The last two years have changed the skills that effective boards will need to succeed in the future. What skills will be most essential in 2022?
The last two years have been challenging years for boards worldwide. With 2021 now in the past, board leaders are evaluating the long-term impacts of the Covid-19 pandemic, economic turbulence, enhanced regulatory pressures, and shifting social, governance, and workforce expectations of the last two years. To help organsations prepare for the ongoing effects of these and other challenges in 2022, OnBoard have compiled a list of five essential skills for boards in the new year.
- Digital transformation
The onset of the pandemic in March 2020 caused organisations across nearly every industry to shift rapidly to remote operations, including remote work and virtual board meetings. This forced many organisations to adopt new tools and technologies that continue to evolve today.
Despite the challenges associated with the abrupt transition, a 2021 OnBoard Board Effectiveness Survey found acceleration of the digital transformation also brought numerous benefits by helping boards be more efficient, effective, and collaborative. In the boardroom, the digital transformation took the form of virtual meetings, and remote and asynchronous work.
It enhanced accessibility for board members, allowing communication and collaboration to occur anytime and anywhere via cloud and mobile formats.
Similar changes occurred within organisations themselves. At the same time, however, greater reliance on digital tools has contributed to a significant increase in competition for many industries, as well as a rise in the number, sophistication, and brazenness of cybersecurity attacks.
A 2021 Harvard Business Review survey found 83% of board members identified bolstering cybersecurity as a top strategic priority for their organisations. Boards that want to continue to reap the benefits of the digital transformation and counter increased competitive and cybersecurity risks should build their digital competencies.
Having a technologist or someone with tech experience on your board of directors can help organisations keep pace with the latest technological advancements and threats, identify transformation needs, and create a roadmap to ensure ongoing progress.
- Environmental, Social, and Governance (ESG) issues
News headlines in recent years have been filled with reports of environmental disasters, police brutality, and a steady stream of alleged abuses by high-profile leaders.
From the wildfires on the West Coast of America, to the #MeToo movement and widespread protests against racial injustices, organisations of all types face mounting pressures to be proactive on ESG issues. Those pressures include increased regulatory requirements.
At the federal level, for example, the US Securities and Exchange Commission is pushing to mandate more disclosure requirements around climate change. Yet OnBoard’s 2021 survey found that while 76% of directors said their boards are highly or somewhat focused on ESG issues, nearly 90% said their boards didn’t have committees dedicated to addressing such issues, and only 9% planned to establish such committees.
At the Society for Corporate Governance’s 2021 National Conference, keynote speaker and SEC Commissioner Allison Herren Lee said boards should seek to integrate ESG issues into their decision-making processes by:
- Enhancing board diversity. Emphasising diversity increases the likelihood that incoming directors will bring new perspectives and new thinking, which in turn facilitates more current and proactive approaches to climate and ESG governance.
- Increasing board expertise. Boards should factor ESG expertise into their board skills matrix and in recruiting new directors. They also should consider training and education to enhance existing board members’ knowledge on these topics.
With 2022 well underway, boards must double down on their commitments to build ESG expertise and confront ESG issues head-on. If they don’t have one already, they should establish a designated ESG committee accountable for working to implement long-term, sustainable policies that address the environmental and social impacts of their organisations.
- Diversity, Equity, and Inclusion (DEI)
To expand on the importance of social issues and awareness, the current environment demands that organisations place renewed focus on diversity, equity, and inclusion — both internally and externally.
For-profit and non-profit companies, associations, and other entities alike are increasingly prioritising social justice, corporate responsibility, and the community impacts of their organisations.
In addition to increased societal pressures, there also are growing regulatory and industry pressures relative to DEI. For instance, the SEC approved new listing rules earlier this year aimed at advancing board diversity.
The rules require certain Nasdaq-listed companies to annually disclose information on the board’s diversity statistics. More companies also are hiring accessibility experts as companies aim to make their products and services more accessible to the one in four Americans who live with disabilities, and groups such as the EDGE Foundation are offering certification programs for companies that provide pay equity across various demographic groups.
Once again, having a diverse board of directors is imperative for organisations that are seeking to be proactive on these issues. As leaders, directors must appropriately represent their communities and the values of their organisations. At the same time, individual board members should exhibit sound moral judgment and compassion for others.
Organisations should assure their board composition is multifaceted, including directors with a broad mix of director competencies, including a range of skills, backgrounds, experiences, and perspectives. Conducting a skills assessment and developing a board skills matrix can help organisations map the characteristics and contributions of their existing board members. It also helps to identify gaps that may need to be filled through succession planning as nominating committees recruit new director candidates.
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- Financial Acumen
With the rise of alternative investment models such as special purpose acquisition companies (SPACs), recent actions by activist consumer investors, and the continued emergence of new cryptocurrency markets, having financial expertise on your board is more important than ever.
SPAC transactions are an increasingly popular avenue for companies going public. They involve the formation of a shell company (the SPAC) that is formed and sold for the sole purpose of acquiring the private company.
In the world of activist investors, billionaire Ryan Cohen made news in August when he used his popularity on social media to gain control of the GameStop board. And in September, the SEC made clear that it plans to take a more hands-on approach in regulating cryptocurrency when it said it would intervene in an upcoming offering from Coinbase, the largest cryptocurrency exchange in America.
These are just some of the latest developments that illustrate an ever-evolving financial landscape. They emphasise the importance of having directors with sufficient financial acumen to help boards understand the latest developments and the potential implications for your organisations.
In establishing new boards for companies that are going public, for example, organisations should have at least three directors with financial expertise, including at least one with significant finance or accounting experience. Boards also need at least one independent audit committee member and two independent compensation committee members when making a public listing.
- Talent Acquisition
The final focus area for boards making their way through 2022 and beyond is ensuring they have directors who can guide organisations in strengthening their recruitment and retention efforts. Companies worldwide are suffering under widespread worker shortages.
A recent survey by the ManpowerGroup found nearly 70% of companies reported talent shortages and difficulty hiring. The findings represent a 15-year high for companies reporting such challenges. Numerous factors are contributing to a much tighter labor market, including demand for increasingly specific skillsets, childcare challenges, and rising competition. Industries around the globe also are experiencing a once-in-a-generation shift in the employer-employee relationship for knowledge workers.
After a year or more of working remote, may employees have become accustomed to greater autonomy and more control over where, when, and how their work gets done. They are less willing to give up their flexibility to return to pre-pandemic office-place norms.
Navigating these challenges requires boards build their knowledge and skills relative to personnel relations. Once again, having a board with a mix of skills and experience provides major benefits, in that it fosters more robust strategic planning discussions and enables them to think creatively about meeting talent acquisition goals.
Why it is important for your board to track skill sets?
In a recent article published on Business Leader, OnBoard shared their recent webinar, Skills Tracking & Board Composition, to dive into the world of what your board will need in 2022.
Watch it here!