WHAT IS BOARD DEVELOPMENT?

Board development is the process of helping your directors gain access to resources that enable them to improve their individual and collective performance and effectiveness. This could be:

  • Sharing best practices

  • Undertaking specific training for continual improvement

  • Filling skills gaps

  • Increasing board diversity

  • Regular evaluations to assess progress

  • Having a defined role to focus on

  • Providing access to relevant papers and reports

The benefits of regular director training

There are a number of benefits of undertaking regular director training, for everyone from CEOs to new board members. These include:

Helping forge bonds

Corporate boards do not have the time to forge close bonds if the only time they interact is during meetings. Bringing them together out of the business environment allows them to network in a less formal space where they can be more relaxed and get to know each other better.

This connection can only help in future meetings, making miscommunication less likely, as directors understand each other more deeply. It aids collaboration and facilitates more productive discussion because the members who disagree are less likely to do so with hostility and will be more inclined to find an amicable solution.

Futureproofing the organisation

The business world is growing and changing all the time, with new capabilities, possibilities and risks entering our consciousness. Regular training helps you avoid treading water and keeps you competitive by ensuring you are on top of new technology and current best practices. Besides, it helps you navigate potential corporate minefields in the short, medium and long term.

Training arms your directors with the tools they need to take advantage of the governance landscape and making it a regular activity means that they are always aware of recent developments and predictions.

Encouraging better decision making

Training gives board members better clarity when it comes to early recognition of problems and difficulties for the business. This allows discussions to take place early, in a less pressured manner, giving the board breathing space to fully debate and develop a solution that works.

Without this ability, the board might not recognise a critical threat until it becomes an urgent issue, meaning that there is a tight deadline on decision-making and less time for reasoned, insightful discussion.

7 steps to better director development

1. Evaluate the current composition

The composition of the board is vital in director development, as it dictates the array of competencies and experiences, as well as attitudes, that make up the board. Understanding your current board composition allows you to decide what training would benefit the individuals and, therefore, the collective. This will form the basis of your recruitment strategy.

Here are some elements that you should consider:


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2. Revise board structure

Based on the discussions you have about composition, you can expand to look at the structure of the board as a whole. How can it be improved to facilitate a better flow of information and decision-making?

Is the structure working well right now? If so, consider if this will be the case in the future and consider what changes are needed to keep it fresh and effective.

3. Write down role descriptions

Almost every job that someone applies for has an extensive role description, detailing exactly what the company will expect of the successful candidate. It makes sense that the board of directors works in the same manner. When new directors are recruited to the board, they are there for a reason and not just to make up the numbers around the boardroom table.

Each director should understand what is expected of them so that they can focus on how best they can contribute to the success of the organisation’s strategy. Writing down detailed role descriptions for directors is essential for development as it guides them down specific paths and allows them to think more strategically.

4. Conduct a skills audit

Once you have role descriptions, you can audit the skills possessed by your current board and analyse how they can be developed in order to fulfil those role responsibilities.

If a director is expected to understand the market in-depth, but they have only basic knowledge of the industry, this is a skill that you need to develop through training or recruitment.

Personal development training is one way to address this skills gap. In addition, you could organise team training sessions or boot camps.

5. Set a clear vision

In order to further hone your audit, you need to understand where you want to go. This dictates the skills you need to achieve your aims. Having a clear vision of the board contributes in the same way that writing specific role descriptions does.

It provides goals for directors to work to and a way of measuring progress. If you can benchmark where you are and understand where you want to go, it is easier to see what needs to change to help you achieve your strategic goals.

6. Carry out annual reviews

Board evaluations are essential to ensuring directors are successfully working towards the collective vision. By understanding what you have or haven’t achieved in the preceding 12 months, you can shape the direction of work for the next year in a manner that will increase effectiveness.

An annual board review looks into the work of the board individually and as a collective, uncovering skills gaps, collating feedback, clarifying objectives and much more. Using Boardclic’s Board Evaluation tool, you can utilise this benchmark data to understand what success actually looks like in your sector and to give you a competitive edge over your peers.

7. Organise refresher training every year

Induction is one thing but regular training should also be a part of your director development programme. It is also important to refresh directors’ existing competencies every year. This helps to foster a culture of continuous improvement, which encourages board members to keep striving to greater heights.

The best performing boards do not rest on their laurels but spend time reflecting on their skill sets, improving and expanding them.

FAQ

How can you encourage directors to attend training?

Encourage individual board members to attend a training programme by giving them control over the training they undertake. Rather than booking training sessions and then fitting your directors into the slots, hold a discussion with the board where you encourage members to suggest types of training that they would like to attend, within the areas in which you would like to see development.

Ensuring the style of training fits the schedule of the individual director also helps. Some board members just do not have the time to spare to attend a three-day boot camp workshop. They would probably benefit more from bite-sized sessions instead.

Do you need a board development committee?

You do not have to have a board development committee, but it does make the process of identifying training opportunities, organising activity and tracking success much easier.

When it functions properly, it contributes to a diverse and well-rounded board that is best equipped to tackle the challenges and embrace the opportunities thrown at it. These committee meetings can help provide executive teams with specific guidance on how to best equip themselves to fulfil the responsibilities of the board.

How to measure board development success?

The success of your executive board development is borne out in the effectiveness of the board overall. You can measure this using Boardclic’s board evaluation platform. It can track your progress in each specific area against both your own benchmark and that of the industry in which you operate.

Conclusion

There is no option to stand still in the corporate world, and that certainly applies to board of directors development. Growing skill sets and expertise as well as consistently seeking out best practices and emerging risk factors are both essential to being able to compete, increase resilience and steer an organisation along the right path.

An important element of board development is your annual board evaluation. It can help you discover skills gaps, pinpoint critical challenges and create an open and transparent, collaborative environment. 

 

Source: boardclic.com


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A healthy board culture is increasingly recognized as an important element of board performance. But unlike other areas of board governance — composition, risk, succession and strategic planning or financial reporting, for example — board culture is less clearly defined and understood.

When asked about their culture, boards tend to speak in generalities, describing it in terms such as “collegial” and “engaged.” While true, those descriptions apply to many boards and don’t go deep enough in distinguishing one board from another — or provide the insight boards need to understand the role the culture is playing in overall board performance.

Two related forces have made the topic of board culture more urgent for many boards: growing stakeholder scrutiny on board performance and increasing board diversity.

In the past several years, shareholder activism has been gaining momentum. Investors around the world have become more active and vocal, seeking deeper engagement with the companies they invest in, using their influence to drive improvements in governance and holding boards to account on a wide range of issues, from strategy and performance to composition and CEO pay.

With less implicit understanding among directors about how the board should behave, it’s more important than ever to define and manage a board culture.

In some regions, the increase in board diversity is an outgrowth of investor pressure on performance. With research showing that companies with more diverse boards perform better, many investors are pushing boards to increase their diversity, especially gender diversity. Boards themselves recognize the value of injecting a broader set of perspectives into boardroom conversations, and are adding directors from other countries or different industries or increasing the gender, ethnic or age diversity of their composition.

Boards are adding new perspectives to enhance board deliberations and improve outcomes, but greater diversity also increases the opportunities for misunderstanding and conflict among directors with different points of view and backgrounds. In the past, boards tended to be more homogeneous and, as a result, there typically was more implicit agreement about how directors should interact and behave. Directors’ shared assumptions and similar experiences made decision making more efficient.

