Hiring the best people to meet the future needs of a business is a challenge at every level – nowhere more so than in the boardroom.
Forward and succession planning when it comes to director appointments means striking a delicate balance between what a company needs today and how the need for different skills and experience may change over time.
While internal business requirements are a key driver for choosing who sits on a board of directors, external forces are frequently playing an enhanced role in the hiring decision-making process.
Calls for more transparency about director remuneration and the management of company pension funds are frequently reported in the news, while the UK Government is seeking to promote greater diversity in business leadership roles via various initiatives, including its ongoing “Women on Boards” Review.
The emergence of new business models and ways of working – such as increased flexible employment resulting from the rise of gig economy companies – are also demanding a fresh look at the skills, experience and vision of the top tier of every business.
For a mid-market business, future-proofing its board of directors can seem like a daunting challenge – but, in the absence of a crystal ball to predict the future, these 10 simple steps can help.
Board director selection and appraisal
According to the Institute of Directors (IOD), an efficient appraisal system is one of the key areas where board effectiveness can be developed, enabling directors’ performance to be monitored and improvements made.
A regular review can help to clarify the individual and collective roles and responsibilities of directors; raise awareness of any current or future skills gaps with a view to filling them; improve working relations between the board. In addition, board appraisal can be enhanced by going out externally, such as with Grant Thornton’s board effectiveness team to bring a different direction to the review, and see through the boardroom self-assessment bias that is common in many boards.
In the Grant Thornton International corporate governance report “Boards of the Future: Steering Organisations to Thrive”, the recommendations provide three further key steps.
The report advises mapping the challenges you think your business will face over the next decade and then map the skills you think you will need to address them in order to identify the gaps that need to fillled.
But, the report says, make sure you have a diverse group to help do this effectively, to limit the existence of issues you don’t know you don’t know. Prioritise the forms of diversity which you need to build on your board, in order to reflect your organisational culture, your markets and your customers.
Another recommendation proposed by the Grant Thornton report is waste no time in developing a cyber strategy. The advice is to make cyber strategy a standing agenda item for every single board meeting.
Wave after wave of cyber-crime will become the norm, and staying one step ahead of the criminals will be a necessity. In addition, collaboration is key, establishing links to gain awareness of hotbeds of activity outside of your day to day business activities.
Don’t be afraid to admit there are things you don’t know, and that there are some challenges and opportunities you won’t see coming. Make the most of your supply chains to garner ideas and nurture the potential stars of the future. Think outside traditional spheres when it comes to digital threats and opportunities, the report adds.
Simon Lowe, Chair of the Grant Thornton’s Governance Institute, noted that “Concerns around cyber risk and technology are increasing at board level, and will continue to move up the agenda. While technology skills are increasingly being brought onto the board (45% of the FTSE 350 have someone with technology background on their board, up from 39% last year). Financial services, healthcare and consumer goods sectors look particularly exposed. In these sectors, less than 30% of those who recognise they face significant technology risk having relevant skills on the board.”
Signposting routes to the top
Finally, the report suggests business should make it easier for the best and brightest talent from across an organisation to make it to the top.
Use a board skills matrix, succession plans, mentoring and shadowing opportunities, and supply chains to boost signposting. Policymakers should embrace innovative initiatives such as a mentoring programme. Encourage the cross-fertilisation of ideas across industries and borders, the report’s final recommendation concludes.
The Future Boards Scheme
The UK Government’s Future Boards Scheme is aimed at FTSE 350 companies, SMEs and other major organisations. The scheme gives talented women from a wide range of backgrounds the opportunity to spend 12 months with boards in a developmental capacity.
Each organisation involved hosts a participant on their own board and in return puts forward an employee of their own to be placed on another participating Board. It is claimed that the scheme has the potential to significantly grow the talent pipeline of women executives by giving women 12 months’ experience on a major board.
Recognise the importance of culture – defined as the combination of values and behaviours in your organisation – and the role that the board plays. Future proofing the board means aligning culture with your strategy, articulating it and embedding throughout your organisation; this is key to achieving strategic ambitions. The everyday actions of the CEO are critical to this. The Grant Thornton Corporate Governance Review finds that currently only 29% of CEOs clearly articulate their culture.
While the outcome of the negotiations remain unclear, we do know that access to foreign workers will be harder post-Brexit. Government has stated its ambition to end the free movement of labour between the UK and EU and reduce the number of people entering the UK to the tens of thousands. This will no-doubt cause difficulties for those companies who rely heavily on EU labour. It will also significantly increase competition for domestic talent. To retain and attract the skills needed to grow, it is vital organisations ensure their employee value proposition is as attractive possible.
Access to business networks, industry associations and trade organisations provide regular opportunities for identifying and keeping an eye on talented individuals who may add value to your business as future needs develop and emerge. The Institute of Directors is specifically focussed on supporting, representing and setting standards for business leaders. It offers factsheets, training courses and networking events to members and non-members across a wide range of topics of interest to company directors, many of them focussed on planning for the future.
Setting strategy for the future
A key role of a board of directors is to set the strategic direction for the business, steering a path between entrepreneurial endeavour and prudent control. While current activity may be reaping rewards, what does the company strategy need to look like in the next decade and beyond? Grant Thornton member firms can work with executive teams to ensure a business is fit for purpose to meet future ambitions through a range of activities, including facilitating boardroom discussions or through their ‘CEO Room’ for horizon scanning and strategy development.
Education, training and skills development
Improving management team skills through education and skills training can help increase options for promotion from within a business. MBA programmes are proving increasingly popular choices among many employees to support career advancement. For a business, identifying ways to help current employees with learning needs can unlock future potential, potentially at Board level. Among the various programme choices on offer is an MBA course developed in partnership by Grant Thornton UK and Cranfield University, which is accredited for apprenticeship levy funding.
To find out more visit the 2017 Corporate Governance Review: a question of trust