How Boards advance – and companies with them

By Jakob Stengel, Global Head of Board Practice, InterSearch & Managing Partner InterSearch Denmark

Introduction

The past year has seen major events – politically as well as business-wise – that only few would have predicted. Across the world, we are witnessing political dogma shifts, greater polarization, technological advancements, business model innovation breakthroughs, geopolitical turbulence, armed conflicts, terrorism, migration streams, artificial intelligence unfolding, climate change rapidly developing, alternative facts and fake news allegations, digitization of services and products, cybercriminals playing a real role in the agenda-setting, etc.

A lot of these developments will be seen as advancements and posing positive implications for a majority. However, another lot of these changes have created and will continue to create an enormous amount of uncertainty and insecurity across most nations and populations. Predictability is deteriorating and expert statements are becoming unreliable.

All in all, we find ourselves in a world less stable influenced by people less reliable. Thus, we are left trying to navigate through an opaque political, societal and economical fog – yet challenged further by a continuous accelerating technological development, implying that not only do we have to assess, plan and act through less transparent conditions but nevertheless try to steer through at increasing speed.

This puts a tremendous pressure on political, public and not least business leaders. They are the ones with the ultimate responsibility for setting course, navigating through hazardous waters and reaching destinations. Some we can look to for inspiration, others will more seek to be inspired themselves. In January and February 2017, we asked around our sizeable global network of chairmen and board members, and we are very proud to have gathered all the findings in our brand new report Global Board Survey 2017 – Advancing Boards.

We dug into how boards are composed, how they work together, how they enhance their effectiveness, how much time they spend, and which tasks they prioritize. We asked them about their look on the future from a societal perspective, from the company’s point of view and in relations to the board’s own development. We investigated where they feel comfortable, and in which areas they could innovate or improve. We looked into their position on various elements of the strategic picture, and on competencies they feel lacking. Or in other words; we investigated how boards advance – and how companies advance with them.

Context

InterSearch – Worldwide Organization of Executive Search Firms and Board Network – The Danish Professional Directors Association together performed the Global Board Survey 2017 in January and February 2017 among 1.017 corporate chairmen and board members from 52 countries on all populated continents.

Respondents represented every imaginable industry, all sizes of companies up to turnovers of more than USD 20 Billion per year, and all kinds of ownership structures.

Some common trends stood out across countries, industries and company size when reviewing the results, and included;

  • Effective board work requires more time spend, both preparatory and at the board meetings and committee meetings, compared to the past.
  • Still more boards perform regular and formal board evaluations; up to 52% of all boards from 47% in our Global Board Survey 2015.
  • Two Megatrends stood out from all others, when asked about which would most significantly impact the society and the economy; one was disruptive and exponential technologies in general, the other was geopolitical instability and political dogma shifts.
  • When asked which board trends that are expected to have the most impact, again two trends stood out; one was transformation focus and digital savviness, the other was more focus on the future of the business, less on compliance/risk/control tasks.
  • Respondents expressed an optimistic and confident view on the economy in the future, with a staggering 68% saying that they expected their company’s financial performance to improve in the coming 2 years compared to the past 2 years.
  • While boardrooms are still heavily populated by men, there is high attention to diversity demands for the future, competency-wise as well as in respect of gender and internationalization. As many as 45% said that increased diversity focus had already impacted how their board is composed. Of those, nearly 2 out of 3 reported that greater gender diversity had been the driver, and 54% said that diversity in competencies had been the aim.
  • Notably, in the same area, half of all respondents expressed that greater gender diversity is definitely to some or a large extent value-adding to any board, and another 31% said that it could potentially be value-adding depending on the situation.
  • When we asked which competencies that should potentially be added to the current board, two competency areas stood out; one was IT / Digitization, and the other (not necessarily far from the first) was Innovation / R&D.
  • As many as 82% of all boards have already had to deal with one or more disruption scenarios, and an overwhelming 92% are planning for having to do so during the next 2 years.

Doing things right, by doing the right things

Historically, most boards have kept their primary focus on the Governance, Risk and Control agenda, but boards of tomorrow will attend much more to future of the business, heading transformations and steering towards a sustainable business model. We see increased time spend on strategy, customers, innovation and stakeholder management, albeit there is a broad expectation of increasing regulation and governmental control.