Today, with less implicit understanding among directors about how the board should behave, it’s more important than ever to define and manage a board culture to facilitate constructive interactions between board members. For boards striving to be more dynamic, performance-oriented and shareholder focused, getting culture right is key.

Board cultures tend to be more heavily weighted in one of four main culture styles: Inquisitive, Decisive, Collaborative or Disciplined.

What is board culture?

A board’s culture is defined by the unwritten rules that influence directors’ interactions and decisions. These include the mindsets, hidden assumptions, group norms, beliefs, values and artifacts (such as the board agenda) that influence the style of director discussions, the quality of engagement and trust among directors, and how the board makes decisions. Board culture also is influenced by the style of the board chair and/or the CEO. Boards can vary by region; in some national or regional cultures, for example, a more direct style is well-accepted, but in others, a more “diplomatic” approach is expected in the boardroom. Absent a dramatic change to composition — from a merger or addition of activist-backed directors, for example — board culture tends to evolve slowly because boards meet and interact intermittently.

We have developed a model for diagnosing and understanding board culture, drawing on extensive research showing that there are two dimensions of culture: attitudes towards people (individual versus collective) and change (flexible versus stable). These same dimensions can be used to evaluate organizational and team cultures as well. In fact, a comprehensive study1 of organizational culture and outcomes found that companies can define and create an optimal culture that leads to better business outcomes when they have a framework for evaluating culture and the tools to manage it. We have found that many of the same principles apply equally well in the boardroom.

In practice, we observe a wide range of working styles and dynamics in the boardroom, yet in our experience, board cultures tend to be more heavily weighted in one of four main culture styles:

  • Inquisitive: These boards value the exchange of ideas and the exploration of alternatives.
  • Decisive: These boards are focused on measurable results, driving a focused agenda and outcome-oriented decisions.
  • Collaborative: These boards value consensus and having a greater purpose.
  • Disciplined: These boards emphasize consistency and managing risks and prioritize planning and adherence to protocols.

None of these styles is objectively better or worse than any other. The culture of a board should align with the business strategy and broader business environment and the requirements for working effectively with management. For example, companies in very dynamic industries, when strategy must be reviewed and reinvented frequently, may benefit from a board culture that is more inquisitive and flexible, where directors question assumptions and value the exchange of ideas. When managing risk is a top priority, boards may need to be more disciplined about monitoring results and performance, and following established protocols to ensure the accuracy of disclosures.

How to change board culture: four questions to consider

Because board culture is an important driver of board performance, a natural time to assess board culture and how it supports strategy is during the board’s annual self-assessment. Using an agreed-upon framework and vocabulary like the one Spencer Stuart has developed, boards can diagnose their current board culture and agree on a target culture. A board may want to evolve its culture if it is underperforming, when there is a new CEO or its own composition is changing, or when the business strategy is changing. For example, in a crisis or turnaround situation, a board may want to be more decisive and results-driven. At a strategic inflection point — when the organization needs to figure out new markets, new products, where to invest in acquisitions or innovation — a board may need to be more inquisitive and flexible.

Once the board has identified a target culture, directors can ask the following questions to help shift the board culture.

Do we have the right people in the boardroom?

Boards consider a variety of factors when recruiting a new director. When they want to evolve board culture, boards can consider an additional lens: how a director would help shift dynamics in the boardroom toward the desired culture. For example, a board that wants to become more decisive and results-driven may want the next director to have a no-nonsense, by-the-numbers style, perhaps a CFO profile. A board wanting to become more adaptive and inquisitive may look to add an entrepreneur or an innovator.

Are we structuring our discussions and assignments to focus on the right issues and activities?

Boards can reinforce their priorities by structuring committee and board assignments and meeting agendas in a way that supports the culture they want to create. A board seeking greater collaboration and openness to the ideas of all members may want to close discussions by “going around the table” and soliciting comments from each director.

Do board and committee leaders model the desired board culture?

The board chair has a profound role in shifting the board culture. The chair (or lead independent director) can move topics requiring the most board focus and energy earlier in the agenda, leaving the less strategic items to later in the meeting. If the board needs to become more inquisitive, the chair may decide to reduce the time devoted to operational reviews to leave time for the exploration of strategic alternatives. On a board that has decided to become more disciplined, the chair can direct a change in the board materials and build more structure around discussion topics.

The board chair or lead independent director and the committee chairs also can influence culture by how they model the desired culture. When a shift is needed, board leaders can guide discussions differently, encouraging or cutting off discussion as appropriate. They also may evolve pre-meeting activities, for example, creating a mechanism for directors to ask questions in advance of a board meeting.

A board may want to evolve its culture if it is underperforming, when there is a new CEO or its own composition is changing, or when the business strategy is changing.

Do we as individual directors consider how we are contributing to the culture?

As directors become more comfortable with the language of culture and more self-aware of how they are promoting or working against the target culture, they can provide feedback to one another on behaviors that may need to change. Just calling attention to directors’ habits and assumptions can help the board adapt its behaviors. Depending on what’s needed, the board also could provide a coach, group training or individual training on topics such as decision making, trust building or communication styles. Boards can use their annual self-assessment to evaluate their progress in moving toward the preferred culture.

On an individual basis, directors can reflect on their own behaviors and whether they are helping to shift the culture. On a board that’s overly collegial or collaborative, for example, directors can consider whether they need to weigh in on every topic. Or if the board wants to become more inquisitive, directors can decide to speak up more.

Starting to understand your board culture

When it’s able to diagnose culture, a board can evaluate the role culture plays in board performance and consider whether there are elements of the culture that need to change. Having a common language about the culture and identifying directors’ preferred styles helps board members understand and adjust to the preferences of one another and make better decisions about the potential culture fit of new director candidates. To provide a sense of various board cultures based on our model, we have plotted several examples of board culture below.

Culture

Author: George Anderson


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Companies’ strategies and operations are facing unprecedented change. Some companies, such as many technology companies and streaming service providers, have thrived in the past few months of upheaval, while companies in tourism and traditional retail are among those facing existential crises. Yet, no matter their financial position, almost every company has undergone a radical shift to virtual operations. Even companies that had nascent or stalled digital transformations have become significantly more tech enabled; this means everything from supporting remote working to finding entirely new market opportunities. Food and beverage brands are now selling directly to consumers, for example, and sectors from home improvement to medicine are innovating as fast as they can to meet both customer and employee expectations for convenience, speed, and safety in the form of low- or no-contact experiences and operations.

As leaders consider how to build on the digital gains they’ve made (however haphazardly) and assess how digital-first operations and the post-pandemic economic reality will affect their strategies, boards have a significant role to play in ensuring their organizations build a digital strategy that will support innovation and performance for the long term. Achieving this goal will require boards and executive teams to take a step back and truly reimagine the business and how it operates. Boards must also keep a close eye on the strategic risk from digital disruption. (For more on how companies can build on crisis-driven digital gains, see “Becoming a digital-first organization: Making the most of crisis-driven digital transformation.”)

To do all this, boards need to understand digital. Many, however, are still lagging in their digital expertise. There a few specific steps they can take to ensure they have the right level of knowledge, supportive governance processes and culture, and a digital orientation. Those that take the following steps will be best able to support the management team in resetting for a digital-first world.

1.  Build digital expertise

Just as no board would consider recruiting a director who couldn’t read a balance sheet, boards should now consider basic digital literacy a qualifier to serve as a director. Without that foundation, directors can hardly be prepared to understand how digital drives—and should drive—the company’s overall purpose and operations or how it enhances the ability to understand and serve customers. Further, without a grasp of the basic digital lexicon and an appreciation of the vast array of issues and considerations digital embraces, directors lack the ability to translate what the management team is telling them or to engage on any meaningful level. This leaves them unprepared to meet challenges, ask the right questions, or provide relevant input.

