In addition to asking where boards are most effective, we asked how they would choose to allocate time. Directors surveyed said that if they could set their board’s full agenda for the year, they would allocate 35% of their time to financial matters. That is where they also rated boards as most effective. It is also significantly more time than they would allocate to discussing the innovation strategy to improve the customer experience—an area that is key to growth in the digital era, and for which they rated the board least effective.
These survey responses indicate ample opportunity to strengthen the board’s oversight capabilities around the critical dimensions of future-forward, long-term value. However, directors are not necessarily thinking about a rebalancing of focus and instead are spending the majority of time in areas that are traditional for the board. Perhaps this is not surprising considering directors have traditionally been sourced from financial and operational leadership roles.
Evolving inputs and knowledge to align to company needs
To expand the board’s capabilities around emerging priorities, board knowledge building and sharing are fundamental. Our survey indicates strong consensus around the view that directors need to focus on knowledge building (e.g., more strategic discussions and deep dives) more than people (e.g., board composition and culture) or processes (e.g., meeting agendas and committee mandates) to provide more value to the company.
On one hand, this finding speaks to the challenge of information asymmetry, particularly given the need for boards to keep pace with the dynamism of the current business environment. On the other hand, it may also signal that directors are more inclined to embrace knowledge building – as opposed to board composition changes – as the answer to board skills gaps, which in some cases could be problematic. The survey results are also interesting in light of the active discussions in so many boardrooms about whether to bring in a cyber risk or ESG specialist.
When asked what aspects of board knowledge need the most improvement, more external, independent perspectives from advisors and experts topped the list, followed by more best practice sharing and discussions. And yet, despite this emphasis on the need for knowledge building, including the use of external experts, only a third of directors said their board has a mandatory continuing education program for its directors.