In a technology-enabled transformative age, businesses have moved outside of traditional capabilities and continue to explore new business models and ways of working, including in the boardroom. To keep pace, boards need to reshape and reimagine their roles in order to ensure they are future-fit. But what are the critical trends and influences that are feeding this unprecedented pace of change (COVID notwithstanding) and what does a future-fit board look like?
Some of the most significant changes we are seeing impact businesses right now are technological, geopolitical, demographic and environmental. They are requiring boards to do the hard work to guide their companies so they seize the upside of disruption, manage risk and optimise company performance. Plus, it’s not simply about a board identifying these changes, it’s also about ensuring the advice a board gives on these issues is informed, while ensuring we bring in experts where there are gaps.
In its report, “Setting the pace: how to ensure your board is fit for the future”, EY identified six key ways for boards to test their future-fitness and, within each, highlighted questions any board should consider. This is a 2019 report, but interestingly the findings remain relevant despite the changes businesses and boards navigated.
The six steps:
- Gather new perspectives
- Revitalise board dynamics
- Increase focus on the long term
- Adapt communication, protect reputation
- Align and monitor culture
- Enhance risk and compliance oversight
What is a future-fit board?
The EY report speaks to the fact that future-fit boards are forward-thinking and proactive in collecting diverse perspectives to inform the guidance they give the business. They are diverse by nature and inclusive. They navigate the provocative and the unexpected. They are outward-looking and not afraid to bring in experts where there is a gap in expertise. They show leadership in balancing broad company interests for the long-term. They are transparent and responsive. They are innovative in their oversight of people and culture as a driver of value for the business. They have an expanded view of risk with technology-enabled compliance, monitoring and mitigation.
There is also a strongly defined and meaningful purpose, something that is crucial and should be high on all board agendas nowadays. Living your company values and the purpose requires visibility of them (walk the talk), as well as great communication throughout the organisation to embed them in an authentic and real way and protect and inspire your reputational standards.
Speaking personally, the way I interpret and adopt these principles varies with every board I represent, but I also find myself able to approach them with a lot of the same practices, questions and a heightened level of curiosity.
Future-fit boards put the customer first
Whether it was during my corporate marketing career or subsequent in my many years as an ASX director, I have never strayed from putting the customer first. And a future-fit board will do this too. One example of how a customer-first focus at board level delivers to the bottom line was illustrated when Woolworths Group Chairman, Gordon Cairns, spoke at the recent AICD Governance Summit on the way he and CEO Brad Banducci handled the challenges that the past few years have thrown at Woolworths. He spoke of the way the two of them — as well as the broader board, executive team and employees — spent and continue to spend enormous amounts of time in store. They do this to gain a grassroots perspective and understand customers and employees, as well as gather trends and insights. Woolworths’ culture of inclusion and learning and the positive shift in results are obvious to see and for all its shareholders to witness.
A future-fit board is diverse in demographics and expertise
To gather new and different perspectives we have to listen more than we speak. We have to seek information from beyond the board table and the CEO. It is incumbent upon all directors to dive beyond the traditional.
Peter F. Drucker said that “The most important thing in communication is to hear what isn’t being said.”
This perfectly sums up the need for boards to listen beyond the boardroom, to encourage diverse and open discussion and that thinking you already know the answer is the most dangerous trait of all. We all have a responsibility today to evaluate skills, culture, leadership and alliances at the board table and apply these findings on top of the standard skills matrix. I know there will be a time when all boards work to ensure a mix of styles and experiences, a board that truly represents inclusiveness and diversity of thought, but most boards have work to do in this area. A diverse, open and inclusive board tickles out the new and unknown answers, ensuring change for any business can happen at pace, with agility and success.
Returning to another insight from Gordon Cairns, his approach as Woolworths Chair is that dissent is encouraged before a decision is made. This type of board leadership ensures all angles are examined, all views are heard, no one is afraid to speak up and offer perspective, diverse thinking is expected, and accountability can be assigned to all the board members, not just a single “expert”.
A future-fit board prioritises company culture
Another Peter Drucker-ism that I love is “culture eats strategy for breakfast”. To be clear, he didn’t mean that strategy was unimportant but that a powerful and empowering culture was a more certain route to success. A significant impact of the rapid pace of change businesses are navigating is the need for boards to recognise this and help a business create a culture that enables success.
Cultural strategy requires goal-setting, a theory of change, its pace, an understanding of the audience and a commitment to meaningful evaluation and learning. This reflects the need to monitor and evolve culture. To seek change when the times require it, even at the top of an organisation. It requires a boldness and a self reflection by directors to know when it’s time to move along. It’s not failure, it’s bravery for a board or chairman to “call it” when a different skill or perspective is needed to build a culture and reinvigorate the strategy for growth.
The boards that are keeping pace with this “article of change” are building the most successful companies of tomorrow because once the strategy is identified, boards need to ladder in additional areas of capability, which can obviously vary enormously across businesses.
Given strategy is typically viewed from a three- to five-year time horizon and refreshed every few years, capabilities and culture also need to be reviewed at the same time and as one process. This longer-term focus is crucial and should be on every business planning meeting agenda, mostly done annually.
For directors it is important to carry a mantle and ask the questions above within the critical themes highlighted by EY. That means staying contemporary and attuned to the outside-in of every business we are involved in.
Ask yourself: are you constantly working to broaden the skills, experiences and style of the boards you sit on so that they are diverse, not just in gender or other demographics, but also in our skill sets and our ways of thinking?
Boards need to drive for change. They need a greater appetite for adaptability, to meet the pace of change that all businesses have begun to understand and navigate these past few years. By doing this, we will ensure that all directors keep up the pace and grow themselves and their businesses accordingly.