Since most boards are currently lagging in digital expertise, most will need to make it a priority as they make the trade-offs among various considerations inherent in any board recruitment. (This is also true of other areas where boards face increasing expectations, such as sustainability and corporate reputation management.)

Finding such directors won’t necessarily be easy and may well require boards to modify their director-recruiting criteria to ensure they are looking in the right places. That typically means taking on traditional prerequisites such as CEO and prior board experience, since directors with digital skills often skew much younger than the typical director—probably in their 30s, compared with the mid-50s that is the average age of new directors around the world—and are unlikely to have C-suite experience.

However, adding one person with digital expertise is just a start. Boards with only one source of expertise on any topic run the risk of delegating everything relevant to that person, and that person runs the risk of being a lone voice unable to influence the broader agenda. In addition to seeking new directors, board leaders should focus on supporting current directors in acquiring sufficient digital knowledge, which most should be able to do. They can also make digital orientation part of onboarding for new directors who lack it. Further, boards should include on their digital knowledge agenda focused and structured immersion trips to other companies that are digital leaders; one leading company makes one board meeting in four a visit to another company it wants to learn from. Meetings with management teams are also an important part of director continuing education.

Gaining real digital value on the board will also take having one or more directors with deep digital expertise who can serve as stretch thinkers—people who can challenge their fellow directors and the management team on what is possible. These people need to be chosen carefully, however, because digital knowledge alone won’t make them effective in such a role. They also need a clear understanding of the board’s role and responsibilities and to be able to work with other directors to take a holistic view of all the board has to tackle.

Any digital expert on the board should also be able to work patiently and steadily as an influencer with both the board and management. With the board, this individual can nudge fellow directors toward the future, helping them imagine and reimagine what alternative futures for the company could look like and how to get there. With management, this director should be able to work behind the scenes—with the cooperation of the CEO—listening, learning, and making recommendations management will ideally adopt as their own. This kind of influencing works best, in our experience, when a director can plant the seeds of ideas, building awareness and ownership while intuitively understanding what the organization can absorb at any given time and not pushing too hard.

2.  Establish a digital orientation

To be effective, boards need to be aligned on their overall purpose, asking and answering fundamental questions: Why does this company and board exist? Who are our key stakeholders? How can we best serve their interests? Similarly, to be effective digital leaders, boards must make sure the company has a clear digital ambition and purpose and that directors are aligned on it as well, understanding how digital transformation will affect every element of the organization and help it better deliver on its purpose. (For more on aligning your board on overall purpose, see Future-Proofing Your Board.)

The goal should be for discussion of digital innovation to be an integral, crucial element of driving impact in the core business rather than a stand-alone topic on the board’s annual agenda. Boards should ensure that digital considerations are woven into both strategy and its implementation, and that the digital strategy sets immediate and longer-term priorities that go well beyond one-off initiatives or the more recent, jury-rigged changes driven by the pandemic.

For that to happen, the board will have had to embrace digital—meeting online, hiring new board members virtually, and making the most of the communication tools and norms (such as more frequent and more informal discussions) that have become standard in recent months.

And, as with any area in which a board wants to assess its own performance, it should set some metrics and regularly track progress against them. Metrics could include the share of directors with specific digital expertise, the amount of time spent discussing the digital strategy, the frequency of meetings with digital and innovation executive leaders, or market share gains from digital innovation, among many others.

3.  Innovate governance to ensure the board can get up to speed

Directors with digital expertise are in ever-increasing demand. Previously, companies may have had the luxury of waiting a year or two to add a new director when a regular board vacancy opened up. But now, the acceleration of digital change created by the pandemic means that waiting will almost certainly put companies behind competitors. Boards that can’t recruit digital experts in the near term can compensate by establishing an advisory board or even temporarily increasing the board’s size if they can’t wait for directors to drop off.

4.  Support a digital culture

Boards determined to lead the way on digital transformation need to foster a culture that rewards innovation and change and doesn’t penalize failure. That starts with supporting the longer-term thinking required to place bets on huge investments that may not pay off for years. For digital, much like sustainability and diversity, it is the board’s job to see that proper actions are taken in the long-term interest of the company. The board should have a plan for communicating the change story to shareholders—and know how to stand its ground when necessary—explaining why, for example, a long-term investment may be a better bet than seeking immediate dividends. At the same time, boards must support management in not losing sight of immediate strategic and tactical needs, ensuring that digital transformation is part of ongoing operations, not separate from or opposed to them.

A digitally savvy board can also set the overall tone for culture change and model expectations going forward. Something as seemingly small as asking informed questions and explanations from management presenting at board meetings—in essence demonstrating that directors don’t have all the answers—speaks volumes when trying to nurture an innovative culture.

There are also digital considerations in boards’ oversight responsibilities—for example, determining whether there is sufficient talent, at every level, to make what may be a seismic shift. Most organizations have a head start from their generally successful transformations through the pandemic and can build on those. In addition, to make sure the positive changes stick, boards will want to monitor executive compensation to determine whether proper incentives are in place to motivate executives to take appropriate risk as they seek to discover new and better ways of doing things, enabling them to keep up with or, better yet, anticipate change.

 

Source: heidrick.com


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The pace of digital change is accelerating at an incredible rate. Chances are, you’ve heard or read this statement countless times over the past couple of decades. But, it’s just as true today as it was at the beginning of the digital era. Arguably even more so now that the so-called “burning platform” of digital transformation has quickly become a “burnt platform.” 

Digital change isn’t a looming threat or shift that’s on the horizon. It’s here. It’s happening right now. And it’s up to you to adapt to it, drive it and turn it to your advantage. Whether you’re talking about changing customer demands, agile new competitors entering the market or employees demanding greater flexibility in where and how they work, the immense cost of failing to adapt means standing still isn’t an option.

But, despite how long digital change and transformation have held their place near the top of most organizations’ strategic agendas, just 16 percent of executives say their company’s digital transformations are succeeding. Plus, 72 percent of strategists say their company’s digital efforts are failing to meet revenue expectations.

To better understand why that might be and identify the underlying causes of unsuccessful digital change projects, Thoughtworks recently conducted a major Technology Proficiency study.

Among the findings, we learned that growing businesses are far more likely to make technology decisions at the board level compared to organizations seeing low or zero growth. But we also discovered a significant skills gap at the board level of many businesses.

The digital board skills gap

Many of the enterprises we surveyed display a gap between the technology areas where directors are the most proficient and the technology areas that are a business priority. The board has digital skills, just not necessarily the right ones to enable growth.

It’s a finding highlighted by other researchers too. For example, a global study by the MIT Center for Information Systems Research found that, among larger companies, just 7 percent have a top management team where more than half of members are digitally proficient. Plus, those companies outperformed the rest on growth and valuation by more than 48 percent.

The need for a digital-ready board is clear. But what does it take to increase digital readiness at the board level, and what does a digitally-proficient board look like?

The anatomy of a digital-ready board

There are many ways to define digital-readiness. But, at the board level, it means being informed, proficient and empowered enough to advise the C-suite in continuously making strategically solid technology decisions. It involves understanding where specific technologies could support a particular strategy or help the organization react to changing conditions or achieve strategic goals.

Crucially, it doesn’t mean that every member of the board has to be a well-versed expert in every emerging or strategically important digital trend. That’s still something the organization gets from its CIO, digital experts and advisors. However, every board member needs to understand how these technology trends can empower their organization while helping them achieve their strategic goals.

