The Top Challenges Facing Boards in 2023 and How to Meet Them

Whether you want to enhance diversity or better achieve your board’s mission, implementing new methods to improve your organization isn’t possible without effective leadership and governance. Today’s boards operate in a more dynamic setting than ever before. Here, we offer a simple yet non-traditional view of governance and explain why embracing change and adaptability is vital. 

Recognize that Good Governance Equals Good Decision-Making

Attempting to define “governance” can leave many seasoned professionals scratching their heads. When board effectiveness researcher Matt Fullbrook explicitly asked for definitions of governance during his research, he often received half-baked answers replete with jargon.

“Many would come back with something along the lines of ‘corporate governance is governing corporations,’ which of course isn’t helpful,” Matt says. “But it illustrates that we’re using this word, governance, without actually having a confident idea of what we mean.”  

That’s why Matt, founder of Fullbrook Board Effectiveness and Ground-Up Governance, came up with his own laser-focused definition of governance: 

Corporate governance is the way that decisions get made in an incorporated entity. Good governance means actively creating conditions that are likely to result in effective decisions. 

The above definition is free of words like boards, executives, policies, processes, bylaws, compliance, disclosure, and executive compensation — and that’s by design.

While elements like your board, your commitment to diversity, and other factors can help you reach effective decisions, Matt says you shouldn’t think of them as governance checkboxes that you need to tick off. Instead, you should purely focus on enabling good decision-making. 

Common Decision-Making Barriers

If governance equals facilitating good decisions, what factors get in the way? While Matt’s definition of good governance is simple, the act of making good decisions is not for many reasons.  Below are four of the most common barriers:

1. Confirmation bias: We tend to embrace information that supports what we already believe and reject information that goes against what we already believe.
2. Narrow framing: We sometimes enter the boardroom with a predetermined binary mindset on an item that is up for decision or vote. 
3. Short-term emotion: Embarrassment can prevent us from speaking up and expressing ourselves in the boardroom.
4. Overconfidence: We’re inclined to be overconfident in our own expertise or the expertise of others. 

Many of the above factors are the product of subconscious or deeply rooted behaviors. But that doesn’t mean fostering a good decision-making environment in the boardroom is impossible. Conditions that help good decision-making include opening the door to multiple opinions and options. Subtle shifts create the conditions that help everybody thrive. 

Use Effective Leadership to Facilitate Necessary Change

Shaking things up can sound easy on paper but prove difficult in theory. That’s precisely why you need strong leaders who are prepared to persevere for the greater good.

Col. David Fivecoat recognized this firsthand in his role as a U.S. Army Ranger School Commander, overseeing gender integration of the elite Ranger School in 2015. Today, David believes that courage and grit are the top hallmarks of any effective leader, whether you’re on the battlefield or in the boardroom.   

Maintain Transparency 

One of the Army’s notoriously toughest programs, the Ranger School accepts only the top 5-10% of military personnel. Until 2015, all participants were men — but by the end of that year, three women graduated from Ranger School. Since then, over 100 have earned that honor.

Opening the Ranger School to women proved to be a high-profile endeavor. Even members of Congress were sitting up and paying attention to this seismic shift in inclusion. David felt the first key to success was maintaining full transparency each step of the way.

“It wasn’t just a ‘black box’ that women went to ranger school and either did or didn’t finish,” David says. 

Clear transparency took the form of frequently speaking with reporters and providing both Army members and the American public with the updates they craved.

Overcome Resistance 

Transparency alone did not lead to smooth sailing. Like David’s experience in the Army, changing the status quo will inevitably lead to resistance and naysayers. The first step is to identify the types of reactions you will encounter.

Reactions don’t always take the form of “for” and “against.” David broke down the most common responses into four nuanced categories: 

1. Active resisters: Those actively trying to prevent the change
2. Passive resisters: Those against the change who are waiting to see what happens 
3. Passive supporters: Those in favor of the change who are waiting to see what happens 
4. Active supporters: Those actively taking action to support the change

Your goal should be to move active and passive resisters to the active supporters group. One way to sway your audience is to hold meetings at the beginning, middle, and end of the project or initiative. For David, this was an opportunity to put out his message and hear the challenges and frustrations on a grassroots level. 

Translating this to the board environment, it’s clear that jumping straight into a significant change can backfire. Instead, prime the change for positive acceptance by giving ample opportunity to hear and address concerns.  

According to David, the secret to facing and overcoming challenges is grit — a fact that he spent an entire book covering, aptly titled, Grow Your Grit.

Having the grit to persevere is critical when leading any change, especially when facing active resistance on multiple fronts. Sticking to your guns and communicating clearly and effectively will typically lead even some naysayers to support your cause.

Adaptable Boards are Successful Boards

If grit and determination are one lever for successful leadership, the counterweight is adaptability. According to Donna Hamlin, Ph.D., Founder & CEO of BoardWise, staying current and contextual is essential as the business landscape can change overnight.

“We have to understand the forces in play that are going to impact us and understand a greater context for the work we’re doing,” Donna says. 

Boards Must Always Be Trend-Spotting

Keeping a pulse on big-picture forces requires more than memorizing facts. It means deeply understanding the current forces shaping the business landscape and envisioning how they may impact your organization. 

Several major headwinds are shaping the business landscape today, including:

• Meeting the expectations of sophisticated shareholders and stakeholders (including the planet)
• Slower speed to market
• Stricter requirements to access institutional investor funds
• Fuller formal transparency
• Tighter regulations and reinforcement
• Data management related to ESG
• Stretching of governance accountability

“We have to think about things in a much greater context than we have in the past,” Donna says.

If it sounds like a lot to grasp, that’s probably because it is. But that shouldn’t stop board leadership from looking forward and preparing for agile responses. 

Steps to Achieve Good Board Governance and Leadership

Good governance and savvy leadership involve actively creating conditions likely to result in effective decisions. But what exactly are those conditions? Matt Fullbrook shared his top 5.

1. Manage Confirmation Bias

People tend to favor and recall information that supports their beliefs or theories. Board members aren’t immune from this bias. That’s why boards must actively root out and manage confirmation bias to drive effective decisions. 

2. Generate Multiple Options

Instead of framing decisions as “yes or no” scenarios, it’s important to hear from all participants and consider all options. Avoid binary choices — in other words, choice A or choice B — whenever possible.  

3. Limit Emotional Influence 

Since emotions can unwittingly impact decision-making, take steps to slow down the process of major decisions so each member can take time to process their thoughts and find space to voice their opinions. The goal is to avoid members simply going with the flow because they can’t identify a comfortable window to speak up. 

4. Manage the Experts in the Room

It seems counterintuitive, but just because you have experts in the room doesn’t mean their decisions and predictions will be correct. The overconfidence of one expert can eliminate or bulldoze the strategic thinking process. The answer? When you have experts in the room, try to encourage them to ask questions instead of making predictions and statements. 

5. Emphasize Inclusion

There is no such thing as boardroom conditions that will optimize the inclusion of every person simultaneously. That’s why boards must strive to create conditions that allow everyone to be active participants by thinking about who is in the room, what their styles are, and how we can best hear them.

With both governance and leadership, it’s important to know when to disrupt the status quo with confidence so you can improve your organization. From pioneering new waters to fostering the best environment for decision-making, the key is to keep an open mind and be willing to experiment.

Even if your current boardroom routine is working “fine,” try something 1% different at your next meeting and see what happens.