What matters most to the boards and directors seems to be changing. Up until recently, boards were interested in spending time discussing strategy or listening to cybersecurity and cloud initiatives. According to a recent study, organizational capability, specifically, talent and succession, seems to be what keeps board members up at night.
The board survey conducted by The Alumni / Harvard Nash Board Report reveals that digital innovation is number two priority, followed by strategy.
Gallup has been reporting on dismal employee engagement for years. Their most recent findings suggest that 85% of employees globally are not engaged or actively disengaged.
Jim Harter writes on the company’s blog, “they are not your worst performers, but they are indifferent to your organization. They give you their time, but not their best effort nor their best ideas.”
So very troublesome!
What makes the above even more dreary is the fact that digital innovation sits at second place for boards.
Why is digital innovation among the top priorities?
Well, almost every company has initiated a transformation program, and the painful reality is that most transformations fail. McKinsey claims that 70% of large-scale transformation programs don’t reach their stated objectives.
There are two reasons for this. One, transformations are ambitious initiatives. They require a lot of work and dedication to pull it off. If we believe that most employees are disengaged and not giving their best to their company, how should we expect that any one of these transformations will work?
Second, innovation is hard. Digital innovation is much harder. Most employees made their careers by sticking to the rules, and not taking risks. Digital innovation requires a different mindset and a lot of test and trial.
Boards should have worried about that for years. But they haven’t. It appears that finally they’re getting there.
It’s not enough to talk about talent or digital fluency, though. Because board directors, or C-level executives are not always digitally fluent, themselves. Most don’t know the nuances of AI, and don’t understand what blockchain represents.
Research by MIT Sloan found that only 1 out of 4 of the boards in the US with over $1 billion in revenues were digitally savvy.
Does it matter? According to the same research, organizations with digitally savvy board members make more money.
“Companies with a digitally savvy board had 38 percent higher revenue growth, 34 percent higher return on assets, and 34 percent higher market cap growth.” writes Tess Bennett, the editor of Which-50. These are not small numbers.
Perhaps, a savvy move for a board would be to start changing their recruitment and pipeline building strategies and processes. Relying on friends, acquaintances, and familiar circles is undoubtedly more comfortable than running a thoughtful board recruitment operation. But you need the latter to lower the firms’ risk profile.
Company boards need diverse people with the right skills. They need people who are deeply digitally savvy, know how to ask the right questions, and can guide top leadership. For a transformative evolution of most organizations, it’s critical to build the right board.
The alternative is a possible Kodak moment. And no one likes that any more.