The key to digital success at the board level is developing not only understanding digital trends, but also bringing diversity of perspective to the discussion. The board is a team just like any other in the business, where no single person needs to be an expert at everything and diversity of experience, background and perspective can be a huge benefit. This diversity of talent and perspective can help boards gain a better balance between their fiduciary responsibilities and the need to shape the long-term strategies of their companies. 

The importance of agility in the board 

Being knowledgeable about the latest digital trends is essential for boards, but it’s also vital that the board adapts its governance and pace of decision-making to the current business climate — one characterized by frequent disruption and capital allocation shifting rapidly toward technology. While the board’s traditional role won’t change — to support and challenge management with a focus on strategy, risk and performance — they must simultaneously adopt a more entrepreneurial approach to help the C-suite stay ahead of this level of disruption and innovation.

In many of our clients, we see a new generation of boards emerging. These boards proactively embrace the opportunity to be the disruptor versus simply managing the risk of being disrupted. These emerging boards make sure that board composition is digital-ready and frequently review their ways of working while adapting their board agendas, processes and tools to enable leaner governance and faster decision-making. In addition, these boards make frequent collaboration and interaction with the C-suite a priority, always staying within the guardrails of the original remit of the board as non-executive directors. 

5 steps for increasing the digital readiness and agility of your board

At Thoughtworks, we’ve helped boards with different levels of digital readiness and agility to plan, navigate and execute digital transformation strategies and initiatives. While every board’s journey is unique, we’ve identified five macro-steps that can help any board achieve a higher level of digital proficiency and agility:

Step 1 – Improve the awareness of the board around digital trends. 

Proactively conduct sessions to help the board keep up with relevant digital trends and identify which ones are applicable across the business. For example, we often facilitate sessions with board members and executives where we share the most recent technology trends and contextualize them to help the team understand how those trends could become a driver in value creation. In some cases, we take them to visit some of our digital native clients and partners so they can interact with key stakeholders in businesses where digital technologies are at the core of their business model. The hands-on experience enables them to envision the different aspects needed to transform their organizations, besides technology.

Step 2 – Identify how digital trends could enable untapped customer and business value.  

Support board and C-suite members to crystalize their digital aspirations, expected business outcomes and contextualized implications while identifying the challenges and opportunities for adopting relevant digital trends. This is an excellent opportunity to have executives and non-executive directors exploring and discussing new technology trends and their ability to enable new customer experiences, services and revenue streams. It also opens the door to visualize critical capability gaps in the organization like technology, culture, talent, operating models and governance structures that might need transformation to sustainably drive digital innovation. 

Step 3 – Build a high level, strategic roadmap to take advantage of digital trends.

Engage board members in reinforcing the broader, long-term benefits of adopting these digital trends while developing a shared understanding of the capability investments needed across talent, culture, technology, governance and operating models. By following the principles of value-driven transformation, every board member should understand the value of adopting digital trends to their business as we can align with management on the metrics of success.

Step 4 – Discuss the role of the board in providing governance to the adoption of digital technologies and digital business models.  

Driving digital transformation across operations and business ecosystems challenges the effectiveness of traditional board governance, regular committees and formal l engagement with management and staff.  Therefore, board and C-suite members must discuss how to leverage lean and agile governance practices and tools to steer digital transformation in ways that deliver the most value for everyone, examine options such as co-creating governance principles for new digital capabilities like artificial intelligence, machine learning and autonomous machines.  Lastly, boards should also explore their role in unlocking continuous human learning capabilities within the organization and its partner ecosystem, to help ensure that the organization can adapt to the changes brought about by digital transformation.

Step 5 – Set a regular cadence for the previous steps. 

Use the above to maintain an updated view of emerging technology, its implications for the business and how it could be implemented and properly governed. Digital transformation is ever-evolving — a quarterly cadence will ensure that the board and C-suite know how technology trends enable both short- and long-term business strategies. In addition, it’ll help ensure close, ongoing collaboration between executives and non-executive directors.

Start your journey to digital board readiness today

Digital trends and emerging technologies are strategically important to businesses in all industries — and every board needs to become digital proficient to make informed, timely decisions about those trends. For some, the idea of having to improve or gain digital  proficiency can be daunting. But, in practice, it’s far easier than most believe. Experienced business leaders don’t need to become highly-skilled tech experts overnight. Instead, they need to understand critical emerging tech trends and their potential impact on the business.

Boards are experiencing a seismic shift in which they must balance long-term business model changes driven by digital technologies and customer expectations with operational governance, compliance and short-term costs reductions. At the center of this seismic shift, there is an opportunity to rethink how boards work and adopt agile and lean practices  — within the guardrails of their remits — to collaborate with the C-suite and stay ahead of disruption by leading digital transformation. Those who embrace this shift will become catalysts for digital transformation, enabling C-suite executives to build resilience into their organizations and adapt to constant digitally-driven changes across marketplaces, customer groups and society at large.

If you’re articulating your own digital transformation journey and want support to help guide your strategic decisions while delivering the best results for your business, contact us today.

 

By:


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Having foresight is key to developing a winning corporate strategy. But between sifting through a sea of data, navigating unpredictable events like the pandemic, and keeping up with the pace of technological innovation, knowing what to keep an eye out for can be challenging.

According to Gartner, the average corporate strategist spends 26% of their team’s time and around $200,000 of the annual budget investigating emerging trends. With the increased spending on corporate strategy expertise (up 51% YoY on Graphite), we wanted to know the trends shaping the future of this core functional skill.

Spending on hiring independent corporate strategy expertise was up 51% YoY in 2022

To get to the bottom of this question, we engaged our network of experts on the ground floor in developing and executing corporate strategies for their clients on Graphite. Here are the five trends we unearthed. 

1. Growth Strategy Will Take on a Whole New Meaning

For years, the role of corporate strategy was centered on where to play and how to win. But as the pace of disruption accelerates, it’s no longer enough to just focus on those areas. To succeed in today’s environment, corporate strategists must focus on speed and capabilities. 

Yet focusing on speed and capabilities must also be done with caution. Rather than focusing on growth at all costs, the focus will be on making smarter, harder investment decisions that will lead to sustainable growth and a risk-averse portfolio. 

A key component to accomplishing this will be finding new ways to differentiate the business from the competition. This will be done in several ways, either by M&A or building those capabilities within the business. Data and analytics, digital customer engagement, and the ability to create digital business models will factor greatly into strategic plans. 

And while M&A growth will be more conservative when compared to 2021, it will still serve as a viable growth strategy as it relates to building out new business capabilities. In this regard, the use of data and technology as part of the transaction process and the ability to execute and move quickly will be vital for any M&A-led growth strategy. 

2. Data and Market Research Will Play a Pivotal Role

Given the uncertainty of new and upcoming coronavirus variants, the economy, and geopolitical tensions, businesses are increasingly relying on data and market research to gain a competitive advantage. 

Fueling this demand for information is the need to quickly synthesize patterns and trends to enable faster decision-making across the entire organization. From an operational perspective, data is essential in driving supply chain efficiencies. Visibility into inventory, distribution, and production goes a long way in protecting a company’s bottom line. 

Likewise, the use of consumer data to inform go-to-market strategies enables companies to better position themselves when entering a new market or launching a new product or service. As digitization and the need to gain new capabilities increase, more emphasis will be placed on market research and data to ensure these initiatives succeed. 

