These days, many boards of directors devote much of their time and energy to risk management. But oversight of a company’s opportunity-generating capabilities is just as important.
Boards of directors have two broad responsibilities on behalf of shareholders and other stakeholders: overseeing the protection of existing value and creating new value. Even though most boards take growth seriously, in practice board oversight has become unbalanced. The imbalance between risk management and opportunity oversight is a potentially serious problem.
In the board’s capacity as opportunity overseer, it should have a well-informed point of view about:
- The company’s overall approach to recognizing and pursuing opportunities.
- The current state of the enterprise’s opportunity-generating capability.
- How that capability aligns with the enterprise’s strategic challenges.
- Top management’s action plan for enhancing that capability.
Correcting the imbalance in board oversight will require an active, constructive partnership between the board and senior leadership — and a board that understands and monitors how the company achieves and maintains a high level of value-creating performance.
Companies can attempt to build opportunity-generating capabilities internally (as Apple has done), acquire them (as Monsanto has done) or attempt some combination. Given the differences among enterprises, there are no simple models for effective opportunity oversight. In most cases, boards will need to develop their own tools and practices. Strengthening the opportunity oversight capabilities of boards will take time, as well as an opportunity-motivated CEO, enthusiastic board members and a board and senior executives willing and able to work in partnership.