In 2022, boards continued to operate amid the ongoing global pandemic, persistent cyber threats, trade wars, climate activism, geopolitical tensions and a growing trust deficit between citizenry and governments. This environment has confronted boards with a multitude of difficult challenges and dynamic opportunities.
This article suggests the need for greater diversity of thinking to ensure boards are fit for the future. In particular, and building on existing strong board governance foundations, the article helps to define the nature of these new skills, capabilities and experiences, as well as where to find them and the critical role of the chair in creating the conditions for their successful integration. These insights are presented in four key insights:
1. Responding to a new operating environment
Boards now operate in a dynamic environment of heightened regulatory oversight, digital disruption, supply chain congestion, climate change, cost escalation, democratisation of business opportunities and stakeholder activism.
A new operating environment requires greater diversity of thinking to better respond to risks and maximise opportunities. Organisations value directors with digital fluency and digital transformation experience, as well as those who hail from a contrasting industry and therefore bring analogous thinking and insights.
2. Future fit boards
The value of traditional board capabilities such as financial literacy, governance expertise, industry and sectoral knowledge, management and operational experience cannot be underestimated. There is also an emerging sense that board governance can be enhanced by broadening the capabilities around the board table. Future fit boards should comprise of traditional capabilities and a range of:
(a) Technical capabilities (functionally orientated), such as workforce strategy, organisational culture, change management, customer, digital transformation and fluency across technology, cyber, data, automation and artificial intelligence and risk management.
(b) Critical skills (not functionally derived), such as customer and community engagement and experience in dealing with regulators and government stakeholders.
(c) Core behavioral traits, such as a learning mindset, curiosity, equanimity, emotional intelligence, flexibility, self-awareness and empathy.
3. Looking further afield
With the advent of virtual meetings, boards have started to source directors from around the country and overseas, meaning they can now more easily access a deeper marketplace of potential directors. These directors will enable boards to access a more diverse set of technical capabilities, such as investor and government relations, regulation, marketing, sustainability, organisational development and digital, as well as manifesting the requisite underlying core skills and traits.
4. The role of the chair
While all directors contribute to sourcing and supporting new appointees, chairs play a pivotal role in the selection of board members and the culture around the board table.
There are six actions chairs could take to support the appointment of more diverse talent to the board and the creation of a welcoming environment.
1. Critically assess board skills and develop a courageous board succession process
2. Align the diversity of thinking and skills needed to the board’s strategy
3. Actively partner with search firms to illuminate broader pools of talent
4. Allow sufficient time to find different appointees
5. Role model an inquisitive mindset and inclusive environment
6. Invest more time and energy in nurturing diverse talent.
The dynamic nature of the business environment warrants the need for Board Chairs to operate strategically. For some boards, the following recommendations will reinforce actions already in train. For others however, they are intended to help prompt a new direction.
(1) Open a discussion to scope the future context
Invite board members, management and external experts to discuss future trends, risks and opportunities and the potential implications in terms of board composition.
(2) Invite an independent review of existing capabilities, skills and traits
(3) Broaden the brief and search in new fields for missing capabilities and skills
Design a board member success profile, in concert with search firms and investors, which reflects the critical underlying skills and capabilities identified in this report rather than just past board or executive titles. Look beyond existing networks and traditional executive roles (e.g., CEO and CFO) to encompass those with sustainability, STEAM, digital, transformation, marketing, legal and regulatory as well as people and culture experience.
(4) Ask the Nominations/People and Remuneration Committee to annually audit the nomination processes and appointments in terms of the board composition review undertaken and future fit objectives. Consider working with more than one executive search firm to generate as broad a list of potential candidates as possible.
(5) Engage with investors, shareholders, proxy advisors and other stakeholders to communicate actions taken and planned to ensure future fitness.
(6) As chairs, be bold and push for greater diversity of thinking
Create the appetite for greater board diversity among other board members. Take a calculated risk on diverse candidates and provide additional support (including a psychologically safe board culture). One way to think about this is in terms of the board size and setting aside a discrete number of board seats (e.g., 1-3 for a board size of 7-10) to enable the introduction of a new team of diverse thinkers. Another way is to take greater risks on those who are appointed out of cycle.
An emerging group of directors are experimenting with new appointments to augment their boards to ensure they continue to be fit for purpose. These directors are finding new sources of appointable talent, from those operating at the fringes of the existing director pool, but also drawing in those who are transitioning from corporate life. Rather than relying on traditional CEO and CFO candidates, or directors drawn from their own personal networks, these directors at the forefront of change are looking for additional skillsets and capabilities.
Their aim is to bring in directors who not only have foundational governance skills, including financial proficiency and operational experience, but can also add value through their heightened sensitivity to ESG issues, stakeholder capitalism, social license to operate, elevated employee expectations, or through bringing digital fluency, an entrepreneurial mindset or systems thinking.
The writer is Partner, Risk Advisory Telecom, Media & Technology (TMT) Industry Leader, Deloitte Ghana