3. Building a Resilient Workforce amid Economic Uncertainty

Growing a team during uncertain economic times remains the main concern for CEOs this year. Leaders face a trifecta of challenges: a slowing economy, decreased profitability, and a tight labor market. Building a team that’s agile and resilient can future-proof the business. But where to start? 

One way hiring managers are widening their talent pool is by leveraging a skill-based hiring model. By hiring for the right skill, companies can build a hyper-focused and more flexible workforce.

Another approach companies are exploring is on-demand talent acquisition platforms. This hiring model enables companies to build agile and flexible teams on demand— helping them pivot and innovate at a much faster pace than with traditional talent acquisition models

Beyond filling an immediate need, businesses can upskill their workforce with the help of independent talent. Likewise, they can layer this hiring model on top of their existing talent strategy to build an agile operating model where talent can be deployed quickly to the highest priority work — ensuring strategic work gets done on time.   

4. Developing More Flexible, Agile, and Adaptable Supply Chains

Supply chain issues will remain a hot-button area for businesses across industries for the foreseeable future. We’ve touched on this throughout this blog, as trends, like most things, are interconnected and influence and impact one another. 

As businesses strive to optimize supply chain operations to satisfy consumer demand, they are using all the tools at their disposal. That means investing in data to facilitate the acquisition and implementation of automation, AI, and machine learning technologies to conduct M&As in adjacent sectors to remove barriers to resources. 

To truly move beyond a reactive state, leaders will need to start focusing on producing the next disruption rather than waiting for it. As a result, companies will be relying more heavily on data and market research to compete effectively, not just with adjacent businesses, but with uncontrollable factors such as climate change as well. 

This is especially true at a time when visibility, tracing, and sustainability are becoming central themes for supply chain leaders. As a result, ESG projects, although not a top priority at the start of the year, will continue to increase in the future. 

5. Continued Acceleration of Digitization 

Digitization has been an ongoing trend, but the pandemic put it into overdrive. Companies that did not have technology as a priority had to quickly pivot and reevaluate their stance on the tech and tools they use. 

Today, the implementation of technology has permeated the entire business ecosystem. Companies are increasingly leaning into AI and machine learning to optimize supply chains, increase productivity, improve customer experiences, and enhance cybersecurity. 

Business leaders show no signs of slowing down either. Global spending on technology is expected to rise by 2.4% this year. Despite an economic slowdown and cost-cutting efforts, companies remain firm in their commitment to digital initiatives by increasing their investments. 

However, productivity and efficiency aren’t the only reasons behind the demand. Businesses are also analyzing how AI and machine learning can be used as a value driver rather than a cost factor. 

John-David Lovelock, Gartner’s research vice president, says that IT spending remains recession-proof. He further states, “while inflation is devastating consumer markets, contributing to layoffs at B2C companies, enterprises continue to increase spending on digital business initiatives despite the world economic slowdown.” 

It’s All about Staying Ahead of the Trends and Capturing Future Value Today

Corporate strategists today are dealing with multiple unknowns and must be able to pivot at a moment’s notice. Besides continuously developing holistic strategies that maximize the benefits of businesses’ investments and initiatives, they’re also expected to accomplish more with less.    

In 2018, the average corporate strategy team consisted of five members. But with the shifts in today’s labor market, it’s likely that the sizes of these teams have either remained or changed, given the increased demand for this core functional skill. 

One way to navigate the trends shaping corporate strategy’s future is to lean on independent experts to add capacity and horsepower to your teams. Adding expertise to your strategies can enhance the effectiveness of your projects while fast-tracking new projects and initiatives. 

Want a look at how companies are using on-demand talent acquisition to power their corporate strategy teams? Read this blog on four ways companies are leveraging independent corporate strategy teams to learn how. 

Source graphite.com


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The success of an organization depends on its strategy. The higher-level strategic planning and the ability of the company to implement its strategy determine how well the organization performs and remains successful in the long run in today’s fast-paced and competitive business environment. Strategy implementation is crucial because you must execute a strategy well to achieve your company’s objectives and goals, and you will miss opportunities and lose revenue.

In contrast, if you can execute your strategy well, your company can gain a significant competitive advantage. It will allow you to achieve your goals and remain ahead of the competition for a long time. As a result, companies are increasingly looking for ways to improve their strategic implementation and enhance their ability to execute their plans better.

Rising Usage of AI

Artificial Intelligence (AI) is among those emerging technologies that have gained focus in the business world in recent years. AI has gradually chipped away the inefficiencies in various aspects of operations and enhanced customer experience. Companies have been exploring and identifying numerous ways to use AI to drive growth and improve business outcomes.

One area where the use of AI is gaining momentum is strategy implementation. AI technologies enable companies to understand and leverage data better, gain valuable insights and optimize their strategy implementation. It leads to better decision-making and resource allocation and brings improved business outcomes. In this article, we will explore how companies use AI for strategy implementation to gain a competitive edge.

Bill Gates

Manage the top line: your strategy, your people, and your products, and the bottom line will follow

Bill Gates

What is a Strategy?

Strategy is a blueprint and a high-level plan created by the management for achieving the long-term goals of an organization.

A business strategy is based on a detailed assessment of the following.

  1. The current situation in the company
  2. Strengths and weaknesses of the organization
  3. New opportunities and threats
  4. Current market conditions
  5. Developments in the industry you operate in
  6. Competitors and competing products
  7. Risks that you may need to manage

Creating a strategy involves making decisions based on these factors, creating a roadmap for operations, and formulating an action plan to achieve the objectives. The business strategy governs the goals, targets, activities, outcomes, and resource allocation for various processes and operations of the organization, such as the following.

  • Market segmentation
  • Product development
  • Product positioning
  • Pricing
  • Sales
  • Marketing
  • And more

Strategy implementation involves creating ownership of the business strategy amongst employees, achieving strategic alignment across the organization, and fine-tuning processes and systems to deliver desired outcomes per the strategic plan.

When executed right, a business strategy will create desired outcomes at all levels, which will snowball into organizational growth, success, and fulfillment of the organizational objectives. It creates a sustainable, long-term competitive advantage for the organization.

 

How does AI help with strategy implementation?

Artificial Intelligence (AI) is a replication or a simulation of intelligence required to perform human tasks that involve perception and cognition. AI-powered machines perform tasks that require human intelligence, such as data analysis, visual perception, image processing, facial recognition, speech recognition, decision-making, translation, etc. These AI systems are constantly learning. They can update themselves, improve functionality, and adapt to new situations and environments.

In the business scenario, integrating AI in various aspects of the business enhances your ability to execute your strategy more effectively. Following are some of the ways AI helps in executing business strategy.

1. Automation of repetitive tasks

AI helps companies automate repetitive tasks, such as inventory management, which humans previously carried out thoroughly. For instance, AI helps in warehouse management and automation of procurement by managing purchase orders, maintaining the vendor database, sending purchase orders to concerned vendors at the right time, etc. Through this automation, the warehouse management system ensures the availability of crucial components, materials, and products just in time when you require them. It helps companies manage demand and supply better. AI is used similarly in various operations to reduce labor costs and increase productivity and efficiency.

2. Data analytics and insights

AI helps companies gain comprehensive insights by analyzing vast amounts of data to identify patterns and trends. For instance, AI can constantly track the number of leads generated through every marketing channel and compare them with the amount you spend in those channels for your marketing efforts. It helps you allocate resources better for different marketing efforts and get more out of reduced spending.

