Why Leaders Should Not Manage Their Own Milestone Processes

The most effective senior leaders pay attention to strategy, organization and operations, driving what to do and why, who’s going to do it, and how to get it done. While the first two are essential, they are useless without the third. High performing organizations rely on a strong milestone management process to ensure things get done when they are supposed to get done. However, for a senior leader, “pay attention” is not the same as “manage.”
Consider the difference between leaders and managers. The best leaders spend their time inspiring and enabling others to do their absolute best together to realize a meaningful and rewarding shared purpose. The strongest managers spend their time directing and coordinating the actions of others.
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The Time Management Flip – Enable Others Before Doing Your Own Work

The time management flip comes in the instant at which your greatest leverage switches from making the best use of your own time to helping your team members make the best use of their time.
As a senior leader, leverage comes from your team. Success is no longer based on what you do yourself, but, rather, on what you inspire and enable in others. This is why individual contributors, managers, and leaders must think about time management differently.
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Why The Most Effective CEOs Spend The Least Amount Of Time Managing

The most effective CEOs concentrate their efforts on leading with vision and values to inspire and enable others to do their absolute best together to realize a meaningful and rewarding shared purpose. The most effective CEOs concentrate their efforts on leading with vision and values to inspire and enable others to do their absolute best together to realize a meaningful and rewarding shared purpose. They focus 20-30% of their time up, 20-30% out, and less than 50% down.They can do this because they delegate managing.
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Equip Yourself for Implementation of the New Credit Losses Standard

Last September, US
Securities and Exchange Commission Chief Accountant Wesley Bricker observed that
“the audit committee plays a vital role in overseeing a company’s financial
reporting, including the implementation of new accounting standards.”

One hotspot on the implementation front is oversight of how companies are implementing a major new accounting standard that will significantly change estimating and accounting for credit losses. The new accounting standard requires companies to measure certain credit losses under a new model, commonly referred to as the current expected credit loss model.

The standard will
affect accounting for a wide range of financial assets, including loans,
held-to-maturity debt securities, receivables, net investments in leases, and
certain off-balance sheet credit exposures. For most calendar year-end public
companies, the new standard is effective on January 1, 2020.

With this oversight challenge looming, the Center for Audit Quality has developed a tool to aid audit committee members. In addition to providing a concise overview of the standard, the tool provides ideas for audit committees regarding important questions to ask in key areas.

Evaluating the Company’s Impact Assessment

Company to company, the impact of the credit losses standard may vary based on a wide range of factors. Given this complexity, management may be performing high-level assessments to gauge whether the new standard’s impact will be limited, moderate, or significant. This impact assessment can be useful to guide the implementation plan, including consideration of needed resources.

As audit committees evaluate
management’s impact assessment, they should consider the following questions,
among others. (See the CAQ’s tool for additional questions.)

Were all relevant parties involved in assessing and understanding the potential impact of the standard? This pool could include the following departments and functions: accounting, tax, communications, financial reporting (including internal control over financial reporting), financial planning and analysis, investor relations, risk, credit, operations (data retention for forecasting), treasury, and information technology.What factors were considered in management’s impact assessment? How has management assessed the potential impact the new standard may have on key areas such as investor relations and communications, regulatory compliance, accounting for taxes, and the impact on financial statements of borrowers?When will management provide pro forma financial statements including disclosures and investor communications to the audit committee to demonstrate the expected impact of the new standard on the financial statements (including multiple scenarios based on potential economic environmental impacts)?

Evaluating the Implementation Plan

Companies should develop an
implementation plan and communicate it to the audit committee. As with the
impact assessment, audit committee members should have a number of questions in
mind as they evaluate the implementation plan.

How are milestones established and monitored? Are the milestones appropriate?How will the audit committee be apprised of status? Audit committees may want to consider requesting a quarterly progress report from management.Does a strong tone at the top support the effort required to implement the new standard? Is implementation receiving the appropriate resources (in-house and third-party) and priority?How is management’s assessment of internal control over financial reporting impacted?Has management created thorough processes to develop the expected credit loss model? Has it performed validation controls to verify that the model is performing as expected? Have governance processes and controls been put in place to determine that the model is—and will remain—fit for purpose?Who is responsible for new accounting policy decisions, and how does the company plan to revise written accounting policies?How has an internal communication plan been established (such that key stakeholders are aware of how the new standard will impact the company)? What is the view of the external auditor as it relates to the implementation plan? Will it satisfy the auditor’s plan and timeline to complete the audit in a timely manner?

Other Important Implementation
Considerations: Disclosure

The questions don’t
stop at impact assessment or implementation. One critical area for audit
committees is understanding how the new standard will affect disclosures.
Exploring the following questions and others in the CAQ tool can aid in
building that understanding.

Has the company disclosed the potential effects of the future adoption of the new standard in interim and annual filings leading up to the effective date? If quantitative amounts are not known, has the company provided qualitative or directional disclosures? What is management’s strategy for identifying, drafting, and communicating to the audit committee any new disclosures required as a result of the standard? To the extent that information for new disclosures is not currently available, how will the company develop new processes and controls to obtain required information?

