Transform the board of directors

Author: Zhao Min
Publisher:
Publish Date: 2003-01-01
Features: "The four stages of board management constitute a complete whole--''CHIP. The board, as the 'heart' of a company, must focus on CHIP: selecting the right people, having sufficient information, maintaining high standards, and striving forever."
The transformation of the board has four steps. The first step is 'Effective Board Management.' At this stage, the transformation has four objectives:
1. For family-owned enterprises and joint-stock companies without standardized boards, the first step is to establish a standardized board.
2. For companies with a board but not functioning effectively, the goal is to enable it to truly start functioning.
3. For companies where the roles, responsibilities, and interests of the board and the management team are blurred, the goal is to clearly separate their functions.
4. For companies with an unestablished or unclear or nonstandardized decision-making system, the goal is to standardize the decision-making system.
At the stage of effective board management, the most important core is "selecting the right people" (i.e., "Person").
The second step is "Efficient Board Management." At this stage, the transformation also has four objectives:
1. The "concept convergence process," meaning board members share similar or values in areas such as corporate development strategies, which is the key factor for the board to make decisions quickly without fundamental disputes.
2. The "information symmetry process," meaning to ensure board members have sufficient and various information needed for decision-making, including management information, market competition information, talent competition information, and detailed financial information.
3. The "informal communication process." To make the formal decision-making process more efficient, there must be corresponding informal communication to supplement it. This thorough informal communication is important for each board member to have a general understanding and tracking of the causes, changes, and development of decision-making events.
4. The "deliberation and decision combination process." At each board meeting, some issues are "deliberated but not decided," emphasizing "deliberation"; others are "deliberated and decided," emphasizing "decision." With four board meetings a year (one per quarter), there are different combinations of deliberation and decision on various topics.
At the stage of efficient board management, the most important core is "having sufficient information" (i.e., "Information").
The third step is "Scientific Board Management." At this stage, the transformation also has four objectives:
1. Dynamic tracking and review of the company's strategic formulation and implementation, analyzing emerging new situations and problems in a timely manner, and adjusting the strategic content and implementation methods accordingly. This is called "strategic monitoring."
2. Detailed analysis and in-depth research of the company's financial status, analyzing problems in the strategic implementation process from aspects such as revenue structure, cost structure, and capital utilization structure, thereby deriving deep-level "financial monitoring."
3. Quality judgment of senior management personnel. When doubts arise about the strategic capabilities and the ability to improve the company's operational conditions of senior management, this quality judgment should be expanded to middle management. This is called "talent monitoring."
4. Fully estimating risks that may arise during the company's strategic advancement, such as those from the government, financiers (shareholders or banks), competitors, consumers, management, employees, and strategic partners, and responding promptly and swiftly to emerging crises. This is called "risk monitoring."
At the stage of scientific board management, the most important core is "maintaining high standards" (i.e., "High Standard").
The fourth step is "Successful Board Management." At this stage, the transformation still has four objectives:
First, transforming the board from an operational management agency into a strategic management agency. To achieve this, a company's basic management must reach a certain level. The board does not need to analyze the specific details of operations, finance, talent, etc., as it did in the third step, but can be relatively detached. This is called the "strategic management transformation of the board."
Second, transforming the board from focusing on product operations to focusing on capital operations. To implement this transformation, certain resource prerequisites must be met, such as capital, industry familiarity, and technical expertise. This objective is also a specific implementation and extension of the strategic management transformation goal. This is called the "capital operation transformation of the board."
Third, during the capital operation transformation, inevitable challenges and conflicts in corporate systems arise. At this point, it is necessary to innovate corporate systems, which can be called the "institutional innovation transformation." Compared to the first strategic management transformation and the second capital operation transformation, institutional innovation transformation places higher requirements on board members, involves greater operational risks, and is more difficult and time-consuming.
Fourth, due to the third institutional innovation transformation, corporate culture needs to be rebuilt. This is brought about by capital operations and is more challenging and time-consuming for large companies, with more complex evaluation criteria. Correspondingly, the board itself must also undergo a "cultural rebirth transformation."
At the stage of successful board management, the most important core is "striving forever" (i.e., "Consistence").
"In my consulting experience with Chinese enterprises and Chinese entrepreneurs, most private owners want to jump to the fourth step without solving effective and efficient management, but the leap is too great, and they fall."
The four stages of board management constitute a complete whole--""CHIP (P-Person, I-Information, H-High Standard, C-Consistence). The board, as the "heart" of a company, must focus on CHIP: selecting the right people, having sufficient information, maintaining high standards, and striving forever.
In every specific enterprise, "effective management, efficient management, scientific management, and successful management" are not mutually isolated or unrelated but rather intertwined and permeated with each other. The former is the foundation for the latter, and the latter is the development of the former. In solving specific problems, they are often integrated and solved together, especially when addressing issues of the latter.
"In my consulting experience with Chinese enterprises and Chinese entrepreneurs, most private owners want to jump to the fourth step without solving effective and efficient management, but the leap is too great, and they fall."
For most state-owned (or controlled) enterprises, the main challenge is how to cross the third step and how quickly. If it is too slow, they will be beaten up domestically and internationally, or even "eaten" by wolves after the WTO."