The Covid-19 pandemic has required companies and their boards to take a renewed look at working practices and human capital management. But new research points to widespread differences in how much boards are involved in and informed on such strategies.
Earlier this month PwC polled 65 board directors from Fortune 1000 and private companies, along with other C-suite executives, about business priorities and decisions they're making around the future of work.
Asked to characterize their board’s involvement in the development of the company's strategy for the future of work that will be in place this fall, fewer than half (45 percent) say the board has received sufficient information from management to assess the strategy.
Only around half (54 percent) of directors say there is a high level of agreement among them with management’s proposed strategy. Roughly a third (32 percent) say the board consulted with outside experts on the strategy, and 12 percent say the board did not play a significant role in the decision.
These figures reflect divergent views on the role boards should play in company strategy. Roger Martin, former dean of the Rotman School of Management at the University of Toronto, wrote in the Harvard Business Review in 2018: ‘If the board feels it needs to do strategy for the company, it is prima facie evidence that it should fire the CEO. If a board that meets just a few days a year can do a better job of setting strategy than the CEO who is in the business 24/7, then the board has the wrong CEO.’
He added: ‘What about the other extreme where the board simply declares yea or nay to the CEO’s strategy? That is less bad but renders the board largely useless in strategy… The latter [nay] is, plainly and simply, a no-confidence vote and leads directly to the same place as above: the board should fire the CEO, if the CEO doesn’t resign first.’
Martin concluded that rather than taking either of these extremes, the right approach is ‘an iterative process in which the CEO is in charge, because it is the CEO’s job to formulate strategy, but the CEO wisely gets the maximum amount of advice from the board – assuming that the board has useful insights.’
The authors of the PwC report take a similar view: ‘Management teams… might benefit from better leveraging board perspectives. The decisions companies are making about the future of work today are unprecedented in their scale and scope, and in the long-term consequences of the potential changes. Directors can be a sounding board for these foundational decisions and provide valuable insights.
‘It’s largely up to management to provide boards with the tools they need to oversee and weigh in on key strategy decisions, especially those in uncharted waters. But directors can also play a part in ensuring that they have the data and outside perspectives they need in order to weigh in on and appropriately challenge management’s view. Monitoring these decisions closely over the short- and medium-term, including the impact they have on workplace culture, should be on every board’s agenda.’
Meanwhile, boards need to keep close tabs on talent management as a key part of human capital management – particularly in a tight labor market. But the PwC research finds that many directors are finding this oversight more challenging in the current environment with widespread remote and hybrid working.
Almost half (49 percent) of respondents say a fully remote or hybrid workforce makes oversight of career development more difficult, versus 24 percent who say it makes it easier and 23 percent who say it makes no difference. Similar results apply to oversight of upskilling/retraining, innovation and recruitment. New working conditions have a slightly less of an impact in terms of overseeing succession planning, with 37 percent of directors saying it makes things more difficult, 34 percent saying it makes no difference and 26 percent saying it makes things easier.
‘[T]alent management can’t take a back seat just because remote workforces are hard to monitor,’ the report authors write. ‘By evaluating the elements of oversight that have become more difficult, boards and management teams can work together to fill the gaps and alleviate some of the challenges. They might do this with increased or different types of reporting, or by bringing different members of management onto the board agenda to keep directors abreast of what’s going on with the workforce.’
Ben Maiden
Ben Maiden is the editor-at-large of Governance Intelligence, an IR Media publication, having joined the company in December 2016. He is based in New York. Ben was previously managing editor of Compliance Reporter, covering regulatory and compliance...
