Aligning Board Talent with Strategy a Key Challenge for Organisations

June 22, 20168:45 am662 views

Three-quarters of corporate directors say they face a critical challenge aligning board talent with the company’s long-term strategy, and three in five want more diversity and viewpoints on the board, according to a global survey by KPMG’s Board Leadership Center. The findings have been well detailed in report by KPMG titled, Building a Great Board.

Survey respondents identified significant barriers to refining the board’s makeup, with issues ranging from the right mix of skills and overcoming “status quo” thinking to lack of formal succession plans.

“Having the right talent in the boardroom is critical to a company’s long-term success,” said Dennis T. Whalen, leader of KPMG’s Board Leadership Center. “But achieving the right diversity of boardroom skills, backgrounds, and experiences to position the company for the future requires an active approach—from robust evaluations to formal succession planning.”

To better understand how directors are thinking about the mix of skills, backgrounds, experiences, and perspectives in the boardroom—and tools and approaches to achieve the right mix—KPMG surveyed more than 2,300 directors and senior executives across 46 countries.

Directors see significant room to refresh or refine the board’s makeup; only 36 percent said they are “satisfied” and 49 percent “somewhat satisfied” that their board has the right combination of skills, background, and experiences to probe management’s strategic assumptions.

The survey also identifies key challenges or barriers to building high-performing boards, as well as steps boards can take to overcome these hurdles and position themselves as strategic assets for their companies.

While the views and practices related to board composition vary by country, the key global trends as highlighted in the survey include:

  • Board composition—and alignment with strategy—is a key priority. Survey respondents identified several reasons for the intense focus on board composition, including the need for directors with an understanding of the competitive environment, greater diversity of viewpoints and backgrounds, and understanding the pace of technology change along with potential disruptors of the company’s business model.

See: Top 8 Boardroom Challenges for Companies in Asia

  • Significant barriers exist to building a high-performing board. The barrier most frequently cited by survey respondents was “finding directors with both general business experience and specific expertise needed by the company” (69 percent). Identifying the board’s future talent needs ranked second (55 percent), followed by resistance to change due to “status quo” thinking (43 percent).• Despite wide recognition of the importance of succession planning in achieving optimal board composition, many boards lack a formal succession plan.While the vast majority of survey respondents said that a formal board succession plan is a key mechanism to achieving the right board composition, only 31 percent reported having either a “formal succession plan in place that aligned with the company’s future needs” (14 percent), or “robust discussions and succession planning in process” (17 percent).

Strong leadership in the boardroom is important to facilitate healthy debate and address potential conflict or friction. The chair or lead director plays a critical role in establishing and maintaining an environment where debate and disagreement can occur without animosity and mistrust.

Sam Strijckmans, Corporate Officer and Vice President – Accounting, Nitto Denko Corp says: “Diversity in terms of the ‘background’ of board members is important, both in terms of technical knowledge or specialty and in terms of business knowledge and international experience.

Strijckmans added, “In Japan, before topics are added to the board’s agenda, they are considered very thoroughly beforehand. The opinions of the individual decision makers are often vetted in advance, so that the board meeting discussion is free from conflict and the decision usually follows quite easily. There are sound deliberations taking place, but these occur outside of the board meeting, unlike in non-Japanese boards. This may create information asymmetry when more external directors come on board.”

Also read: Why Are Few Women Found in the Boardrooms in Asia?

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