To investigate this topic, Valcon, the Scandinavian management consulting firm, and Board Network, The Danish Professional Directors Association, conducted a quantitative survey among 265 Scandinavian board members, supplemented by in-depth interviews with selected notable board members. Here is what we learned on a few selected topics that we believe are critical to the success of future board work.
UNDERSTANDING THE CHANGING ENVIRONMENT IS HARD – BUT WE ARE ON THE RIGHT TRACK
35% of respondents “strongly agree” that the board focusses on the changing needs of customers and on the core services needed in the market. But only 25% strongly agree that the board focuses on detecting trends and development needs in due time. So, is all well on this important topic?
Yes and no, if you ask our interviewed board members. They articulated the following concerns:
- Is market input to be collected directly by board members – or should the board rely solely on presentations from the executive management team?
- How can the board efficiently collect first-hand market input, when time is a scarce resource?
- How do you really identify future needs rather than present needs and demands?
We did also hear some great ideas on this topic:
- “We need to develop joint future-state scenarios with our main customers”
- “It is clearly insufficient to talk only with your present customers. We should talk with our customers’ customers and understand their drivers and needs – because that will eventually impact our company”
- “BtB companies need to understand that ultimately everything becomes BtC. The board therefore needs to understand consumer trends – event though they are somewhat down your value chain”
THE BOARD’S ROLE IN STRATEGISING IS CHANGING – DEEPER INVOLVEMENT, HIGHER FREQUENCY, MORE TACTICAL OVERSIGHT
Another topic in focus in the survey is strategy. 80% of respondents agree that the board focuses on having a company strategy that proactively reflects changing trends and development needs. And 87% of board members agree that the board focuses on strategic adjustments on an ongoing basis.
Statements from our interviewed board members confirmed that strategic work is indeed done differently in the boardroom nowadays:
- Many companies operate with defined “end-state” or “to-be” or “target” descriptions – but only articulate strategies for 12-18 months
- Strategies are constantly (or at least annually) revised for relevance
- The board’s role does not stop with the strategising – it now also includes tactical translations and follow-up
- The division of work between the board and the executive team regarding strategising is becoming more and more board centred. The dilemma is that the executive team still needs to own the strategy – but the board also needs to spend more time on strategy
We heard some very clear statements from board members on this topic:
- “The board’s role today is much more consultative and curious than years ago”
- “We discuss strategy much more frequently”
- “The operational pressure on the executive teams means that they have too little bandwidth for the transformative components on their jobs. Maybe the boards should step in harder here”
- “Strategy is not a five-year thing anymore, we re-evaluate annually and spend a lot of time translating into key must-win battles”
- “We don’t just discuss the “why” and the “what” – but also the “how””
ARE BOARDS SUFFICIENTLY FOCUSSED ON ORGANISATIONAL CAPABILITIES
So here is the real dilemma: The world is changing fast. Hence our companies must change fast and, in many cases, radically. This requires an organisation that is both robust and agile. This is critical for strategy execution. But is it a real board issue? Or is it something that is and should be solely the domain of the executive team?
The jury is still out on this one.
In our survey, all questions relating to the board’s focus on the organisation scored the lowest. Only 32% of respondents strongly agreed that the board focuses on continuous improvement and development of the organisation. Only 34% strongly agreed that the board focuses on the organisation being purpose-driven – a topic most research indicates is imperative for organisational engagement. Only 32% of respondents strongly agreed that the board focuses on effective and transparent processes, structures and roles.
So, an important topic. But a board topic? We heard conflicting point of views on this.
Some interviewees stated that organisational capital (agility, ability to execute, empowerment, motivation and engagement, etc) should be left to the executive team. Others think it is an important board topic but find it hard to contribute to it in a meaningful way.
Statements also pointed to conflicting views and probably a need for development of tools and processes for how the board can address this topic:
|“When strategising, we not only discuss ambitions but also organisational abilities to execute”
“We still do not know as a board how to address these things”
“We need to discuss sustainability and organisational purpose much more”
“As board members, we need to understand company culture. This is hard, but we need to collect first-hand input”
“In reality, very little development has happened in the way we discuss organisation”
“We are cautious not to become too operational with respect to the organisation. That is left for the executive team”
WHAT DOES ALL THIS MEAN FOR THE WAY THE BOARD OPERATES
During the interviews, there were many reflections on the cooperation between the board and the executive team as well as the division of responsibilities between the two. On the one hand, the boards seem to take on a larger role in defining the future and, not least, in translating this into tactical plans. On the other hand, accountability clearly needs to reside with the executive team. Perhaps as a consequence of this, the working climate in the boardroom and especially between the chairman and the CEO was stressed by many as extremely important. There is no doubt that the cooperation between these two levels of the organisation has become increasingly close and therefore needs to be successful.
It was also stressed that the board’s new and more hands-on role with involvement in the actual tactical plans makes it increasingly difficult to also find time to focus on other important aspects such as future trends and developments. There was general consensus that the executive team is not to fault for this but rather that it is a question of behavioural changes in the boardroom. Speed and executional power in the boardroom were articulated by many as topics for improvement. Translating trends into actions, ensuring swift organisational responses, etc., was seen as insufficient.
Changes in the way the board operates also requires for the board to look at their own composition to verify whether this is still optimal for the new role of the board. Diversity in the boardroom was repeated by all as a prerequisite to succeed, which should not come as a surprise to anyone. However, it may be more surprising that the trend that we see towards “professional board members of age +50” is being strongly challenged by some. Some call for much younger board members, whereas others have the view that board members without their own executive responsibilities (elsewhere) rapidly lose relevance.
In conclusion: boards are on the move! Ways of operating are changing, and the role of the board itself is changing. But there are still topics to be further developed. The strategic role of identifying future needs and the strategic approach to organisational development and oversight are still immature. These topics probably need further development for boards and companies to become truly future-proof!
(An abridged version of this article was published in Nordic Business Magazine (1) 2020)