Louise Chaplin, Head of Board Practice at Eton Bridge Partners, shares insights and discussion points from an intriguing discussion at a recent event hosted by Eton Bridge & NEDA (Non-Executive Directors Association).

It was a pleasure to co-host, along with NEDA, an interactive breakfast briefing at London’s Hotel Café Royal attended by over fifty Business Leaders.

Graham Durgan, NEDA Chair, led a wide-ranging discussion with a panel of three Non-Executive Directors (NEDs) – Caroline Britton, Gary Browning and Joel Segal, who drew on their experience to provide a sharp analysis of the trends they have observed in the modern boardroom, and those they expect to see in years to come.

Succession Planning & Forward Thinking: do boards do enough – and do they do it right?

Boards should be anticipatory, looking at the skills and mindsets they will need in future. They need to ask if they are bringing in the right intellectual attributes and diversity of thought – particularly in the SME space.

• Today, boards too often approach succession planning in an episodic manner. It is often addressed only when the board needs to replace a retiring director. This is not overly surprising considering it can be a sensitive topic.

• Succession planning shouldn’t be something you do once a year, it should be part of a wider capability plan which is continuous. You need a culture and a mindset that says thinking about the talent you need tomorrow is fundamental to your survival and success going forward.

• Many companies approach it from the point of view of replacing ‘what’ they have already, which makes no sense in a world that’s changing at a phenomenal rate.

• Around the world, governments are predicting serious employment challenges relating to a pending shortage of key skills. The UK Commission for Education and Skills (UKCES) contributes to policy and research on employment and in its report, Working Futures 2012-2022, predicts that by 2022, two million vacancies requiring higher level skills will arise.

• Perhaps predictably, over three-quarters of those employers who identified a skills gap are trying to overcome them by increasing their investment in training, greater staff supervision and development on the job and more regular and better connected appraisal activity. Yet a quarter have not yet acknowledged any danger.

• The skills gap presents a challenge for L&D professionals and the providers they work with, but ensuing an appropriately skilled and developed workforce who have the required skills to meet both current and future challenges is essential to ensure organisations remain competitive and sustainable.

• Learning and Development departments are working more closely with line managers to upskill them in how to identify their training needs, create L&D plans and follow up programmes to embed learning.

• Not enough boards are future-focused. Recent research suggests two-thirds of American companies do no forward planning at all.

Everyone on a board must be collectively responsible. If you over-emphasise structure, people can say: “Someone else is dealing with that.” If you have only experts dealing with each topic, you lose the diversity of discussion. If anybody thinks: “That’s not my responsibility because the structure says it’s somebody else’s,” they’re in the wrong job.

• There’s a big difference between listed and unlisted businesses –  in the listed environment, the emphasis is on governance, regulation and risk can prevail to the detriment of forward thinking.  In the unlisted company the emphasis is on monitoring process, risk mitigation and steering a long term successful and sustainable business.

Diversity: A debate that needs to take a major step forward

• Gender diversity has been hugely topical but businesses need to embrace diversity of thinking too.

• It’s not just about gender, race or age; boards need neurological diversity. Microsoft were early adopters of neurological diversity. They spotted that many of the people who were very good at coding and data analysis had, what were historically thought of as ‘disabilities’, such as autism, dyspraxia and ADHD and other conditions, rather than being Nurodiverse bestowing special skills. The ability to think about a problem differently is hugely valuable.

• Companies that do not address the need to adapt will not be around in future.

• Increasing the diversity of leadership teams leads to more and better innovation and improved financial performance. Increasing diversity has a direct effect on the bottom line. Companies that have more diverse management teams have 19% higher revenue due to innovation.

• A study by Forbes found that instead of focusing on a specific area of diversity, focusing on creating teams that have multiple areas of diversity has more value. So how can companies structure diverse teams? Although there is no one fit all answer, the researchers indicate that the initiatives that come from the CEO’s vision coupled with policies such as well equal pay, a culture of openness and inclusion help companies create a diverse and well-rounded environment.

• Quotas matter, but people should be appointed because they’re the right person for the job, not to tick a box. If someone’s on the board as a token women, they’ll be ignored. Diversity is when you ask someone to a party; inclusion is when you invite them to dance.

• If you’re a woman looking for a board role, look for CEOs and chairmen with daughters in their teens and early twenties – that’s the point at which they really understand diversity!

Agility: Boards need to build flexibility into their strategy

• If companies don’t evolve they won’t survive. Organisations need to embrace diversity of thinking, the different cognitive abilities people bring to debates.

• Companies need to understand their differentiation with customers and their operating capability, but also their long-term vision and purpose.

• Businesses have to ask how they will transform their workforce; the high performers of today may not be the ones of the future.

The concept of strategy has to change. The era of three-year rolling plans has gone – looking forward three months is challenging enough these days. Peter Drucker’s famous line: “Culture eats strategy for breakfast,” has never been more true.

• Strategy now is about embedding a culture in a business, ensuring an organisation is agile, adaptable, able to respond to change.

• Traditional companies were like a supertanker – hugely complex and taking five miles to change direction. Now you need a fleet of speedboats – equally capacious but able to change direction when it needs to.

• Boards also need to do the piece that comes before strategy, which is the vision. The strategy is the “operationalisation” of that vision. You need a shared sense of purpose for that to work.

Awareness of societal impact will change the boards of the future

• Boards are very focused on employee interest and partner interest, but increasingly on societal interest. This is partly in response to directors’ duties under Section 172 of the Companies Act 2006, which requires boards to act for the benefit of their shareholders but also for the community and environment.

• One of the biggest issues the UK faces in the next 20 years, with a falling birth rate, will be a talent shortage. The challenge will be attracting new staff. This means that addressing the interest of young people – such as the environment and sustainability – will become increasingly important.

• There is a risk that Section 172 disclosures could become boilerplates that nobody cares about. If society does take note, however, and holds companies to account it could be a force for good.

• Even large companies are now saying capitalism is all very well – but it has to be responsible capitalism. Only good companies take responsibility for their role in the wider community.

• Companies who don’t take climate change seriously, who see it as a box-ticking exercise, will find it more difficult to attract millennials and the generations to come after them.

• Sustainability shouldn’t be a bolt-on, just a way of attracting millennial staff; people can see through a little bit of packaging. It should be hard-baked into your business, not just a Band-Aid.

Our thanks to the panel and the guests who attended – and contributed to a lively Q&A session.