Today’s boards are changing
They are becoming more diverse across attributes from gender to race to level of education and years of experience. While board composition is changing, so is the world around them. New and diverse perspectives and mindsets are needed to help boards lead business, enable a future workforce and create sustainable value beyond what is seen on balance sheets.
The pandemic has fast-tracked a rising trend toward workforce strategy oversight at the board level. In Accenture’s Modern Board 2020 Survey, we found that COVID-19 increased 70% of board member involvement in company workforce strategy.
Boards of directors are finding themselves pressed to recalibrate business strategy and governance models of yesterday to urgently address today’s evolving needs. The pressure is high. The need is undeniable. It is time to give workforce strategy a seat at the table.
Board engagement in workforce strategy is no longer an option: it’s the new oversight. The pandemic is not the only factor propelling a new level of board involvement in workforce strategy—industry leaders and governing bodies are calling for change. The International Business and the World Economic Forum recommended non-financial disclosures across environmental, social and governance (ESG) domains to help advance more mainstream and universal annual reporting.
Large investor groups such as BlackRock and State Street Global Advisors penned letters in 2019 urging companies to increase their focus on company purpose, workforce strategies and culture. The rationale being that strong efforts in workforce strategy play a role in strong company performance, including risk mitigation and the bottom line. Our research is proof positive.
We found that Modern Boards were leaders of organizations that exhibited better performance in workforce strategy, revenue and innovation. They are stewards of companies that have experienced revenue growth of 10% more than peers (over the last three years). Furthermore, these organizations were better prepared for crises such as COVID-19 and the impact of social injustice.
What does it take to be a modern board?
The Accenture Modern Board 2020 Survey reveals that those boards answering the call are excelling across five key dimensions:
The bottom-line benefits
Boards with low involvement in workforce strategy saw a revenue decline of at least 5% during COVID-19 within the business they oversee—a rate 1.3X higher than boards that shielded their organizations from such a decline in financial performance.
Innovation is a hallmark of companies with Modern Boards. These businesses are up to 1.5X more innovative than peers. Even boards moderately involved in workforce strategy proved to guide businesses that are significantly better at innovation.
Boardroom leaders—and the entire C-suite—have an active role to play in addressing workforce topics. Modern Boards are 1.7X more likely to hold the broader C-suite accountable for workforce strategy. By sharing accountability across the C-suite with necessary board oversight, the board can empower management to lead and it sets the tone for how important workforce strategy is across the organization.
Raising the accountability of workforce strategy to the boardroom reinforces to management that their workforce initiatives and strategies are important and monitored by highest levels of corporate governance. Modern Boards who provide the necessary oversight and hold the broader C-suite accountable for workforce strategy are nearly 2X more likely to have a mature workforce strategy of which effectiveness is driven by metrics.
Modern Boards are nearly 1.9X more likely to be responsive to inclusion and diversity issues not just internal to the business, but externally as well. They are also more responsive to social issues that have impact on the corporate culture and worker well-being.
In addition, they were 1.3X more likely than their counterparts to lead businesses that take a stand against racism and bias in the workplace, up to 2X more likely to publicly report diversity and well-being metrics. These boards not only recognize the problems, they are also more prepared to address issues related to diversity in the organization.
Modern Boards know that they only manage what they measure. These boards embed workforce strategy in their oversight. They also frequently measure and discuss workforce metrics on a monthly or quarterly basis (rather than reviewing metrics biannually—moderately involved, annually or not at all—low involved.)
Modern Boards are 3.8X more likely to have a strong pulse on the workforce health of the businesses they guide, compared to their less involved counterparts, and 1.3X more than their moderately involved counterparts.
Modern Boards review financial metrics, and they also examine various workforce metrics to provide critical oversight on issues vital to elevating and empowering the workplace. The workforce metrics most commonly discussed among Modern Boards were related to productivity, health and safety, candidate recruiting. Health and safety metrics will likely garner more attention during the pandemic as boards contemplate bringing on new roles, such as medical officers, to better prepare for and manage health and safety risks.
Our research also shows that Modern Boards are tackling tough workforce topics that garner public scrutiny. For instance, pay equity, inclusion and diversity and workforce reduction plans.
Powered by data and shared C-suite accountability, Modern Boards are 3.4X more likely to lead organizations that excel across all workforce capabilities such as recruiting, learning and development, employee engagement and experience and talent retention.
These leading boards make active and strategic use of the CHRO, interacting with the them individually and many (86%) engage the CHRO to provide actionable feedback at least quarterly. Moreover, the CHRO has an active and strategic voice that helps inform board oversight into transparency metrics beyond areas such as executive compensation.
Modern Boards are 1.4X more committed to diversity in the boardroom. These boards are more global in nature, they have greater industry and functional diversity, they include more women, persons with disabilities and LGBTQIA individuals, and they are more racially and ethnically diverse. Currently, many top companies don’t have a single Black board member.
Many barriers still exist, and they continue to prevent diverse individuals from serving boards. This needs to change as many boards in their current composition do not reflect the diversity of the workers they represent and serve—and they do not represent their own customers.
Modern Boards are more diverse than peers
Five actions to close the gap
There is hope and opportunity for traditional boards to quickly evolve to become Modern Boards that have the curiosity, passion and drive to lead their organizations into the future, while managing risk in this uncertain world. Boardroom leaders can begin to make the journey by taking action in critical areas today:
- Understand and accept that fiduciary responsibility should also include addressing workforce challenges and strategic objectives such as inclusion and diversity, health and safety, and workforce reduction plans.
- Embed humanity and compassion into fiduciary and risk oversight to solve workforce issues and minimize lost revenue. If risks are realized, that leads to loss in trust by various stakeholders such as workers, investors and customers. The direct impact on future revenue losses due to trust-based events conservatively totaled US$180 billion for the 7,000+ companies we analyzed.
- Share accountability for workforce topics with the entire C-suite. Frequent measurement and review will help to improve the effectiveness of workforce capabilities.
- Disclose workforce-related metrics, along with other ESG progress, to be more transparent and reveal opportunities for enterprise and ecosystem value creation. Workers and other stakeholders want and value greater transparency. Now is the time to act or get left behind.
- Commit to improving both board and workforce diversity—and execute on those commitments. Shareholders, workers and consumers at large expect to see diversity, so it’s time to deliver on promises made.
Making improvements to workforce strategy oversight will not only have impact on revenue, performance, innovation and other essential areas—it will position the business to be a leader in the truest sense, showing others how to operate with compassion and purpose in a new world.