One of the primary roles of any Board is to safeguard the interests of the shareholders by planning a strategic course for the future. But just how thorough are Board members when it comes to considering the realities that are creeping up on them: demographic, social and technological trends that will shape the way in which we work, plan and live in the 21st century? Futurologist Richard Watson helps senior executives predict what their organisations and the wider world may look like in 20 years’ time. Together with KPMG's UK Head of Audit Oliver Tant, Watson considers some of the pressing issues facing enterprises today.
OT: I think it’s easier to comment on the distant future because most Board members won’t be accountable for it. If they say what’s going to happen in six months’ time with a high level of probability then they are going to have to answer for it. What’s happening in 10 years’ time is unlikely to be significant to them, they are likely to have moved on and can speak freely and openly about it. I think the challenge is whether they really are thinking about the scale of change and being brave enough about the implications it might have, to the point that they are beginning to factor that into some of the things they are doing in the short term.
Let’s take as an example longevity. We all know it’s an issue. It’s not threescore years and ten anymore. It’s fourscore years and beyond. People are staying fitter for longer and may retire at 65, but they are not looking to stop. What are businesses doing about it? What are they doing about that available resource? It’s not something that can wait until individuals are 65, because people tend to want to plan in that context. If you want to continue to motivate people you’ve got to begin to plan what you will be doing with them when they are 55.
RW: Ageing is very interesting. Until recently it has been the elephant in the boardroom, but it is the one thing we know with real certainty. We know, for instance, that by 2051, the proportion of people in the UK aged 65 and over is likely to reach 24 percent. Short of pandemic or radical changes in immigration, these numbers are pretty fixed.
Some companies are planning around these issues: you have companies within financial services recruiting retirees to deal with retirees; retailers designing stores with older customers in mind. But the mindset of most companies below the level of the Board is still obsessed with youth.
OT: You would expect Boards to be further forward in understanding the way it is going to impact and how they are going to respond to the opportunities that it provides. But I don’t think there is enough debate around this. When you get into the boardroom the focus is the next set of results and debate is around how you are going to get there.
Another example is the virtual world. We are not far off a situation where remote working is not only available, but preferred. How are organisations addressing this and taking the opportunity to move to a much more flexible and appealing way of working?
To what extent are they embracing change, particularly the impact of online behaviour? If we look at the high street, around one in five stores has closed. But if you look at the rate of growth of online sales then we start to see that it isn’t retail per se that is slowing. Not many businesses have anticipated the need for change, which, okay, perhaps 12 years ago we might have forgiven them for. But it’s now taken hold.
RW: Boards can be tremendously out of touch. With Boards and companies, what you often have is a court, and information is filtered. Boards get a very sanitised view of reality. Below Board-level you often get this terrific clash in styles of working, so that you have young people who want to work remotely, don’t necessarily want to work standard office hours, but still want to work and can actually do their jobs well and creatively. Meanwhile, you have managers a generation older who don’t know how to manage them. And, as the population ages and you get three generations in the workplace, things are set to become really interesting. It’s either a massive threat or an opportunity, depending on how you look at it. I think it’s a massive opportunity.
OT: They need greater diversity. If you think of the structure of the non-exec Board, bearing in mind that the executive Board spend most of their time running the shop, largely there is a focus on people who can attest and assure. Now, as an auditor, I ought to be delighted with that, because that is the world I inhabit. But actually I question whether the Board shouldn’t contain more innovative minds. Shouldn’t we be inspiring people to identify new opportunity? In a rapidly changing world, we have to acknowledge the rate of change is very much faster than it once was and is not slowing. If you acknowledge that, is the right philosophy to have around the Board-table a set of people whose job it is to
attest and assure?
RW: The world has become more turbulent and technology is moving much faster. Just look at how quickly populations across the world have taken to mobile phone use, for instance. It took 50 years for 50 percent of homes in the US
to acquire a telephone from the early 1900s, versus just seven years for the same proportion to acquire a mobile phone.
One of the ways of dealing with such rapid cultural evolution is the diversity approach. But the trouble is people think that diversity is how many women you have around the table or how racially mixed the boardroom is. Actually, it’s way broader than that. We need people from the shop floor. What about a historian? The head of R&D should be on the Board. What you should have is a real mix of experience.
OT: To be fair, just breaking the stranglehold of men on Boards would make a massive difference, but it’s only one step on the journey. People with different life experiences. The majority of people on our Board have a financial background, so to what extent are people being encouraged to think more broadly about opportunity? The whole governance structure, in a way, is encouraging a kind of stagnation in the name of stability that may undermine the whole viability of businesses they were designed to protect.
RW: I’m not sure they should be doing it themselves. I think they should be saying it’s not happening. To some extent, the sort of people you need wouldn’t be seen dead in a large corporation, so trying to entice them is an issue. Assuming modest growth, we are looking at some really serious skills shortages coming up. According to the CBI and vocational qualifications body EDI, employers are increasingly concerned about filling graduate and A Level-type positions, with shortfalls in science, technology, engineering and maths a particular worry. And I’m not sure people have really woken up to the question: how do we source and retain talent?
OT: I would actually say there is a vast array of talent, but it’s not necessarily to be found in the usual places. It’s easy for us to go and find talent. Technology is a great enabler on that front and opportunities are less local and more global. And that’s fine because our clients are less local and more global. So I think the issue is to make sure that you don’t have any barriers to entry. If I want the best IT talent it would make sense to consider London’s Silicone Roundabout, or perhaps even India. If you have something that needs to be delivered locally, for example healthcare, then looking further afield won’t apply. But anything service-related, IT-related and tradable, for that you can access talent from around the world.
OT: I would say the greatest opportunity is to embrace change. I actually don’t think it’s a threat. For those organisations that don’t look at what is happening around them, there is only one direction they will head in. For the vast majority of businesses, this change environment creates immense opportunity. We talk in this industry in very negative terms of regulatory change, but in reality there is nothing sacrosanct in the way we do things today. What we need to do is do it better and more effectively.
RW: Organisations need to unleash great resilience, change faster, have more rigorous thinking. Change is going to get faster and life is going to get more volatile. Just sitting there and doing things the way you’ve always done them is a very good recipe for extinction.