Aligning board talent with strategy, a key challenge

Friday, 24 June 2016 00:00 - - {{hitsCtrl.values.hits}}

Three-quarters of corporate directors say they face a critical challenge aligning board talent with the company’s long-term strategy, and three in five want more diversity and viewpoints on the board, according to a global survey by KPMG’s Board Leadership Center.

Survey respondents also identified significant barriers to refining the board’s makeup, with issues ranging from the right mix of skills and overcoming “status quo” thinking to lack of formal succession plans.

“Having the right talent in the boardroom is critical to a company’s long-term success,” said Dennis T. Whalen, leader of KPMG’s Board Leadership Center. “But achieving the right diversity of boardroom skills, backgrounds, and experiences to position the company for the future requires an active approach—from robust evaluations to formal succession planning.”

To better understand how directors are thinking about the mix of skills, backgrounds, experiences, and perspectives in the boardroom—and tools and approaches to achieve the right mix—KPMG surveyed more than 2,300 directors and senior executives across 46 countries.

Directors see significant room to refresh or refine the board’s makeup; only 36 % said they are “satisfied” and 49 % “somewhat satisfied” that their board has the right combination of skills, background, and experiences to probe management’s strategic assumptions. The survey also identifies key challenges or barriers to building high-performing boards, as well as steps boards are taking to overcome these hurdles and position themselves as strategic assets for their companies.

While the views and practices related to board composition vary by country (as detailed in the survey report), key global trends include:

nBoard composition—and alignment with strategy—is a key priority. Survey respondents identified several reasons for the intense focus on board composition, including the need for directors with an understanding of the competitive environment, greater diversity of viewpoints and backgrounds, and understanding the pace of technology change and the potential disruptors of the company’s business model.

nSignificant barriers exist to building a high-performing board. The barrier most frequently cited by survey respondents was “finding directors with both general business experience and specific expertise needed by the company” (69 %). Identifying the board’s future talent needs ranked second (55 percent), followed by resistance to change due to “status quo” thinking (43 %).

nDespite wide recognition of the importance of succession planning in achieving optimal board composition, many boards lack a formal succession plan. While the vast majority of survey respondents said that a formal board succession plan is a key mechanism to achieving the right board composition, only 31 % reported having either a “formal succession plan in place that aligned with the company’s future needs” (14 %), or “robust discussions and succession planning in process” (17 %).