Plus 10 provocative questions to help launch useful boardroom discussions.
In two previous articles over the first half of April, we discussed key findings from a first-of-its-kind global study conducted by Protiviti, BoardProspects and Broadridge involving more than 1,000 directors and C-suite executives and the resulting call to action based on those findings. The directors and senior leaders participating in the survey identified the five most significant obstacles toward achieving their organization’s growth objectives during the next three years. This week, we explore these five areas and recommend that directors integrate them into their boardroom agendas.
Recruiting, retaining and skilling talent. Our survey suggests a need for focused strategic conversations regarding the shortage of talent and skilled labor. The board should evaluate and advise on investments needed to upgrade not only the organization’s talent strategy but the talent management function itself so that they are aligned with market realities and the company’s overall growth strategy. Succession planning and leadership development activities also warrant more stringent stress-testing from boards to ensure the executive bench is strong. The bottom line is that talent wins and is vital to designing and executing differentiating strategies.
Board oversight of human capital management can miss the mark if it does not consider whether the corporate culture is fit for purpose from a recruitment, retention and skill-building perspective. The board has an important role to play in setting the tone for building a trust-based, diverse and inclusive culture fostered by the CEO and leadership team that is authentic, connected, transparent and resilient. Culture is the key to breaking down barriers of resistance and enhancing organizational preparedness, agility and decisiveness.
Access to capital and/or liquidity. Concerns regarding access to capital and liquidity are understandable in this era of higher interest rates and the related impact on cost of capital. The reality is that many executives have been allocating capital with cheap money for a long time. Now capital-intensive decisions come with greater cost and higher risk. Investors understand this picture all too well as increasing risk-free rates have elevated hurdle rates. Thus, managing balance sheets and optimizing capital structures have become more challenging. Capital is the source of every organization’s lifeblood. Cash is king. Constraints on access to either may restrict growth opportunities for the organization.
New and emerging technologies. In the marketplace, it’s disrupt or be disrupted. Advanced technologies — such as artificial intelligence (including advancements such as generative AI), automation in all of its forms, hyper-scalable platforms, faster data transmission, quantum computing, blockchain, digital currencies and the metaverse — are changing the world, presenting both opportunities to grow and lose market share. They also present talent issues as they require new skills that either are in short supply in the market or require significant efforts to upskill and reskill existing employees.
As new and emerging technologies can easily outpace an organization’s ability to compete without significant changes to its business model, directors need to understand them and their potential applications and use cases. Technology underpins virtually every conversation as it drives changes in the workplace, spawns the emergence of new competitors, evolves customer preferences, enables insightful data analytics, breeds resistance to change, and triggers fresh data privacy and cybersecurity threats. The focus on innovation and digital transformation to retain relevance has never been stronger.
Central bank monetary policy, inflation and rising labor costs driving economic uncertainty. All eyes are focused on the central banks, with the U.S. Federal Reserve and European Central Bank both unwilling to commit to the timing and frequency of rate cuts. Persistent inflation is being fueled by higher labor costs and robust employment, outsized government stimulus, the West’s de-risking reliance upon China, regional conflicts, container shipping issues in the Red Sea and Panama Canal, and increasing shelter, food and energy prices. The uncertainty is requiring boards and senior leaders to operate in an uncertain economic environment requiring attention to intelligent capital allocation, pricing strategy and margin management with an eye toward preserving financial health and positioning the organization to seize the next wave of growth.
Rapid change from disruptive innovation. The board should be satisfied that it is well-positioned to challenge conventional thinking and assist management in transforming customer experiences and disrupting long-established value chains. In today’s technology-driven marketplace, disruption occurs in many ways — new business models, rapid product innovation, changing customer value propositions and disintermediation of distribution channels. Companies can either lead the way or be swept away. The good news: New and emerging technologies and change from disruptive innovation are intertwined and, while containing risk, also present market opportunities for boards and their organizations to grow and prosper.
The above five areas cover a broad swath across many topics discussed in the boardroom. Following are some provocative questions to launch useful discussions:
- Is our business model being disrupted? If it is, how and when would we know?
- Is our talent management strategy fit for purpose and aligned with our growth strategy?
- Is our culture encouraging challenges to conventional thinking and disruption of long-standing ways of working that are obstacles to aligning our business model and strategy with new market realities, improving the customer experience and reimagining internal processes?
- Do we have access to sufficient intelligence regarding changes in competitors, customers, suppliers, new and emerging technologies, regulatory requirements and other relevant external forces? Have we thought about how competitors or unexpected market developments could bring down our company?
- How are new and emerging technologies affecting our industry? Are we monitoring what our competitors are doing? Are we exposed to the risk of new market entrants, especially those that are “born digital”?
- Is the executive team aligned in formulating and executing the transformation roadmap? Is the CEO satisfied that the executive team members and their direct reports are sufficiently agile and adaptive to pivot in the face of unexpected market disruption?
- Is the company recognizing market opportunities and emerging risks early enough and addressing them with timely adjustments to its strategy and infrastructure?
- Are we staying in touch with our customers and the customer experience? Are our insights data-driven?
- Are we monitoring cash flow and inventory levels and supporting appropriate investments to springboard growth once economic headwinds subside?
- Have we developed a hierarchy of cost-savings initiatives that could be implemented in the event of a downturn to create a scalable plan depending on the severity of the downturn?
Next week, we will discuss “blind spots” in the boardroom.
Read the full report Global Board Governance Survey | Protiviti United States and watch a recording of our webinar discussing the results Views on Global Board Governance — Where Directors and C-Suite Leaders Align and Diverge (on24.com)].
Jim DeLoach and Frank Kurre are managing directors of Protiviti.
About Protiviti
Protiviti (www.protiviti.com) is a global consulting firm that delivers deep expertise, objective insights, a tailored approach and unparalleled collaboration to help leaders confidently face the future. Protiviti and our independent and locally owned member firms provide clients with consulting and managed solutions in finance, technology, operations, data, analytics, digital, legal, HR, governance, risk and internal audit through our network of more than 85 offices in over 25 countries.
Named to the 2023 Fortune 100 Best Companies to Work For list, Protiviti has served more than 80% of Fortune 100 and nearly 80% of Fortune 500 companies. The firm also works with smaller, growing companies, including those looking to go public, as well as with government agencies. Protiviti is a wholly owned subsidiary of Robert Half (NYSE: RHI). Founded in 1948, Robert Half is a member of the S&P 500 index.
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