Unlocking Leadership Excellence in the Middle East

While ninety-one% of the respondents to our board effectiveness review talk about the importance of strategy over operational aspects of running a business, I think it's very, very clear that strategy, essentially the direction of the business in that competition for attention and capital, is at the forefront. If eighty-three% of respondents to our survey are talking about strategy and value creation, and yet recognizing that we're not actually doing enough of that because we tend to get over-involved in day-to-day management of running the business, then clearly we have to respond. But at the same time, I know as an executive, it's very tempting to get over-involved, having run businesses themselves, to actually see what executive management are up to. Establishing clear boundaries between the roles of the board of directors and executive management is key. And our board effectiveness framework shows clearly how it can work by putting the right people in the right places, whether at the non-executive level or at the executive level. Or as we like to say at GCC Board Directors Institute, as far as we're concerned, the role of the board is noses in, fingers out. Don't get over-involved in the operations. Stay strategic. Stay focused on value creation and the direction of the business. Identify the gaps and help management perform. So what we found in the report is that boards unfortunately still are not taking succession planning seriously enough. And this is a huge, huge risk because appointing the right CEO, the best CEO, is the board's number one responsibility. In order to mitigate the risk, and what I've seen the best boards internationally do, is they start two or three years out in terms of their succession planning. They build a success profile of the type of CEO that they're looking for. That success profile is based upon the vision, the direction for the company, but also based upon the risks that the company is running. And then finally, I'd say put in place a succession plan, that has key development elements to it. Now, one is putting the individual or individuals into different roles so they get, a sense of variety, and also putting them with a decent coach and with a decent mentor. This year's survey told us that seventy-eight% of respondents believe that board performance has strengthened over the last two years, which indicates a strong commitment by boards in the region to move beyond compliance towards strategic and purpose-driven governance. This confidence in board effectiveness may be due to the sharp increase in the number of certified directors in the region over the last two years, with four hundred and fifty directors certified by GCCBDI to date. In order to continue to increase board effectiveness in the coming years and beyond, we recommend that boards focus on four pillars: purpose, strategy, diversity, and capability. Regarding purpose, boards should look beyond compliance to ensure their organizations deliver strategic value to all stakeholders. To do this, boards should remain flexible and forward-thinking, planning for and adapting strategies for shifting market, technological, and geopolitical realities. Diversity is key to this. Getting the right people in place who bring a mix of perspectives and also represent the market and population in terms of gender, age, nationality, expertise, and beyond are vital to making informed decisions and to long-term resilience. Last, building board member capability through continuous professional development is key. Over-boarding is a challenge because the region is growing so quickly, so there aren't enough experienced board members to cover the board roles that are available. Certainly, our advice would be to do two things. One is for boards to very seriously consider introducing independent non-executive directors if they haven't already done so. We found through our board review work that independent non-executive directors can add huge value to a board, if not a transformational value to the impact and effectiveness of that board. And the second thing we'd encourage them to do is perhaps introduce an advisory board that sits alongside the main board, and that advisory board has skills, networks, and capabilities that reflect the challenges, the opportunities, but also the core business of the organization. In this year's survey, we expanded our questions regarding board diversity because it is a critical component of board effectiveness. The research shows that diverse boards perform better. They exhibit less group think, they make better decisions, and they are more innovative. Importantly, they also have an enhanced understanding of their market base because of the fact that they represent the market that they are serving. While we have seen some progress with respect to increasing the number of women on boards in the GCCThere is still a significant underrepresentation. We know that on average, women currently represent 6.8% of board seats on the boards of publicly listed companies in the GCC. The good news is we are seeing some gradual progress towards increasing women on boards in the region, and we do expect to see this continue over time, but it does take intentional action by regulators through board quotas, recruitment of diverse board members, and the board chair's important role of creating a culture that supports the success and contributions of all board members. If we consider the responses to the question on technology, artificial intelligence or AI in particular, we're told by the respondents that the majority of them aren't entirely comfortable with the notion of AI. In addition, more of them, 63%, say they're not really equipped in terms of an AI strategy. I think that's quite normal. If you think of the emergence of AI in the last couple of years, the speed at which it's changing, it's not that surprising for seasoned boards of directors with other skill sets. Today, while boards aren't necessarily comfortable, they don't know enough about AI, and most of them admit they don't have an AI strategy, the good news is they're learning and they're curious. We're seeing guardrails put in place to enable decision-making, and increasingly we're seeing the right questions being asked about this new technology. As with all technology, when it's new, it emerges quickly, it's exciting, and of course, we want to jump into it and get involved. Sometimes thinking about the role of the board, it's good to take a step back, let management do their job, and ask the questions, identify the gaps, and if necessary, add to the executive management or indeed at board level, the expertise that you require. Unfortunately, geopolitics is right at the top of the risk register for every board at the moment, and I think the best boards certainly that I've worked with or I'm working with currently, they do three things. One is they are taking a more dynamic and a more agile approach to their strategy. They're looking at strategy now on a six-month, 12-month rolling basis and really considering progress against that strategy. The second thing they do is they look at their supply chain. They also look at their customer base, and they see across those two very important groups where the key risks are from a geopolitical perspective, and they work with management to mitigate those risks. And finally, the best boards look at risk on a biannual basis, so twice yearly. They will spend dedicated time, like a morning or an afternoon, to consider or from a horizon perspective, what are the risks that could impact our business and how can we scenario plan against those? So they do those three things and do them well. And in this day and age, we can think of all manner of external factors, be it technology related, artificial intelligence, for instance, or indeed the world that we live in suggesting much by the way of geopolitics. The role of the board of directors is to consider these spots, not necessarily what we want to deal with, but to scan the horizon, look out for the future, and anticipate what's coming while leaving management to do the job that they're paid to do, which is run the business. Boards of directors need to identify the gaps and equip themselves, and when necessary, add to their expertise on the board of directors to ensure that they perform their role of strategic oversight. For GCC boards to be more effective, I believe they need to consider what we call leadership assurance. So leadership assurance is the process that boards go through to determine whether they've got the right leadership capabilities in place. Now, this is not just about having effective leaders, which of course is incredibly important and the board has a key role in that, but it's also making sure that there are various other dimensions in place. For example, an effective healthy culture, being clear what the strategy is for the organization, being clear what the risks are and having good risk management processes and internal controls in place, having a great talent management strategy and a very clear accountability framework. These tools are absolutely critical for any organization to grow and to prosper and to be profitable. If we're to address the gaps that we've identified from the board effectiveness survey, then we really need to be thinking harder about forward-thinking agenda and identifying the gaps the board needs to fill with management. We recommend focusing on director education and certification, board evaluation, and importantly, adding board members who have the diversity of expertise and experience to address evolving demands. There is great opportunity for boards in the GCC to define their leadership through these four pillars. And in doing so, we expect board effectiveness in the region to continue to improve in the coming years.