Naturally, the questions listed above are just starting points in what should be a robust dialogue. For more, I urge audit committee members to download our tool, which, like all CAQ resources for audit committees, is a complimentary resource to the public.

Julie Bell Lindsay became the executive director of the Center for Audit Quality in May 2019.

The Questions Directors Should Ask to Adeptly Oversee Innovation

Thriving in
this business environment demands that businesses take evolutionary and
revolutionary approaches to the products and services they offer consumers. But
given the constant churn of new technologies, figuring out how to stay on the
cutting edge is daunting, to say the least.

According to data from the 2018–2019 NACD Public Company Governance Survey, nearly 70 percent of directors report that their boards need to strengthen the monitoring of strategy execution and their understanding of innovation and the associated risks and opportunities. To explore the board’s role in overseeing innovation, NACD recently hosted a roundtable discussion led by Nichole Jordan, national managing partner, markets, clients, and industry at Grant Thornton, and Ron Markham, executive innovation and risk leader of cloud computing company ServiceNow.

Jordan framed
the conversation by recommending the following key questions that boards should
ask:

Are
you leveraging technology to sense risk? Do
you seek outside perspectives?Is
my board digitally savvy?Do
I understand the organization’s transformation strategy?Is
the board receiving updates on relevant regulatory risks?

Are you leveraging
technology to sense risk? A best practice that Jordan is seeing as she interacts with boards
is the use of risk-sensing technologies—state-of-the-art solutions that scan
millions of data points in real time to surface the risks that are most
relevant to the organization. “That information may be changes related to your
key customers, or your competitors, like new patents being issued to your
competitors,” Jordan said. “Risk sensing  will separate the signal from the noise and
provide that to you in a dashboard every morning so that you’re focused on the
most important developments. ”

Do you seek outside
perspectives? Although technology can be used to conveniently filter and funnel
information into the boardroom, participants agreed that directors need to go
outside of their peers to further augment their knowledge of what is happening
in the marketplace. Jordan emphasized how important that can be. She suggested
attending events such as CES or other conferences that afford directors direct
exposure to new technologies and the opportunity to ask questions of the people
responsible for bringing those new technologies to market.

One
roundtable attendee who went to a presentation given by Google on cloud
technology remarked on how helpful that experience was because it inspired
questions she would not have otherwise thought to ask. She mentioned that the
presentation provided her with information that allowed her to constructively
challenge the ways in which management was proposing to integrate cloud
technology into the business. Other solutions include consulting with research
firms or industry groups—Gartner or the Information Technology Industry
Council, for example—to bring in additional insights.

Is my board digitally savvy? Jordan stressed
that it’s imperative for boards to have digitally savvy members—especially if
the company is in an industry where business models are notorious for changing rapidly,
such as telecommunications. Citing research from the Massachusetts Institute of
Technology, Jordan said that companies with technologically adept
directors—people who served in roles such as chief information officers (CIOs),
chief technology officers, or chief operations officer—were more profitable and
enjoyed higher rates of growth. MIT also found that these directors approach
strategy differently. “They draw on their experience to focus the company’s
strategy on trends and transformation and the risks of not doing something,”
Jordan said. “They raise questions to help drive strategy in new directions.”

However, adding expertise comes at a cost—and not all boards are financially
able to either add a board seat or attract top talent. “Rather than having a
CIO on the board, you can have an advisory board that is compensated nominally
or not at all—they’re just happy to be affiliated and providing advice to a
board,” one attendee remarked. “I thought that was an elegant solution, increasing
the level of savvy on the board without getting an extra body or spending a lot
of money.”

“I don’t know that it’s necessarily true that you need a tech person,” another
director opined, “but what you do need is somebody that can be what I would
call a technology translator, that can take whatever the technology is and
apply it to the business to say, ‘Okay, as a result of this technology, what
would be the right business applications that would provide the biggest
opportunity for the company, and what risks does having that technology if you
will create?’”

Boards can also leverage the CIOs functioning within their own organizations. “My
corollary to having more digitally savvy boards is there needs to be more
digitally savvy CIOs,” Markham remarked, recalling an experience of his own
where he stepped into a CIO role and had to quickly fix material IT-related
problems that were discovered via an external audit. “Not only did I have to be
board-savvy, my entire management team had to be board-savvy. They became
board-savvy. They understood risk, they understood internal controls, they
understood their responsibility with those controls, that they’re very
tangible, they’re critical, and they became part of our transformation story.”

For additional highlights from this roundtable conversation, check back on NACD BoardTalk on May 28.

AI: Do You Have A Map for Your Journey?

We are all familiar with Artificial
Intelligence (AI), even if most of us might not be able to explain it. In simple terms, AI is computer-generated technology
that simulates human
intelligence. It is the basis for two perennially cheerful characters that many
of us speak to every day: Apple’s intelligent assistant Siri and Amazon’s
virtual helper Alexa. AI is also the brain behind millions
of recommendations on Netflix and Amazon. It powers self-driving cars and makes
impressively accurate Fantasy Football predictions.

