Aligning boardroom talent with the company’s strategy is a key driver of many boards’ increasing focus on board composition and succession planning today.
To better understand directors’ thinking about the combination of skills, backgrounds, experience and perspectives in the boardroom, KPMG’s Audit Committee Institute surveyed more than 2,300 directors and senior executives across 46 countries. The survey identified the key challenges or barriers to building high-performing boards, as well as the steps boards are taking to overcome these hurdles and position themselves as strategic assets for their companies.
Building a great board
Having the right talent in the boardroom is critical to a company’s long-term success. Nevertheless, achieving the right mix of board members to position the company for the future requires an active approach – from robust board performance evaluations to formal succession planning.
Three-quarters of the directors and senior executives surveyed say the alignment of board talent with the company’s long-term strategy is a critical challenge for their board. Moreover, three in five cite the need for more diverse backgrounds and viewpoints on the board. Respondents also reported that the inability to find directors with the ideal skill set and the lack of formal succession plans pose significant barriers to refining the board’s composition.
Directors also see significant room to refresh the board’s composition: only 36 percent said they are “satisfied,” and 49 percent are “somewhat satisfied” that their board has the right portfolio of skills, background and experience to probe management’s strategic assumptions.
What are the key global trends?
While the views and practices related to board composition vary by country (as detailed in the survey), key global trends include:
- Board composition – and alignment with strategy – is a key priority.
Several reasons for the intense focus on board composition were identified, including the need for directors who understand the competitive environment, the pace of technology change and the potential disruptors of the company’s business model and who bring greater diversity of viewpoint and background to the board.
- Significant barriers exist to building a high-performing board.The barrier most frequently cited 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%), followed by resistance to change due to “status quo” thinking (43%).
- Many boards lack a formal succession plan.
Despite wide recognition of the importance of succession planning to achieving optimal board composition – the vast majority said that a formal succession plan is a key mechanism to achieving and maintaining the right board composition – only 31 percent reported having either a “formal succession plan in place that is aligned with the company’s future needs” (14%) or “robust discussions and succession planning in process” (17%).
Swiss results show formal succession plans are a reality
In Switzerland, the main concerns that influence directors and senior executives’ thinking regarding the present and future composition of the board include the “alignment of board talent with company’s 3 to 5 year strategy” (75%) and “business model disruption and other competitive threats” (67%). To achieve the right mix of skills, background, experience and perspectives on the board, Swiss respondents consider robust board evaluations (79%) and formal board succession plans (75%) to be key mechanisms. Compared to the global average of 14 percent, Switzerland stands out with 38 percent reporting that they already have and presently use formal succession plans.