Business is going through a period of huge change and uncertainty.
As advances in technology remove barriers to entry on a previously unseen scale, business models are disrupted and ‘old’ sources of competitive advantage displaced, many feel that we are still in the fairly early stages of ‘The Fourth Industrial Revolution’.
In addition, global warming is already affecting many businesses, particularly those in the energy, manufacturing and insurance sectors, whilst recent political developments, especially in the UK and USA, have shown a growing distrust of business and its leaders and there is also concern at the economic shift eastwards. And all of this easily and instantaneously brought to the fore with the relentless ‘24/7’ world of social media and other communications channels.
Periods of change lead to winners and losers. Yet, relatively little attention seems to have been paid to how boards themselves will need to respond if they are to provide effective leadership to their businesses in the coming years.
Boards should take action now
To respond successfully to this changing and unpredictable world, boards need to have both the agility and resilience to anticipate and cope with uncertain futures resulting from the above interconnected trends through planning, accompanied by the use of relevant external analysis and forecasting techniques such as scenario planning. In addition, they need to be willing to embrace potentially fundamental changes in their business model, which may well be driven by new entrants without legacy issues, and to ensure they have the necessary collective skills and expertise. This may possibly be achieved by recruiting new board members or by setting up alternative structures, such as board advisory groups, which allows them to access expertise across the range of technology issues including cybersecurity, uppermost in everyone’s mind at the moment given the global ransomware attacks, and the use of big data and online sales.
Five key areas to consider
The upside is that periods of major change generally bring substantial opportunities as well as risks and the enduringly successful boards will be those with the foresight and skills to identify and seize the right opportunities in the business and bring them to successful fruition. And then to do it again… and again!
To respond to the challenges boards facing them need to consider five areas:
- Further diversifying their composition, eg by ethnicity, international business background and skills base as well by gender with increasing pressure for the executive team as well as the independent directors to be of diverse background.
- Changes in board roles and structures with possible new roles linked to technology, stakeholder engagement, corporate culture and broader approaches to measurement. More boards may also have board committees dealing with stakeholder and related issues.
- Changes in boards’ working practices which in addition to a greater use of technology in the boardroom, and possibly more virtual board meetings, are likely to include some longer board meetings to facilitate critical reflection and in-depth discussion and a greater drawing on external expertise.
- Recognising the central importance of the chair’s role and what will lead to high levels of effectiveness including through building a shared vision, empowering critical thinking, working constructively with top management in times of change and steering the board towards seizing the right opportunities.
- A stronger focus on director formation and development recognising the growing complexity of the board’s role and its increased diversity with more members coming from non-traditional backgrounds.
Periods of change lead to winners and losers. Is your board determined to act now in order to remain in the Premier League of successful businesses and to be in contention for the Premiership rather than to be battling relegation?
These issues are considered in more detail in ‘The Future Board: Stewardship for sustainable success,’ a newly published guide by Mazars and ABIS- The Academy of Business in Society.