Four challenges threaten viability of traditional board models
Leadership is never easy, but in 2021, it appears pressure on Australian board members is increasing. Interviews with almost 100 directors, non-executive directors and those who work with them, reveal that four major challenges are not only making it more difficult to govern effectively – they threaten the fundamental viability of current operating models.
1. Growing regulatory and risk burden
Those interviewed, told us of regularly being tasked with 800+ page board packs ahead of meetings. This risk, compliance and regulatory overload is distracting boards from the strategic conversations that add real value. Added to an increased threat of personal risk exposure, mean Australian boards may struggle to attract top talent.
2. Outdated operating model
'High touch, low tech' boards face mountains of historic data and content with limited use of digital tools to interrogate and unlock value. This leave them with less time for meaningful strategic conversations and a lack of actionable insights to guide better decisions and respond effectively to volatility.
3. Looming gaps in skills and behaviours
Most boards have an emerging gap in digital literacy, as well as the 'soft skills', such as behavioural science, that are critical to successfully running today’s organisation. Diversity in its broadest sense also lags. The recognition that divergent thinking will be vital to better decision-making, innovation and value creation is still maturing.
4. An identity crisis around stakeholder priority and ESG
Boards are working out how best to meet public and investor expectations on sustainability and long-term value; and to square this with short-term demand for earnings. The shift to more inclusive stakeholder capitalism has begun for some (but, by no means all) though, for many of those making the shift, it is an early and sometimes uncomfortable transition. Deciding how best to 'walk the talk' rather than 'talk the talk' is an evolutionary process.
You can explore these challenges in more depth here.
These issues are not expected to abate. Our research predicts the board of 2030 will operate in an environment shaped by five key governance trends:
- Elevated stakeholder voice from more diverse groups
- More transparent decision-making
- Greater accountability – and consequences – for boards
- Faster, more unpredictable pace of change
- Complex business ecosystems that make governance more challenging
These trends are expected to change all key elements of the traditional board operating model, leading to less uniformity. You can read more about these trends and their impact here.
As boards navigate these trends, they’ll need to break free of the homogeneity driven by a 'comply or explain' culture. Boards will need to have the courage (and be encouraged) to stand out from the herd, if they really want to create fit-for-purpose governance. We believe that three areas of focus can help boards do this, to reshape to meet the challenges of today and more adequately prepare for a different tomorrow.