Boards are responsible for the oversight of organizations that are increasingly reliant on technology to support the execution of their strategic plans.
Consider that corporations tap into the Internet of Things (IOT) for asset management, energy efficiencies, warehouse inventory systems, manufacturing operations, security, transportation automation, and even automated healthcare monitoring and treatment.
Individuals and companies alike have been turning to artificial intelligence (AI) for some time, in many instances without necessarily acknowledging the extent of our reliance. Even so, the prevalence of AI is on the rise and it involves more than personal assistants. It’s just last year that the Royal Bank of Scotland introduced Cora, a “digital human,” as a pilot program. “Cora” has pierced ears and can convey facial expressions while responding to an initial range of 200 banking-related questions over clients’ smartphones, computer screens and tablets.
If you find yourself in a hospital ward, you just might be equipped with wearable technology along with your gown and bed. In wards using such systems, a nurse will wrap an enhanced Band-Aid-style strip around your pinky in order to transmit your vitals to both a bedside monitor and the nursing station. Elsewhere in the healthcare sector, AI is used to aid in the diagnosis of cancer and other diseases.
Customer relationship management (CRM) providers, meanwhile, have been investing in the integration of AI with their products. The goal is to enable CRM systems to centralize and capitalize on IOT data. Across the globe, such digital disruption is escalating.
Even a casual surveillance of this landscape begs the question: How are boards, the entities that shareholders charge with responsibility for organizational oversight, doing on the technological adaptation front? Are boards keeping pace?
How to Leverage Board Technology in the Boardroom
For some governance professionals, it will have been an impressive accomplishment – a true red-letter
day – when their boards committed to using a portal and doing away with hard copy agenda packages. I know of one instance in which a governance professional and board chair placed the portal concept on a board agenda to mixed reaction. One director expressed polite but firm resistance. The governance professional astutely recommended including that resister on the working group that assessed how (and whether) to proceed. That director’s voice and concerns were heard and respected during the process, and the director eventually became one of the greatest advocates of the new technology.
It’s not uncommon for people to resist change, or to accept it only incrementally. These factors may be reflected in Forrester Consulting’s October 2018 report, Directors’ Digital Divide: Boardroom Practices Aren’t Keeping Pace With Technology.
The report follows the consulting firm’s April 2018 study commissioned by Diligent Corporation. In the process, Forrester surveyed 411 governance professionals across 11 countries in North America, Europe and Asia Pacific. Survey participants included board directors, corporate secretaries, general counsels, C-level executives, senior IT leaders and investor relations staff.
Forrester’s report showed that, of the three regions surveyed, board portal software usage is highest in Asia Pacific, at 54%. Usage rates are lowest among North American boards, at 32%, while 48% of the study’s European boards rely on portals.
The study found that, although boards have increasingly adopted portals, the extent to which they capitalize on them is limited. While using your portal to publish or access meeting packages is beneficial for meeting preparation, such functionality is only one aspect of good governance. Limiting your portal use to meeting packages also fails to fully capitalize on an organization’s financial investment in portal software. Forrester’s study found that, overall, less than a third of governance responsibilities are currently being solved with technology.
These findings highlight yet another opportunity for governance professionals to introduce changes that can further elevate board performance. Consider that your board wants to make the best possible decisions. That implies providing the board with access to the right data. Boards want to understand risks, and they also need to ensure that the organizations they lead meet compliance requirements.
How Board Management Technology Can Provide Insights
Forrester found that just over a third of all boards think that having a better understanding of the areas of greatest risk to their board would be the most impactful if solved with technology. This suggests an opportunity to incorporate Enterprise Governance Management (EGM), the application of technical tools and resources to address governance needs. Leveraging integrated technology can surface insights that will enable the board to make better-informed decisions.
When contemplating risks, compliance may well come to mind. Through its automation of process chains,
Diligent’s Entity Management platform positions an organization to remain compliant with domestic and global regulations. The system serves as a secure corporate data library. Your organization can create a signing authority data library that enables signing and filing of legal documentation.
Cybersecurity is a widely recognized risk, and directors want to improve their overall security understanding. Forrester found that, overall, 87% of boards are mildly to extremely concerned about the security of their board data-sharing and communications. While 77% of North American boards are at least mildly concerned about this security, the numbers rise to 87% of European boards and 92% of boards in Asia Pacific.
These are valid concerns, as hackers are known to specifically target directors and those who support C-level executives. Fifty-six percent of board members use personal email for their board communications, and they’re in good company. The Forrester study found that 51% of C-level executives and 50% of governance professionals do the same.
What Tools Can Help Improve Boardroom Communication
A solution? Rather than relying on personal or business email, you and your board can collaborate in real time through Diligent Messenger, another component of Enterprise Governance Management (EGM). This innovation enables you to message one another and share attachments in real time, within a secure environment. Diligent Messenger functions as a stand-alone product, as well as integrating seamlessly with Diligent Boards™.
Directors can sometimes feel challenged in not knowing what they don’t know. Technology can be leveraged to resolve this issue, and yet only 23% of the boards involved in the study said that their responsibility for understanding the greatest areas of risk had already been solved at their organizations with technology. Then there’s insight on company operations, such as reported HR incidents. A mere 24% of boards said that this particular governance responsibility had been solved with technology.
It’s worth contemplating this in tandem with the October 2018 release of the PwC 2018 Annual Corporate Directors Survey. Among that survey’s findings? When it comes to assessing corporate culture, 64% of directors rely on gut feelings based on their interactions with management. Sixty-three percent turn to employee turnover stats for the same purpose. Yet, less than a third of directors consider either approach useful. In fact, employee engagement survey results, along with executives’ feedback results and exit interview debriefs results, topped directors’ list of metrics that are most useful in assessing corporate culture.
By introducing discussion of EGM practices, you can position your board to more readily and comprehensively identify areas of potential risk. As a board builds depth in its understanding of risks, it also gains greater insights on the organization’s operations.
The boardroom is evolving, as are expectations of directors. You and your board may want to assess whether the board’s resources are keeping pace with these expectations and with the complexities of governance. Ultimately, enabling the board to leverage technology for better insights can yield better boardroom performance.