Evolution Time: Oversight to Insight to Foresight
Posted on May 1st, 2008 by Julie Garland McLellan »Permalink
This is the most important aspect of board governance. The oversight function is the absolute minimum that investors and owners have a right to expect from boards. Some boards are too focused on simply providing the minimum.
Board members should, individually and collectively, have experience of business and community life that will enable them to add value to the organisation as well as to effectively monitor its operations. They add this value by the insights they bring.
Oversight is looking at a function and asking the compliance related questions:
• Should we be doing this?
• Are we doing this correctly?
• Are the right people doing this and do they have the right tools and training?
Insight comes when the board start ask questions about performance such as:
• Are these activities the best activities for generating the results we want?
• If they are the best activities, could we do them more effectively or efficiently?
• What would help our people to be more effective?
• Who does these activities better than we do and what could we learn from them?
An insightful board will challenge and support the President or CEO by helping to keep the organisation focused on outcomes rather than processes.
Foresight comes when the board can predict aspects of future performance by monitoring current KPIs. A board with foresight is able to look at the evolving corporate landscape and ask questions such as:
• What activities will be required in the future?
• What must we learn now to be more effective in the future?
• How will we track that our people are learning the required skills?
• When should we start to deploy new activities?
It is important to remember that the oversight role is the foundation for the insight role. No board can sensibly offer advice on improving performance if there is any doubt about the veracity of the information they are basing their insights upon. Similarly the board must have appropriate good quality data from their performance insight to be able to make any use of their instincts regarding foresight. Attempting to move to a higher level without the data from the lower levels is dangerous; it can leave a board exposed to making decisions that do not stand the test of later analysis.
Attempting to govern a successful company without progressing from oversight to foresight is also dangerous. The board can become trapped in old paradigm thinking and performance can deteriorate to a point where future options are limited by lack of resources. Boards must have confidence in their data to be able to move successfully through from oversight to insight and then to foresight so that their organisation moves from compliance to performance to sustained competitive advantage.
Tags: corporate boards, risk management, compliance