UK boards lack skills to tackle digital disruption

UK boards lack skills to tackle digital disruption

London – November 19, 2015

Fifty three percent of non-executive directors believe their boards lack the skills to tackle digital disruption, rating it as by far the most needed skill to improve board performance. This is according to the Harvey Nash Board Report, representing the views of almost 300 non-executive directors (NEDs) and chairs.

It is our aim to provide insight on the kind of challenges Boards are currently facing and what sort of change they’re seeing and would like to see. Here is a breakdown of our key findings this year:

  1. Whilst there is an active debate to improve boardroom representation, there remains a significant challenge around true diversity of thought. One third of non-executives were from a finance background but their next biggest concerns after regulation and compliance included digitisation, talent acquisition, delivering strategy and corporate reputation.
  2. The knowledge base of non-executives has lagged behind the rising strategic importance of digital technologies. Digitisation is the fastest growing topic of discussion on company boards, while 53% of chairs rank this expertise in shortest supply among non-executive directors.
  3. The appointment process for non-executives is more rigorous. Three-quarters of non-executives said they went through a thorough appointment process compared with 65% last year, with differences between the genders beginning to disappear.
  4. Chairs revealed that 52% were only somewhat satisfied and 14% unsatisfied with the pool of non-executive talent. There is still work to be done in developing non-executive talent and the performance of non-executive directors.
  5. Many boards have undergone evaluation in recent years but more than a quarter have never been evaluated. While half of all respondents had been through an external review within the past two years, more than a quarter said their boards had never been through a board evaluation.
  6. Respondents overwhelmingly believed that the behaviour of business leaders has the greatest impact on building public trust in business. Almost nine out of ten respondents said “good business” was the right thing to do, though surprisingly 12% could not agree with this statement.

Whilst initiatives such Lord Davies’ Women on Boards report are driving boardrooms to become increasingly gender diverse, they remain stubbornly lacking in ‘functional’ diversity. Almost half (45 percent) of board members come from a finance or corporate strategy background, but only four per cent have hands-on experience in digital or technology.

Ashok Gupta, Chair AA Insurance Services, commenting in the Harvey Nash report, said: “The pendulum has swung too far. The political and economic climate has led to increasing focus on corporate reporting, compliance, risk and controls. So non-executive experts in these areas have been recruited. With increasing digitisation we need to spend more time considering the customer needs and innovation, as well as creating the right culture.”

As boards become increasingly concerned by the risk of cyber-crime, as well as recognising the highly disruptive effect of companies like Uber or Amazon, digital is moving from being a tactical issue primarily of concern to the executive team, to a strategic issue that has consequences for non-executives. Two-thirds (67 percent) of non-executives indicated they were talking about Digital noticeably more compared to three years ago, and one-fifth (21 percent) indicated ‘significantly more’. Digital is the second fastest growing worry for the board, only behind Corporate Governance and Risk.

Christine de Largy, chair Harvey Nash Board Practice, commented: “The challenge for boards is how to access the right digital skills. But at the same time all board members need to find a way to assimilate digital skills so they can genuinely understand the detail and do not abdicate the collective responsibility of the board. In today’s world, boards need as firm a grasp on digital as they do on finance.”

About the research:
(i) The Harvey Nash Board Report 2015/16 collected data during the Summer and Autumn of 2015 and represents the views of 292 Non-Executive Directors and chairs from across the UK via a quantitative survey and 28 qualitative interviews.
(ii) Of the respondents, 54 per cent identified themselves as Non-Executive Directors, and 46 per cent were chairs or held both positions. Almost a third (32 percent) served at companies with up to 5,000 employees, while a quarter (23 percent) had roles at organisations with more than 5,000.
(ii) For more information about the survey and to request a full copy of the results, please complete this form


IORMA Board Member
Chair
UK Board Practice
Harvey Nash 


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