Our survey noted that only 58% of directors and 36% of C-suite leaders agree that board members falling short of expectations are addressed in a constructive manner, suggesting a need for improvement in evaluating or offboarding underperforming directors. There is no place in the boardroom for underperforming directors who are unable to demonstrate the capacity to improve their performance. The self-assessment process, as recommended below, should encourage candor in identifying opportunities for individual directors to improve. Constructive engagement to improve performance is the goal and, if not possible, steps should be taken to offboard certain directors. Accepting underperformance or waiting until the age or term limit is reached can be detrimental to board dynamics. Be mindful of overboarding issues or other commitments that can impair the effectiveness of a director’s board service.

According to our survey, the five most important obstacles to organizational growth over the next three years are recruiting, retaining and skilling talent; access to capital and/or liquidity; new and emerging technologies; economic uncertainty around central bank monetary policy, inflation and rising labor costs; and rapid change from disruptive innovation. In addition, the survey noted that digital transformation and organizational culture were two of the areas requiring more board time and attention. The question arises as to whether the board’s activities are sufficiently focused on the opportunities and risks that matter.

• With respect to talent acquisition and retention, our survey suggests a need for focused strategic conversations regarding the shortage of talent and skilled labor. The board should evaluate and advise on investments needed to upgrade the organization’s talent strategy and talent management function so that they are aligned with market realities and the company’s overall strategy. Succession planning and leadership development activities also warrant more stringent stress-testing from boards.
• Underpinning the focus on talent management, the board should devote sufficient time to corporate culture. Talent management strategies should leverage the corporate culture as a competitive advantage from a recruitment, reskilling, retention and innovation perspective. The board has an important role to play in setting the tone for building a fit-for-purpose culture in a rapidly changing environment. A trust-based, diverse and inclusive culture fostered by the CEO and leadership team that is authentic, connected and transparent is needed to break down barriers of resistance and enhance organizational preparedness, agility and decisiveness.
• The board should be satisfied that it is well-positioned to challenge conventional thinking and assist management in transforming customer experiences and disrupting long-established value chains. In today’s technology-driven markets, it is disrupt or be disrupted. Disruption occurs in many ways — new business models, rapid product innovation, changing customer value propositions, and disintermediation of distribution channels. Companies can either lead the way or be swept away.

These strategic conversations require a deep understanding of emerging and maturing technologies and their application in imaginative ways to drive disruptive innovation and rethink and transform the organization’s business model and strategy continuously. The board should emphasize the importance of staying close to the customer experience, keeping an eye on relevant market trends, organizing for speed and embracing change. As most innovation is technology-driven, the boardroom agenda should allocate sufficient time to discuss the company’s innovation and digital transformation strategy and the talent needed to execute it successfully.

Our survey suggests a need for a stronger board focus on crisis management. As the coming year unfolds, new and existing geopolitical, economic, environmental, social and cyber-related crises could arise and/or conflagrate. In addition, the results of national elections occurring all over the world during 2024 can lead to disruptive impacts extending beyond the voting countries’ borders, with particular emphasis on the United States.

One more area identified by our survey requiring additional board time and attention is cybersecurity. The ever-changing cyber threat landscape and growing geopolitical tensions are likely the reasons for this finding.

Our survey points to a divergence between board members and C-suite leaders in their assessments of the organization’s preparedness for certain risks, particularly talent management, organizational culture and third-party risk. Interestingly, executive leaders rate the organization’s preparedness lower in these areas than do board members. To position the board to contribute value, directors should seek to understand the concerns of their company’s senior leaders, particularly if those leaders are requesting more resources and support to meet expectations. This should involve the board requesting an adequate level of information from management. If the board’s assessment is significantly more favorable than management’s, a disconnect in boardroom conversations may result. If a request for resources appears excessive, ask management for a stronger articulation of the market opportunity or emerging risk and the expected value contributed to execution of the strategy and preservation of the company’s reputation and brand image. Finally, directors should ensure they are receiving periodic risk updates from management so that there is clarity among both groups regarding potential risks to the organization.

Our survey noted that C-suite respondents are less likely to agree that board members come prepared for each meeting and are constructively engaged during meetings. Therefore:

• The board’s charter and/or corporate governance guidelines should establish criteria for director performance that sets forth clear expectations for meeting preparedness and engagement as well as criteria for overboarding.
• If there are issues with preparedness and engagement, the CEO should inform the board chair or lead director and a plan should be developed to improve in these areas. If the focus is on certain directors, the board chair or lead director should counsel those directors.
• All directors should periodically assess their commitment to board service and, most importantly, their ability to allocate the necessary time and energy. The optics of today’s marketplace demand full engagement, such that every director must pull their weight with intention and purpose to justify their seat at the boardroom table.

The above said, the street runs two ways. Information overload can contribute to a perceived lack of director preparedness. Management can facilitate preparedness by being more selective and timely in submitting pre-meeting materials to the board. The board should set the tone by being clear in its expectations of management. This can be achieved through planning board meeting agendas, encouraging concise executive summaries and providing post-meeting feedback to management on the quality of meeting materials. These activities enable an iterative process toward improving briefing materials over time.

The survey noted that board members agree less frequently than C-suite executives that they are given an opportunity to influence the agenda in advance of formal board meetings. To that point, when planning for future meetings, the board chair or lead director should consider involving board members in setting the agenda. Recommendations could be solicited in executive session. Such involvement would elevate the level of director engagement.

At least annually, the board should conduct a robust self-assessment of the performance of the full board, each board committee and each individual member of the board to determine whether they are functioning effectively. The self-assessment process should be conducted on a confidential, anonymous basis and ensure that the board and each committee are staffed and appropriately led, individual board members are effective in fulfilling their fiduciary obligations, and the oversight processes in place are contributing value. The process should encourage candor and be rooted in trust and transparency with an eye toward continuous improvement.

One way to approach the assessment process is to summarize strengths and opportunities for improvement and have the full board and each board committee discuss the results in executive session with the intention to develop and implement improvement plans. The process can be supported by written questionnaires, one-on-one interviews and group discussions facilitated by a member of the board or a third-party adviser. The board should vary the approach over time to encourage director engagement and address key themes or topics, as identified by the board chair or lead director.

• The process should be designed to provide meaningful and actionable feedback. It should present an opportunity to ensure that committee workloads are manageable.
• The process should include an evaluation of composition and onboarding criteria, as discussed below.
• Informal feedback from the CEO, CFO, CHRO, CPO and other senior executives as to how the board can best contribute value can provide useful insights to the self-assessment process.

Our survey results suggest that skill and experience, industry knowledge, technology savviness, knowledge of other industries, and gender diversity are attributes boards are primarily looking for as they evaluate new director candidates. While this finding is not intended to suggest a one-size-fits-all approach, it nonetheless points to a need to assess whether the currency, experience and diversity of thinking in the boardroom are sufficient. Recommended changes should be incorporated into a board composition skills matrix (or its equivalent) summarizing the skills and expertise that the board needs to oversee the organization effectively. Changes to the board composition skills matrix (or its equivalent) should be mapped by the governance or nominating committee (or its equivalent) against the skills possessed by each board member. Any gaps should be considered when evaluating new director candidates.