As businesses make key operational changes to secure their future, Karen Brice explores how non-executive directors (NEDs) can help drive the conversations that will aid their decision-making.
The role of NEDs is evolving, escalated by the challenges and impacts of COVID-19. Such fundamental changes in the way we work have created a critical moment for business leaders. Now is the time to decide how they want their organisations to operate in the future. Non-executive directors are uniquely positioned to shape and drive that conversation with their strategic perspective, often with experience in previous workplace evolutions and the ability to bring different skills to the virtual boardroom table.
“We cannot think, do, be the same, we’ve got to always be pressing ourselves to be more than what we were before” Sola Afuape
In the second in our series of insights taken from the non-executive director (NED) webinar, ‘The Evolution of NEDs’, we sat down with experienced NEDs to discuss the importance of looking to the future amid a still uncertain present.
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| Karen Brice Director, Governance and Board Advisory, Grant Thornton UK |
Mark Winlow Chair and Senior Independent Director |
Simon Lowe Consultant and Chair of Grant Thornton Governance Institute |
Sola Afuape Non-executive director NHS |
Annemarie Durbin Non-Executive Director and Remuneration Committee Chair of Santander UK PLC, WHSmith PLC and Persimmon PLC |
"Ideas that might have taken two years, they’ve done in two months… can I keep that same urgency around other developments we need to do?” Mark Winlow
It is difficult to overstate the challenge of the last twelve months, or the scale and pace of the change that’s taken place. For most of 2020 an acute operational focus drove emergency decision-making.
The agility that’s been shown is impressive, but now it's time to evaluate how successful those decisions have been. NEDs have the objectivity necessary to provide that reflection, not just to ensure organisations are compliant with regulations and governance requirements, but also to guarantee they remain future-focused.
This is sensitive work. To add value, as well as support at board level, you must provide constructive challenge rooted in purpose and the relationships involved based on mutual trust.
"The importance of continuing to build trust cannot be overemphasised. It is harder to do this remotely and cannot be taken for granted" Annemarie Durbin
Building trust at a distance is a huge challenge – one that NEDs can help by proactively nurturing conversations across the business. Knowing your purpose is key to getting those conversations right, however. A clear, shared understanding of why you do what you do is the bedrock on which trust is built.
"Companies are starting to embrace what their purpose is… why they’re there, who they’re seeking to service, what their impact is on the wider community" Simon Lowe
Our 2020 Corporate Governance Review shows that roughly 50% of businesses now embrace what their purpose is, but only 6% measure its impact. It’s an area non-executives need to continue challenging the board on, ensuring enough time is given over to properly measuring how company purpose affects the wider stakeholders. By doing so they improve the board's ability to look beyond the horizon, cement strategy and identify risk.
When looking at Environmental, Social, and Corporate Governance (ESG) which affects the wider stakeholder group, companies need to look not only at how they are reporting on their environmental and social performance, but also how they are integrating that into their strategy, linking it to their purpose and also executive remuneration.
Read how responding appropriately to ESG concerns can add value to your business →
"We need to recognise that we operate within a system… we have to think about risk across that system and not just within an organisation" Sola Afuape
At the start of last year our Corporate Governance Review found that only 24% of companies had identified a COVID-19-like crisis on their risk register. Now, of course, that number is far higher, but how do you guard against similar blind spots in the future? What are the 'unknown' unknowns? Answering these questions isn't easy but again it comes back to constructive challenge, a proactive approach and bringing the outside perspective in.
"Managing risk is a bit like a fireman’s net. It only works when there’s dynamic tension. NEDs can provide that" Mark Winlow
Effectively identifying emerging risks means being able to look in all directions. Away from the immediate operational pressures faced by executives, NEDs have the space needed to encourage boards to seek out new perspectives and to scan for risks still on the horizon.
"The real challenge that comes around is figuring out how you mitigate these emerging risks" Simon Lowe
And yet we found only 31% of businesses took time to really work on how they’ll tackle risks as they emerge. It is essential that NEDs continue to challenge boards on risk mitigation. How are they developing the talent in the room? What skills are they going to need in future? And where will they find them?
"We need to be much more adaptable. We’ve got to challenge some of these structures we’ve had in place" Mark Winlow
A board’s ability to identify both future risk and opportunity will be greatly improved by expanding the range of voices in the room. Understanding the importance of diversity, in all forms, is the first step. Taking meaningful action is much harder. For NEDs, it’s a key conversation to drive.
"We have to recognise that difference is an increasingly important element we need recruit for – and have inherently in our board membership" Sola Afuape
This isn’t easy work to do. There’s no quick fix. NEDs need to lead by example. They should be curious, seek out what they don’t know and encourage colleagues to do the same.
"If your starting point is to be a compassionate leader, it will encourage you to stay with the uncomfortable conversation and be courageous" Sola Afuape
You’re going to hear uncomfortable things. Again trust will be crucial, both in the boardroom and with stakeholders; trust that these mature, often difficult conversations are being had and being acted on.
"You have to have a mindset of listening to really understand, and not just to respond" Annemarie Durbin
Developing a more future-focused board isn’t just about broadening the backgrounds and life experiences in the room, but also expanding the skill sets. New ways of working will inevitably require new skills not just throughout the business, but represented and understood at board level.
"As opposed to just saying "we’re going to be inclusive, we’re going to give opportunities, we’re going to have a diverse board", you’ve got to do something about it" Mark Winlow
Technology is a good example. As recently as 2018 technology was only represented at board level in, on average, 46% of companies, according to our 2020 Corporate Governance Review. That figure has increased over the past year, but considering how essential technology has been throughout 2020, that feels like a worrying lag to make up. Whether through recruitment, training or succession planning NEDs must continue to challenge the board on whether they have the right skills in place, not just for now, but for the future.
"You can’t just pluck those skills out of thin air, you need to develop them" Simon Lowe
As we reflect on the fundamental changes that have occurred over the course of the past year and the operational agility that has been demonstrated in navigating them, one thing is clear. For companies looking to not just survive, but thrive, focusing on today isn’t going to be enough. They must also be looking to the future. The role of the NED, now more than ever, is to make sure that they are.
“The past is not going to be where the solution for the future is” Annemarie Durbin
To help drive conversations that will enhance and aid decision-making by the board now and in future, here are five things NEDs can bring to the table.
1 Stay relevant – bring outside perspectives in.
2 Do the work – be curious, seek out what you don’t know; aim to listen and understand rather than react or fix.
3 Build trust – from embracing technology to uncomfortable conversations, be proactive in building connections and relationships.
4 Understand your impact – make time to measure and understand the impact your purpose and decisions have on your stakeholders.
5 Challenge – use constructive, high-quality challenges to maintain a future focus.
For further information or support on governance and board advisory practice, contact Karen Brice.