3. Predictive modelling

AI can help businesses build predictive models to anticipate future outcomes and trends. For example, you can predict product demand based on patterns identified from historical sales data and customer behavior. For instance, if the holiday season is nearing, AI can help you analyze and predict the surge of demand and make critical business decisions, such as setting higher production targets, running extra shifts, having a specific amount of products in stock, adjusting pricing, designing marketing campaigns and offers to attract customers, etc.

4. Personalization

AI helps companies personalize the customer experience. For instance, it provides product suggestions based on customer preferences. It enables personalization in other areas, such as emailers that can be customized and personalized with content based on certain predefined conditions. For instance, companies have abandoned cart reminders automatically sent to customers who add products to the cart but leave the site/app before making a purchase. Through these personalizations, AI makes it possible to cater to every customer better based on their preferences and improve customer experience drastically. It also helps to increase conversion and retain customers better.

5. Automated decision-making

AI can automate decision-making processes. For example, chatbots can cancel orders and initiate refunds upon request. In a variable pricing scenario, AI helps to determine the pricing based on predefined rules and criteria. It helps reduce human errors and make data-driven decisions to achieve success consistently.

5. Automated decision-making

AI can automate decision-making processes. For example, chatbots can cancel orders and initiate refunds upon request. In a variable pricing scenario, AI helps to determine the pricing based on predefined rules and criteria. It helps reduce human errors and make data-driven decisions to achieve success consistently.

6. Risk management

AI analyzes data and identifies business risks to help companies prepare for these eventualities and avert risks. For instance, AI can analyze patterns and save insurance companies from false claims by assessing historical data and finding the correlation between connected events and a spike in claims, such as the connection between the loss/damage of smartphones and the launch of next-generation models. The use of AI in risk management is gaining popularity in recent times.

A Step-by-Step Guide to Integrating AI into Your Strategic Execution

AI needs to be set up and customized to your use cases. Before you can start integrating AI, you need the following.

  • A clear understanding of the business goals and objectives
  • In-depth understanding of the data and systems required to support the strategy
  • Human resources and infrastructure to support the development and deployment of AI models and systems

You can start integrating AI and enhance your strategy execution by following these steps.

 

1. Encourage the adoption of data analysis

While AI can provide insights that can lead to business-critical decision-making, the stakeholders and decision-makers need to realize the importance of data. They should build a deeper understanding of how to decode insights and rationalize decisions and actions based on that. Otherwise, your team won’t be able to leverage the data for the organization’s benefit. So it is essential to train your workforce, management, and leadership team on data analytics and ensure they have the analytical skills to drive business outcomes. A consistent understanding and interpretation of insights go a long way in driving sustained change.

2. Identify your use cases

While implementing AI Can bring efficiencies and ensure better strategy implementation, it also costs a lot. So it is essential to study how your competitors and the leading companies outside the industry implement their strategy using AI. You can draw inspiration from them, but identify your unique use cases and analyze the feasibility of integrating AI. It is crucial to discuss with all the stakeholders, including concerned teams, and analyze if the benefits outweigh the costs.

3. Select the areas of opportunity

After you can identify the use cases, you have to select the areas in your business operations that will benefit the most from AI integration and get a quick return on investment. You can forecast this using various metrics to analyze the potential impact of AI implementation in these areas.

4. Audit your capabilities

You have to thoroughly analyze and identify the human resource and technology requirements to implement artificial intelligence in the identified areas. You need to identify the gaps in existing technology and the lack of skills required to leverage AI. Based on this analysis, you have to organize training and workshops for concerned employees and seek the expertise of consultants and other third-party associates, to leave no stone unturned regarding AI implementation.

5. Narrow down your choices

While you can choose broad areas of business where artificial intelligence makes sense for your operations, you have to narrow your focus further. For instance, if you want to implement AI in marketing, you can do it in many ways. You can use AI to automatically segment customers based on their preferences and behavior on your e-commerce website and create categories in the mailing list accordingly; you can automate sending of emailers based on certain pre-determined conditions; you can use AI to track the performance of marketing campaigns and optimize marketing efforts; you can use AI to provide personalized experiences by sending personalized offers to customers and creating loyalty programs optimized to increase conversion rates. You can narrow your focus to specific operations and processes in your broader use cases by identifying inefficiencies in operations, finding suitable AI solutions to address them, and doing a cost-benefit analysis.

6. Implement a pilot project on a small scale

When integrating AI for strategy implementation, you can first test it on a smaller scale. You need to gather data, develop customized algorithms and release it on a smaller scale in a controlled test setup involving experts in artificial intelligence, data analytics, and the concerned business processes. It helps to measure the impact, foresee the risks and tweak your AI models before scaling them up.

7. Establish a baseline understanding

Document your learnings and establish a baseline of understanding. Compare the results with the forecasts and see whether your small-scale pilot project met its objectives. It helps to build on your experience and knowledge of AI and fathom its impact on your strategy implementation.

8. Scale your AI integration

Once you verify the effectiveness of your AI on a small scale, you can gradually scale AI deployment. As you scale up the AI integration, you may need to continuously tweak the algorithms and business processes. Ideally, the impact of AI on your strategy implementation will show up in your metrics and help build confidence across the organization. It will convince the stakeholders to experiment with AI integration in other aspects of your business and broaden the influence of AI in your strategy implementation.

9. Complete the AI integration

Integrating AI is one thing, but gaining a competitive advantage in the long run and achieving long-term growth by improving its lifecycle, testing, and deployment is another.

You can achieve these by building a modern data platform that enables the streamlined collection, storage, and structuring of data so that the accuracy of chosen metrics and the quality of insights and reporting remain consistent. You can structure your organization in such a way that the development of data platforms and governance based on the priorities of your business power your goals and decisions. You should also build processes and expand the technologies required to manage data elements from various parties.

10. Build on the implementation and find room for improvements

AI models and processes require continuous improvements to keep in sync with the rapid changes in the business environment and quickly respond to changes in the strategy. It would be best to listen to feedback and proactively address the lack of AI adoption or resistance to AI at every level of the organization.

Frequently Asked Questions

    1. What is the role of AI in business strategy?

AI helps companies improve strategy execution by analyzing massive data, offering valuable insights, influencing business-critical decisions, and optimizing operations to achieve a sustained competitive advantage.

    1. What are the 4 AI business strategies?

AI strategies can be classified into

(a) Effectiveness strategy – to make operations more effective and impactful

(b) Expert strategy – for the automation of decision-making

(c) Efficiency Strategy – to optimize operations, cut costs, and achieve better efficiency

(d) Innovation strategy – for promoting creativity and innovation

    1. What is an example of how businesses use AI?

An example of AI usage by e-commerce businesses is the automation of sending personalized abandoned cart emailers.

Conclusion

AI is transforming the way businesses approach strategy. By leveraging AI to analyze data, automate operations, and personalize the customer experience, businesses can gain a competitive advantage in today’s fast-paced business environment.

Source: profit.co
 

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As risk professionals look ahead into 2024 and beyond, there are a number of key risks they will need to monitor and prepare for. According to Aon’s annual Global Risk Management survey, the following five current risks are of greatest concern for risk professionals and business leaders in 2024, and some of the firm’s top mitigation tips: 

1. Cyberattack or Data Breach
Survey respondents ranked cyberattack and/or data breach as the top risk for 2024, with 18% of respondents indicating cyber-related risks contributed to a loss for their organization in the past 12 months. After declining in 2022, ransomware attacks jumped 176% in the first half of 2023, according to the report. On a positive note, 89% said their organization had set up a plan to respond to cyberrisks. To mitigate the impact of a cyberattack or data breach, the report outlines four key strategies:

Identify and assess cyberrisk. Aon suggested collecting and examining data and insights related to any exposures and impacts to inform leaders’ decisions to mitigate, avoid or transfer cybberrisk in the future.

