The Nasscom 'Thought Leaders Conclave', focused on strategies for enhancing the effectiveness of corporate boards, with Prof. Krishna G Palepu from the Harvard Business School delivering the keynote address.
Other panelists included, Pramod Bhasin, CEO, Genpact and Salil Parekh, CEO, Capgemini India. The discussion was chaired by Jerry Rao, Chairman EDS Asia Pacific, formerly Mphasis.
Prof. Krishna provided some insights on impediments to effectiveness that typically plagues boards:
- Lack of clarity on the role of directors
- Lack of crisp and timely information
- Lack of a proper agenda
- Whether boardroom discussion dynamics exist in fact or as mere formality?
- Poor board leadership
Prof Palepu also emphasised that the role of the board members is to protect the long-term interests of the corporation and its external investors.
He further clarified the practices that contribute to making an effective board and stressed that effective boards have:
- An appropriate board composition and size. It should be large enough to staff committees, but not large to prevent a good discussion.
- A sound leader, who can provide direction.
- Streamlined board information focussed on strategic performance metrics.
- A concise agenda
- A Board retreat - where the members, take a couple of days off, and in a different environment, to re-evaluate their existing strategy
The potential framework for an effective board would to be focus the board's agenda on key drivers of value and key risks that can derail the strategy.
Prof. Palepu went on to emphasise, that the Boards should do away with the "fat information books provided to the members, prior to the meeting", which are not read by the board members most of the time, and replace them with a 4-page executive summary.
To this, Jerry Rao, suggested that it was a superlative take-home for everyone, and in jest mentioned, that it was most appropriate for board members a majority of who are at advanced age, as it would help is maintaining their attention span.
The 4-pager should contain the following information, says Prof. Palepu .
One page for:
- Strategy on each of the businesses
- Customer metrics and related strategies
- Key processes and capability metrics and related strategic information
- Key competitors and industry developments
According to Prof. Palepu, the key to a successful strategy is to be able to satisfactorily answer 5 questions.
- What is the customer need, and what are we trying to satisfy?
- What is our competition?
- How do we differentiate?
- What are our key capabilities and processes to succesfully differentiate?
- What are the potential threats to our differentiation?
- He concluded his presentation with the potential pay offs of adhering to his mantra.
More time can be focussed on what is strategically critical
- External market focus can be added on the agenda
- Problems can be identified early on, so that they can be discussed and corrected
- Resource allocation choices, audit and compensation committees' work can be linked with the broader Board work.
This intellectually stimulating presetation, has definitely changed various existing notions, and urges companies to think differently and break existing norms.