Given the sheer utility and ubiquity
of AI, it’s no surprise that companies across all industries are willing to
spend to get in on the game. Global spending on AI-related technologies is set to grow from $1.5
billion in 2017 to $2.8 billion in 2021.

With these innovative
technologies in mind, is your board ready to work with management to lay the
best roadmap to success for your company? Let’s turn first to some examples of
how companies are putting AI to work now.

How AI Is Being Used Today

In financial services, AI is already being
used to speed up the process of opening a bank account by extracting
information from images and documents that the customer can submit through a
mobile app. This reduces the on-boarding process to minutes instead of hours
and helps grow the bank’s customer base since, according to a recent study, 38
percent of customers will abandon the account opening process if it takes too
long.   

AI is also being used to help nudge
customers to improve their financial lives and save more money. Consider the
fact that  40 percent of American
households don’t have enough savings to cover $400 in emergency expenses.
Similar to how your Nest thermostat learns your preferences of temperature
control, personal wealth planning applications learn your spending patterns,
risk profile, and investment preferences, and suggest ways to change your
behavior to increase savings.

In addition to improving the customer experience, banks are looking to AI to help improve the bottom line. More than 60 percent of participants in a recent NACD webinar said they would invest in AI for increased efficiency and productivity in their operations. AI’s ability to eliminate errors, improve customer service, and automate processes can exceed 80 percent in specific scenarios, so it is not surprising that AI is becoming a central strategic theme in many organizations.

It’s likely we’ve only seen the tip of the
iceberg in terms of AI applications within the financial services industry, let
alone many others. There is already talk of using AI in the loans space to
review documents in place of lawyers, and to make better decisions about borrowers
when market data is scarce.

Starting the AI Conversation

But I know there are lingering worries
about AI emerging in conversations in boardrooms worldwide. Every quarter there
seems to be a new technology that promises to address all of yesterday’s
problems. While there are certainly many success stories and examples of
improvements from AI, there are also implications to a company’s strategy, operations,
and culture. For example, concerns about the potential impact on the company
culture and employees present a real risk.

But so are the risks of not embracing
AI, since there’s little doubt your competitors will. To move forward with a
smart AI strategy, here are some questions that can help your board define the
company’s AI goals:

What problems are we trying to solve with AI? What metrics and milestones are we using to define success?Is our existing technology ready to support AI initiatives?Does our AI budget match our strategic goals? What are our competitors doing that we can replicate and improve?

And the central theme of all of these
questions should be: How is this ultimately helping our customers? AI
technology can facilitate quantum jumps in the ease of doing business, the
accuracy and timeliness of services, and data delivered, but the focus should
be on the customer’s needs first.

Building Your AI Strategy

Best practices in this space have deep
roots in other management theories, but have evolved to reflect recent successes
at enterprises across industries as companies explore the possibilities of AI.
A winning strategy boils down to customer-focused design, data preparation, a
prototyping plan, and buy-in from your employees.

Design. When management works to design the strategy, they should avoid asking
clients about features and functions. Instead, the board should direct the
strategy team to focus on clients’ problems. New technologies allow product
design to reimagine a customer’s experience across the end-to-end lifecycle. With
this comes the question of how the company is capturing client feedback on
their experiences with your products and services and how that feedback is taken.Preparedness. Any move to incorporate AI into your business strategy should start
with an assessment of the current situation. Much of technology modernization
comes down to the state of the company’s data. Not all processes will benefit
from AI. But where there is potential for AI solutions, features such as
real-time processing, high-availability, scalability, and cost efficiency
matter. Being able to provide data visualization, analytics, predictive
analytics, and machine learning will all be dependent on the state of the
company’s applications and their associated data. Directors should ask for
benchmarks on data quality when assessing AI’s role in strategy. Experiments. The phrase “fail fast” is frequently used in today’s agile design and
programming methodology. Another way to consider this approach is “learn
quickly.” Boards should encourage management to engender a culture that prototypes,
observes, gets client feedback, and adjusts accordingly. At Broadridge, we frequently
use pilot programs to quickly assess the viability of new ideas. Determining
how to implement ideas quickly and inexpensively with the understanding that
some will not work is essential to building an organization and culture aligned
with the reorientation to new technologies.Personnel. Perhaps the most important reason to have a clear AI roadmap is to
communicate it to the company’s existing personnel. Employees want to be
inspired by the firms they work for. They want to understand the vision. And
they don’t enjoy repetitive jobs. What many firms lose sight of is that in any
transformation, when there are new tools for the job, training the existing experts
to use them is often the best solution. The board should ask management what
their plan is for rolling out the new technology and how it will navigate
questions and concerns from personnel.

Directors shouldn’t doubt the utility of AI and that it has a role to play. The technology of today has the potential to transform our clients’ experiences, leveraging our subject matter experts as we increasingly connect the dots to consider the end-to-end client lifecycle. But these opportunities are not without risk, and nirvana is rarely reached without discussions about the roads to take along the journey. It’s worth having these conversations today if we wish to harness the power of AI tomorrow.

Interested in hearing more from Broadridge’s Michael Tae on AI? Listen to a recent NACD webinar about the reality of AI here.