Mitigate cyberrisk. There is a lot that goes into mitigating cyber-related risks, including staying on top of evolving threats, which usually coincide with new technologies, and conducting organization-wide cyber-defense training to emphasize the importance of complying with cybersecurity measures.

Prepare cyber-incident response and recovery. Whether accidental or malicious, cyber incidents are unfortunately inevitable at this point. Every organization should have plans in place for incident response, containment and investigation efforts.

Transfer cyberrisk. Risk transfer is important to ensure financial resilience. In addition to traditional insurance placement, captive insurance and alternative capital are also viable approaches for some organizations to protect their balance sheets.

2. Business Interruption
Whether the cause is a natural disaster, global pandemic or political conflict, losses can be significant and put an organization at risk. With so many complex issues constantly at play, respondents identified business interruption as the second-highest risk. While business interruption claims are often out of an organization’s control, Aon offered a few best practices to help mitigate losses:

Regularly revisit and update crisis management and business continuity plans
To reduce supply chain risk, a related factor in business interruption, use multiple sources for receiving inventory
Stay in regular contact with your insurance broker to keep business interruption plans updated
Maintain any business operations you can while focusing on recovery
3. Economic Slowdown or Slow Recovery
As consumers cut back on frivolous spending or seek out alternatives to their normal purchases, organizations feel the effects of economic downturns in the form of a revenue decreases, supply chain disruptions, financing issues, and labor and staffing troubles. Banking crises and the lingering effects of the COVID-19 pandemic also contributed to the most recent economic slowdown.

Aon research shows that economic slowdowns happen about once a decade, but it is not an exact science. To brace against the impact of economic slowdowns, Aon recommended that organizations:

Increase cash reserves. If possible, focus on increasing the amount of cash your business has on hand so that it can still meet financial obligations during a period of revenue decline.

Implement strategies to minimize workforce disruptions. Conduct skills assessments and job architecture planning, for example, to provide an organization with detailed insights to identify opportunities to reskill or move employees to other areas.

Increase focus on related risks. Focusing on recovery or maintenance during an economic slowdown is great, but do not turn a blind eye to other related risks, such as cyberattacks, supply chain issues and regulatory risks.

Diversify. Switch up investment strategies, supply chains and customer bases to get the most out of your business while the economy is slowing down or recovering from a slowdown.

4. Failure to Attract or Retain Top Talent
Recruiting and retaining top talent has been a business issue for years, and that will not change any time soon. Companies are constantly struggling to balance the need for top talent with the need to be fiscally responsible, and sometimes tough choices need to be made. While recent inflation seems to be nearing its end, businesses are still reeling from the effects of a sustained period of high costs for materials and other major expenditures. As a result, hiring has either halted altogether or positions come with lower compensation packages, making it harder to reach top-tier candidates. Workers are also demanding different working conditions. For example, remote work boomed during the pandemic, and now many workers will not even consider a company requiring in-person office work, especially as many viable employees choose to live where housing is more affordable, which does not always align with where top companies are.

According to Aon, one way to ensure your organization is not missing out on recruiting and retaining top talent is to recognize increases in cost of living and improve salary packages, whether in the form of higher base salaries or stock options.

5. Regulatory or Legislative Changes
Constant activity from regulators and lawmakers impacts thousands of businesses. Organizations must stay on top of the latest changes and make sure they remain in compliance with regulations or risk hefty fines, among other potential consequences. Organizations have a few options for mitigating the impact according to Aon, including:

Set up an in-house team to track regulatory and legislative changes and implement compliance measures
Find ways to influence the development, passage and implementation of new laws and regulations and
Clearly communicate the new rules to employees


Source:  Jennifer Post is an editor at Risk Management.


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Trends reshaping risk management include use of GRC platforms, risk maturity models, risk appetite statements and AI tools, plus the need to manage AI risks.

Enterprise risk management has taken center stage in many organizations as they grapple with the lingering effects of the COVID-19 pandemic, economic uncertainties, the rapid pace of business change and other potential business risks.

Forward-looking corporate executives recognize that stronger risk management programs are required to remain competitive in today’s business world. For example, one aspect of the current enterprise risk management (ERM) landscape that companies must contend with is the connectivity of risks between different organizations.

Businesses are increasingly interconnected with partners, vendors and suppliers across global markets, complicating various types of risks they face, explained Alla Valente, an analyst at Forrester Research.

“We find that when there is significantly more risk in one of those categories it can have a ripple effect that impacts other categories,” she said. The business impact of a local natural disaster, the ongoing wars in Ukraine and Gaza, higher interest rates or other developments can cascade across an entire supply chain worldwide. Along with other factors, that makes effective risk management a prerequisite for continued business success.

But there’s a lot for risk managers to keep up with. Here are 12 security and risk management trends that are reshaping the ERM process and influencing business continuity planning and risk mitigation efforts.

1. Risk maturity models consolidate workflows
More enterprises are considering a risk maturity model as a way to manage the growing interconnectedness of risk vulnerabilities, Valente observed. This method mirrors other frameworks like the capability maturity model widely used in software development. Adopting a risk maturity model requires addressing risk management processes and technologies that can support them.

On the process side, risk management leaders must put together a team of risk stakeholders. This team should combine the technical and business expertise necessary to make fast and intelligent risk-based decisions, establish ERM policies and procedures, and implement the proper controls. Risk managers also need to establish processes for consolidating ERM workflows across disparate entities.

The technology side includes the IT infrastructure for centralizing and contextualizing information about risk management and automating risk policy enforcement.

2. ERM technology stacks expand into GRC
Enterprise risk management has expanded beyond financial issues to also reach into cybersecurity; IT; third-party relationships; and governance, risk and compliance (GRC) procedures. A comprehensive GRC platform can be a critical integration tier for all types of risk management activities. An organization can use one to create and manage policies, conduct risk assessments, understand its risk posture, identify gaps in regulatory compliance, manage and respond to incidents, and automate the internal audit process.

CIOs need to confirm that their risk management technology stack is adequate for each task and used proactively, not just reactively, Valente said. Consider integrating the following functions into a more comprehensive technology stack:

Risk intelligence tools to analyze geopolitical risks, natural disasters and other incidents.
Third-party risk assessment tools to track sanctions, security incidents and financial health in other organizations.
Cybersecurity systems to assess the potential impact of security vulnerabilities, data breaches and cyberattacks.
Social media monitoring capabilities to identify sudden changes in brand reputation.
3. ERM seen as a competitive advantage
Organizations now often view risk management as a way to increase their competitive advantage instead of simply a risk avoidance exercise, especially since the onslaught of COVID-19.

“Although many companies suffered economic losses during the pandemic,” Valente noted, “we also saw many companies pivoting to new opportunities that did not exist before.”

Valente’s research team has been exploring the differences between traditional chief risk officers who are laser-focused on minimizing risk and so-called transformational CROs who see risk management as a competitive differentiator that can prevent risks from interfering with business strategy and limiting revenue streams.

“Companies with a transformational approach to risk can mobilize their teams and business leaders quickly to jump on a new gap in the market,” Valente explained. When, for example, Ikea’s store traffic plummeted during the initial pandemic lockdown, the furniture retailer quickly implemented a new contactless pickup system that let customers securely pick up their purchases, according to Valente.

