In the face of lasting challenges from the COVID-19 pandemic and the prospect of inflation and a possible global recession, robust Board of Directors Training becomes more relevant than ever. As 2023 unfolds, leaders and board members, backed by the comprehensive understanding provided by such training, must be proactive in recognizing and tackling emerging and enduring obstacles and opportunities. Here are the top 10 governance trends they should focus on in 2023.
1. Tenacious COVID experience
While many of us have put our masks away, the pandemic isn’t over. Waves continue to pop up. Most recently, a major flare-up in China prompted travel restrictions, supply chain pressures, and lower earnings for companies from Apple to Starbucks.
But just as board members must be mindful of the continued operational impacts of COVID, they also must pay attention to the permanent cultural shifts this period forced. Not only have we wrestled with a global health crisis, but the workforce also has confronted social unrest, threats to their safety nets, and upticks in mental health issues.
To understand the full impact on our culture, consider Maslow’s Hierarchy of Needs. The psychological framework outlines that our physiological and safety needs, along with a feeling of love and belonging, must be met before we can achieve self-esteem and our fullest potential. But many are missing those basic needs. They’re mourning the death of loved ones from COVID or struggling to pay for housing amid rent hikes.
In 2023, executive leaders must have a finger on the pulse of these ongoing stressors, and board members must lead intentionally to ensure that organizational culture considers the wellbeing of the humans who work for them. In this work, leaders can’t be passive.
2. ESG and Your Social Voice
ESG, which covers the environmental, social, and governance factors that guide how organizations increasingly operate, has been in the headlines in the last year — both in support of the strategy intended to ensure ethical operations and in opposition from those who claim it negatively impacts the free market.
Regardless of the headlines, however, board members must understand the concerns of their customers and workforce. And, when it comes to the environment, in Canada, the United States, the United Kingdom, and Australia, the majority of people are somewhat or very concerned that climate change will personally harm them during their lifetimes, according to the Pew Research Center. Organizations must proactively communicate that they care about the environment by celebrating their successes at whatever level is appropriate — from reducing the use of plastic water bottles in the office to going carbon neutral. Your stakeholders will embrace it, support it, and be drawn to you.
While the environmental part of ESG garners the most attention, the G in ESG — the ethical governance of organizations — is growing in visibility. This factor, in particular, is under a board’s purview. Board members must be careful not to get caught up in the latest online “governance noise” that aims to be provocative or alarming.
In 2023, remember to always lead with principle and purpose and be aware of your “social voice” — how your statements, actions, or silence send a clear message about who you are as an organization. Find your niche and proactively voice your social value, relevance, and identity on ESG matters.
3. The I in Equity, Diversity, and Inclusion
In the past three years, organizations have done a decent job checking the E and D boxes in Equity, Diversity, and Inclusion (EDI). The real issue that remains is I — inclusion. Now that you have a more diverse workforce, do underrepresented groups, including women or people of color, actually feel like they are an important and welcomed part of the organization? Do they see people like themselves in leadership roles or in the boardroom?
Employee engagement surveys can uncover inclusion issues, flagging whether diverse workers feel encouraged to innovate and participate in conversations at the same rate as their colleagues. So can workforce metrics, which reveal whether diverse employees have the same opportunities for promotion, leadership, and career development.
And that idea of inclusion carries over to the board, too. In 2023, board members should be focused on bringing diverse voices and perspectives to their membership as well — and ensuring that those new members aren’t just token representatives of a particular demographic, but leaders with the full respect and attention of everybody around the table.
4. Trust Bump or Bottoming Out
Public trust in institutions, including government and businesses, has been eroding for decades. But, amid the stress of the pandemic, some employers went above and beyond and now enjoy the opposite effect. Quickly moving to remote offices, supplying their workers with everything they needed, and retooling other processes to keep workers employed, they’re experiencing a “trust bump.”
In 2023, it’s critical for board members to understand whether they’re benefitting from that trust bump or experiencing a continued erosion in trust and how to either capitalize on it or fix it. A comparison of metrics from employee engagement surveys today and three years ago can uncover areas where trust might be flagging.
Any downturn in trust is an urgent matter. Board members and management teams must quickly work together to build a strategy to rebuild it. If you have a trust bump, consider it a competitive advantage to net both customers and talent. Harness this wonderful opportunity — PwC calls trust a business’s “most important assets” — to build on that cohesion and engagement to take the organization to the next level.
5. Technological Transformation Now and Later
Across industries, a digital transformation has reshaped longstanding business practices. For board members, it’s been a top priority for years as they oversee technology deployment, data integrity, and cybersecurity. But they also need to stay on top of the impact of new technologies that are emerging in the near horizon or beyond — the metaverse, Web 3.0, artificial intelligence, machine learning, blockchain, and cryptocurrency, among others.
The executive team, of course, must stay abreast of the latest developments’ impacts or potential benefits on operations. Meanwhile, board members must ensure they understand what these new technologies are. After all, if you don’t understand what blockchain or the metaverse is, how will you oversee management’s decision to adopt them?