Today’s boards also recognize that for the business to survive tomorrow, the fundamental business principles need to be long-term sustainable. Globalization has meant that no one – not even the Apples, the Unilevers, the VWs, the TATAs, the LEGOs, the Shells, the HSBCs, the Huaweis, the Coca-Colas, the Samsungs, the Pfizers, the Canons, or the Facebooks of the world –  can feel certain in a market leader position, as competition is agile and due to a global geographical span very difficult to keep under surveillance.

In the good old days, size was the predominant factor to determine a market leader. Today, agility is the key. However, that shouldn’t leave the big players in complete despair. They too can act agile, but in addition to constant and continuous innovation one more factor will be key if they want to stay in the game; adhering to proper quality delivered in decency and orderliness, ie. with a sustainability pillar underneath it all. Look to VWs Diesel-gate, Apple’s tax fine from the EU, Google’s fine for anti-competitive practices also from the EU, Olympus’ accounting fraud, RBS’ mis-selling scandal in the US, and many other examples of companies that despite numerous control mechanisms and all the right company values written down, they can still suffer tremendously from the hard-hitting reality when ethical (and legal) wrongdoings suddenly surface.

Recommendations to the Boards on ‘Advancing Boards’

Based on this year’s Global Board Survey 2017, and adding to that our vast experience from working with some of the world’s most influential board members from some of the world’s largest companies, we have been able to identify ten characteristics that Advancing Boards have in common;

  1. First and foremost, they are courageous. They have courage to think in new ways, to challenge status quo, to try new things, to speak out their mind, voice their concerns, share their experience.
  1. They lead. They know that the Tone at the Top is set by the very top; the board – and they accept the responsibility that comes with that.
  1. They continuously prepare for the future and do not rely on achievements and glory from the past. They personally observe Megatrends and customer behaviour patterns, all while ensuring to support initiatives that have the potential to disrupt the competition instead of themselves becoming obsolete.
  1. They engage fully. Advancing Board members do not accept positions that they can not devote enough time to. They know that the company is dependent on them.
  1. They do not rely on gut feeling when making strategic decisions, but make sure that the strategic vision, engagement and alignment rely on evidence, facts and data.
  1. They are all for diversity. Vigilance, innovation, adaptability, risk management, agility and transformations are all areas that are better supported by heterogeneity in competencies and mindsets rather than by homogeneity, hence also better supported by diversity in nationality, age, gender etc.
  1. They act timely by being well prepared, showing decisiveness, making changes when needed, without hesitation – also when it comes to changing the CEO.
  1. They exhibit integrity. The do what they say, and say what they do, and remember that sustainability is not about meaningless philanthropy, but more so about staying in business for the long term.
  1. They undergo regular and formal board evaluations, taking their own medicine in relations to measuring performance. Yearly they evaluate the competencies, inter-dynamics and effectiveness on the board.
  1. They remember why they were originally appointed to the board. It was originally all about shareholders believing they could add value. Knowing their company and trade. And they are adding that value – to the board, the company and the shareholders.

Concluding

Key here is the acknowledgement that relentless change, ferocious competition, unstoppable innovation and global turbulence are all trends that are here to stay. Radical innovation and exponential organizations will continue to challenge today’s market leaders. As already stated elsewhere, we have no doubt that companies looking to advance need to rely on Advancing Boards. We urge you as chairs and board members to continuously strive for a momentum of advancement and will end of with words of encouragement from the late founder of Apple, Steve Jobs:

‘Here’s to the crazy ones, the misfits, the rebels, the troublemakers, the round pegs in the square holes… the ones who see things differently — they’re not fond of rules… You can quote them, disagree with them, glorify or vilify them, but the only thing you can’t do is ignore them. Because they change things… They push the human race forward, and while some may see them as the crazy ones, we see genius, because the ones who are crazy enough to think that they can change the world, are the ones who do.’

To read the full report and InterSearch’s press release on the report, please go to: http://intersearch.org/news/86-news-and-press-releases/316-advancing-boards-global-board-survey-2017-results-how-boards-advance-–-and-companies-with-them

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