Navigating shifting sands: Six shifts boards are making to thrive now

An interesting report by Heidrick & Struggles (Board Monitor UK 2024) provides a comprehensive analysis of how boards in the UK and globally adapt to a rapidly evolving business environment. The report is based on surveys conducted with over 2,500 CEOs and board members globally, revealing critical insights into stakeholder influence, risk management, board involvement, and diversity. The document highlights six significant shifts that boards are making to thrive in this challenging landscape. You can read the full document here https://www.heidrick.com/-/media/heidrickcom/publications-and-reports/board-monitor-uk-2024.pdf?I have summarised the findings here as follows;

Performance of Boards in the UK and Globally

Boards in the UK and worldwide are experiencing increasing pressure from various stakeholders, notably regulators, employees, and consumers. In the UK, 47% of respondents noted a significant increase in the influence of the broader workforce, compared to 43% in Europe and 49% globally. Regulatory influence is also prominent, with 52% of UK respondents acknowledging increased pressure from regulators, higher than the global average of 45%. Globally, boards are reallocating their time to address emerging issues, with 71% of respondents stating they spend more time on emerging technologies, including AI, compared to the pre-COVID period. Cybersecurity follows closely, with 62% of global respondents spending more time on this issue. In the UK, the focus on AI and cybersecurity is even more pronounced, with 74% and 70% of respondents, respectively, indicating increased time allocation. Operational involvement by boards has risen, with 25% of global respondents stating that board members are frequently involved in operations, while 45% report occasional involvement. In the UK, 22% of respondents indicated frequent operational involvement, with 49% reporting occasional involvement. This trend is primarily driven by the need to understand better operations (50% of directors globally) and the possession of specialised knowledge that the executive team may lack (48%).

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Top 10 Takeaways

1. Increased Stakeholder Influence: The influence of stakeholders such as the workforce (47% in the UK), regulators (52% in the UK), and consumers has grown significantly, shaping board agendas more than traditional shareholder concerns (22% for mainstream shareholders in the UK).
2. Focus on Emerging Technologies: Boards are dedicating more time to understanding and addressing risks associated with emerging technologies, with 71% of global respondents focusing more on AI post-Covid. In the UK, this figure is higher at 74%.
3. Operational Involvement: Operational involvement by boards has increased, with 74% of global respondents acknowledging some level of involvement. In the UK, 71% of respondents report similar involvement, driven by a desire to learn more about operations (50% of directors globally) and specialised knowledge (48%).
4. Risk Management: UK boards are leading in proactive risk management, with 67% spending more time understanding and defining risks than the global average of 60%. Additionally, 54% of UK respondents report hearing from external experts on risk areas, compared to 54% globally.
5. Sustainability Prioritisation: Sustainability is a high priority for 61% of UK boards, slightly above the global average of 54%. This focus reflects regulatory solid and societal pressures in the region.
6. Workforce Engagement: Boards increasingly engage with employees beyond senior management, with 96% of UK respondents supporting this engagement. It is higher than the global average of 86%.
7. Diversity and Inclusion: The UK continues to progress in board diversity, with 235 out of 350 FTSE companies achieving at least 40% female representation. However, only 70% of FTSE 250 companies have met the target of at least one director of colour, compared to 96% of FTSE 100 companies.
8. CEO Succession Planning: CEO succession planning is often deprioritised, with only 27% of global respondents indicating spending more time on it post-Covid. In the UK, this figure is slightly higher at 33%, reflecting some directors' concerns.
9. Governance Across Boundaries: Boards are increasingly expected to govern across societal and geopolitical boundaries, with 71% of UK respondents indicating an increase in time spent on geopolitical volatility compared to the global average of 56%.
10. Adaptation and Learning: There is a strong emphasis on cultivating a learning culture within the boardroom, with 67% of UK respondents spending more time understanding and defining risks than 60% globally.

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Recommendations

1. Enhance Stakeholder Engagement: Most directors (47% in the UK and 43% globally) are increasing stakeholder engagement. In the UK, regulators top the list, with 52% of respondents noting their increased influence.
2. Cultivate a Learning Culture: With 67% of UK respondents spending more time on risk understanding and definition, there is a clear need for boards to prioritise continuous learning and adaptability, particularly in emerging areas like AI and geopolitical risks.
3. Expand Expertise: With 54% of UK boards engaging external experts for risk management, there is a growing trend towards leveraging external advisors, advisory committees, and on-demand talent platforms to bring in the necessary expertise.
4. Strengthen Succession Planning: Despite only 33% of UK respondents increasing their focus on CEO succession planning, there is a clear need for proactive approaches, ensuring that succession is aligned with the organisation's long-term strategy.
5. Govern Across Boundaries: With 71% of UK respondents spending more time on geopolitical risks, selecting directors who can operate across cultural and geopolitical boundaries is crucial, bringing diverse perspectives and experiences to the boardroom.
6. Leverage External Support: As the scope of board responsibilities expands, 67% of UK respondents report increased time spent on understanding risks, highlighting the importance of relying on corporate secretaries, external experts, and peer networks to share the burden and drive innovation.
7. Prioritise Risk Management: With 67% of UK boards spending more time on risk management, boards should continue to focus on comprehensive risk strategies, integrating both internal and external perspectives to navigate the widening risk landscape.
8. Focus on Diversity: With 235 FTSE companies achieving gender diversity targets, continued emphasis on diversity in gender, ethnicity, and thought should remain a priority, with boards striving to reflect the demographics of the markets they serve.
9. Increase Operational Involvement Judiciously: While 71% of UK respondents acknowledge operational involvement, boards should maintain a balance to avoid overstepping into management roles, ensuring they add value without disrupting executive functions.
10. Align with Sustainability Goals: With 61% of UK boards prioritising sustainability, boards must ensure these goals are integrated into the organisation's core strategy, reflecting long-term value creation.

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