4. Wider use of risk appetite statements
Risk appetite statements emerged in the financial industry to improve communication with employees, investors and regulators. Some risk is required to expand a pool of loans, but if too many customers default, a bank needs a program in place to trigger decisive action. For example, banks might establish a safety baseline for mortgage defaults or fraudulent transactions that still lets them turn a profit.

Risk appetite statements are starting to gain popularity in other industries to replace rudimentary “check the box” exercises with a process that more definitively guides day-to-day risk management decisions, observed Chris Matlock, vice president and advisory team manager for the corporate strategy and risk practice at Gartner. There’s a caveat, though.

“It is difficult to do,” Matlock warned, but “the payoff for organizations that do it is extremely high.”

He explained that companies face numerous challenges in creating an effective risk appetite statement. Some executives believe it could limit their ability to pursue new business opportunities, while others are concerned that a poorly worded statement might be misinterpreted as condoning unacceptable practices.

5. Subject matter experts expedite risk assessment and response
Bringing all the risk information together is important, but experts are also required to make sense of it. Enterprises are increasingly using their GRC platform to create an informed network of subject matter experts for critical projects, Matlock said. When issues spanning multiple departments emerge, such as a security incident involving IT, legal and HR, an appropriate panel of experts in those areas can quickly assess the risk and take required actions.

Risk assessment at the beginning of a new project is table stakes now. Devising the best plan and creating a process that supports a timely risk response yields the best results. “It is the maintenance of risk and the timely response to risk throughout a project’s lifespan that has the biggest impact on success,” Matlock said.

6. Risk mitigation and measurement tools multiply
Tools for actively measuring and mitigating risks are getting better, said Keri Calagna, a principal at Deloitte who is the professional services firm’s advisory leader on strategic risk and resilience in the U.S. Among the improvements are internal and external risk-sensing tools that help generate the risk intelligence needed to detect trending and emerging risks.

In addition, Calagna reported that enterprises are turning to more integrated tools that do the following:

Present a holistic view of risks across the organization.
Capture leading risk indicators to show how a risk is trending.
Promote accountability for the actions taken to mitigate risk.
Provide real-time risk reporting to aid in management decisions.
Expect a rise in scenario planning and assumption testing capabilities, Calagna said. Companies are also using simulations, war games, tabletop exercises and other interactive workshops to promote more cross-functional thinking about risk management and help assess the impact of different future events on corporate business plans and strategies.

7. GRC meets ESG
Another enterprise risk management trend is connecting the dots between business risk and environmental, social and governance (ESG) agendas.

“As companies begin their ESG risk planning, they should ensure that the actions they are taking are significant and genuine,” cautioned Cliff Huntington, general manager of software vendor OneTrust’s GRC and Security Assurance Cloud product suite. Organizations need to demonstrate that they aren’t just greenwashing and are instead making measurable progress as part of their ESG strategies and programs, according to Huntington.

“Business leaders,” he said, “are realizing that ESG risk is a business risk and are taking steps to mitigate it in conjunction with their enterprise risk initiatives.”

8. Extreme weather risks grow in importance
With crisis events like extreme weather growing in impact and frequency, CEOs and boards of directors will be called on to implement risk management strategies to mitigate the impact on employees and business assets. In 2023, there were a record 28 billion-dollar weather and climate disasters in the U.S. that caused a total of at least $92.9 billion in damages, according to the National Oceanic and Atmospheric Administration.

“With extreme weather now a norm, CEOs will need to learn about risk mitigation to protect their assets, employees and bottom line,” said Mark Herrington, CEO at OnSolve, a software vendor that offers a critical event management platform.

9. Integrating risk management with digital transformation
As business operations increasingly go digital and IT environments become more and more complex, enterprises are increasingly adopting an integrated GRC, or IGRC, program to simplify their risk management activities, said Elizabeth McNichol, a principal at PwC and enterprise technology leader in its U.S. cyber, risk and regulatory consulting practice.

“Due to decentralized, overly complex systems, many companies are not aware of all the kinds of data they have, how it is organized or even if it may be noncompliant with the law,” she said. Rules for how organizations handle data and comply with regulations should be clear, straightforward, universal and grounded in a risk-based approach, McNichol added.

IT plays a critical role as both a driver and enabler of IGRC. CIOs and other IT leaders must work with business managers to identify, assess and mitigate risks in accordance with a company’s risk appetite. An integrated governance model can help by coordinating strategy, people, process and technology objectives across the enterprise. These steps are crucial for ensuring the risk management component is successfully integrated into broader digital transformation plans.

10. Enhanced and contextualized risk monitoring
Kumar Avijit, practice director for cloud and infrastructure at technology research firm Everest Group, is seeing increased demand for risk management monitoring tools tailored for various roles and personas, such as CIOs, CISOs and business managers. This is because various executives and business users are defining new risk management priorities and mandates. These tools enhance traditional risk analysis with drill-down views that provide the right level of granularity.

Examples of some of the growing risk priorities for different roles include the following:

CEOs want to drive secure business transformation.
CFOs want to reduce business risks and the cost of data breaches.
COOs want to run resilient business operations.
CIOs want to make security a foundational element of IT strategy.
CISOs want to quantify cybersecurity risks to aid in decision-making.


11. AI augments risk management initiatives
AI will play a growing role in risk management initiatives. Abhishek Gupta, founder and principal researcher at the Montreal AI Ethics Institute, said he expects the following to be some of the most common manifestations of this trend:

AI-driven risk identification and prediction. Machine learning is beginning to be used to identify risks more accurately and faster than humans can. That’s especially the case in dynamic risk management processes for cybersecurity, in which heuristic- or rule-based approaches can become outdated because adversaries are using AI themselves to mount novel attacks. AI and machine learning tools can also monitor risks and predict how they might develop in the future, enabling mitigation strategies to become more proactive.
Use of chatbots. They can answer risk management questions from employees, customers, business partners and other parties that would otherwise need to be addressed by risk managers. Chatbots can also navigate internal knowledge bases to surface risk-related scenarios and incidents that were previously encountered in an organization, thus saving time and preventing redundant investments in resolving issues.
AI in legal and model risk management. AI tools are being used to ensure legal compliance and mitigate related risks. They can also be used for model risk management and stress testing of quantitative and qualitative models to meet regulatory requirements in financial services, insurance and other industries.


12. AI introduces new risks that need to be managed
On the flip side, the surge in interest in AI being driven partly by the emergence of generative AI technologies also threatens to burden enterprises with various new risks that haven’t been widely considered before now. Gupta predicted that organizations will adopt the following measures to help manage AI risks:

AI risk management frameworks. Progress is expected on case studies and tests to determine whether new AI risk management frameworks, such as one developed by the National Institute of Standards and Technology, are effective. If they are, that would remove a big impediment for organizations in getting started on managing AI risks.
Responsible AI programs. A cohesive responsible AI strategy will be an important component of AI risk management. But some companies likely will struggle to balance idealistic commitments to responsible AI principles with the level of resources required to support and sustain a program. Organizations will need to think seriously about how to achieve that balance.
AI governance policies. This involves establishing guidelines that align the governance of AI systems with an organization’s values and objectives. Without such alignment, the implementation of an AI governance policy could fail due to internal friction, resulting in limited adoption and an inability to effectively manage AI risks across the organization.
Management of third-party AI risks. Organizations also must address risks that stem from the use of externally developed AI tools. Incorporating these third-party AI risks into existing risk management strategies will separate companies that are successful in their approaches from those that aren’t.

Source: TechTarget.com

 


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