In 2023, boards must have a frank assessment of their capacity in the relevant areas of technology and get the training and education they need to fill in any capacity gaps. One word of caution: As board members get into the nitty gritty of new technologies, it’s easy to start overstepping into management’s role. Remember, as a board member, your role is to use your knowledge at an oversight — not operational — level.
6. HR Scarcity and Expectations
There’s been pushback from Elon Musk and others who aren’t sold on the benefits of the work-at-home movement. Musk famously told his employees at Twitter and Tesla that if they want to work from home, they should “pretend” to work elsewhere.
But, the reality is that research tells us working remotely can boost productivity — by up to 77% when employees work from home a few times a month, according to a study by cloud solutions provider ConnectSolutions. And workers want flexibility — when offered to work remotely, 87% of workers say yes, according to McKinsey & Company.
Today’s labor market is a perfect storm for employers. They’re competing for a scarce resource — high-potential, high-performance employees. Some workers are quiet quitting or withdrawing from the workforce as they struggle with pandemic-related grief or act on their desire to feel valued and have a purpose at work. And, though inflation is putting pressure on organizational budgets, competition for workers is forcing salary increases. The Willis Tars Watson Salary Budget Planning Report forecasted that salaries will jump 4.6% in 2023.
As a crucial part of Board of Directors Training this year, board members and executives will need to reassess total rewards packages to retain and engage top talent. The right recognition package and professional development and non-compensation rewards, including the opportunity for flexibility and a focus on ensuring workers feel valued, will be critical.
7. From Succession Planning to a Succession Strategy
As learned in Board of Directors Training, traditionally, boards and senior management teams have been involved in succession planning — identifying specific individuals to replace leaders. The CEO would focus on the vice presidents. Board members would seek out potential executives to fill in C-suite openings. It was a bit like building out the bench strength of a sports team.
But research has told us that slotting specific people into specific positions is not the best approach. Leaders need to take a bigger picture look at their overall talent requirements.
In 2023, the combined effect of the tenacious COVID experience, business transformation, ESG, EDI, technological change, and human resources scarcity is to fundamentally change the way that boards think about the organization’s identity, purpose, and strategy. This newly unveiled identity, purpose, and strategy needs to directly inform the board’s approach to succession, taking a strategy-driven approach to succession planning, talent management, HR recruitment, and retention, aligning HR practices with the employee of the future.
We know that today’s workers want to be passionate about their job and their employer’s mission. At the board level, members must ensure the organization's mission, vision, and values paint a landscape that’s attractive to the right job seekers. And, when it comes to employee experience and benefits, board members also must provide strategic oversight to ensure the organization proactively offers the flexible and personalized benefits that workers expect.
8. Business Model Transformation
We’ve covered digital transformation, but organizations also have seen dramatic updates to their business models amid the pandemic. Some of these updates to people or processes are incremental, and others are sweeping reinventions of the business. In many cases, circumstances — the need to shift to remote work or find new suppliers — forced the transformation in a very short period of time because organizations had no choice. In some cases, the changes were considered for years but never implemented.
Any update to a business model has the potential to make a significant impact on an organization's growth, and board members must capitalize on this willingness to transform.
In 2023, applying their Board of Directors Training, board members should take a hard look at their business model and understand how it’s changed in the last three years. Which changes should be kept or discarded? To what extent are those transformations triggering the need for a different leadership style or a more intentionally paced implementation as the change is embedded into the organization? And how prepared are our culture, technology, strategy, and people for the next business model transformation?
9. The Inflation/Recession Balancing Act
With talk of the ongoing inflation and a looming recession, the microeconomic forecast might seem bleak. In uncertain times, it’s important to remember that recessions are increasingly selective. Some sectors get hit worse by economic downturns than others. And most experts are projecting that if a recession is in the offing, it likely won’t affect employment that much as so much unfilled capacity remains. That’s good news for many.
But nothing is certain in today’s climate. To survive what’s to come, organizations must be resilient — a vital component emphasized in Board of Directors Training. An emergent and adaptive strategy is required to weather whatever the central bank does with interest rates, what happens with inflation, whether we’re hit with a recession, and what effect that will have on demand for products and services. Building that resilient and adaptable organization must be a top priority for boards in 2023.
10. The Sweet Spot of Performance Metrics
You can’t fix what you don’t understand, and your suite of performance metrics can measure the success of every one of the previous nine trends we just outlined — ESG factors, institutional trust levels, employee engagement, and worker inclusion rates, among them.
In partnership with the CEO, as guided by Board of Directors Training, boards must ensure that the performance scorecard is actively refreshed and aligned with the organization’s current strategy and operations. In 2023, the board’s job is to set the direction for the goals and targets that the metrics will monitor. Focus on outcomes and results, not activities and processes.
Once you find that sweet spot in your metrics suite, measuring the impact of today’s challenges and demands on your organization, you’ll have the independent perspective to either gain assurance that your expectations are being met or pivot if they’re not.