Keeping traditional administrative boards in tune with the ongoing digital revolution is not something that can be left only to the young tech-guns, or so called «digital nerds,» Guido Schilling argues in an essay for finews.first.
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The automation and data exchange process, or Industry 4.0, is now a reality for most industrial sectors. Companies now face rapid technical change, be it through shrinking margins in established business areas, or the entry of new market players using digital business models.
At the same time, however, digitalization offers companies the opportunity of reorganizing both internally and in their client relationships. This poses a major challenge not only for management, but also for the board of directors or administrative board, where the ultimate responsibility for leading the firm lies.
«Who is qualified to bring the necessary know-how to the board?»
The board needs to recognize and react to strategic risks to ensure the long-term profitability of the company. For this it needs a profound understanding of the changes needed for the business model and the organization, which the digital transformation requires.
Only then can it develop into a useful sparring partner for management in developing the company’s future. Who, however, is qualified to bring the necessary know-how to the board?
Three strategies are feasible: The board can bring in new digitally-savvy members from outside, it can set up a digital advisory council, or provide current members with digital training. Achieving the best results depend on a number of variables, like the skills possessed by the current board and the opportunity for personnel changes.
Also the size and traditional nature of the company’s base and the degree of cooperation between board and management, could play a role.
«Many of them have demonstrated aggressive growth strategies»
The first option has drawn most support, with experts calling for greater representation of younger, more digitally attuned members. Startup-founders should be given easier access to administrative boards, and for young companies with a modern work culture this could be the right choice.
Without doubt successful startup-founders have the necessary business acumen and experience from which a board of directors could benefit. Many of them have been able to demonstrate aggressive growth strategies in their search for «hockey stick growth.» Their understanding of major digital trends and experience with IT projects are also major advantages.
«A problem is the availability of such 30- to 50-year-olds»
However I am also convinced such expertise is not only to be found among so-called «digital nerds,», or entrepreneurs under 40 years of age. The important issue is how big and what sort of company such «nerds» have directed. Managing a startup comprising 50 highly motivated High-Potentials is very different from driving change in a 3,000-strong traditionally orientated undertaking.
Someone never exposed to managing a large corporation often lacks understanding for its complexities and the lack of room for maneuver: achieving change takes time.
In addition traditional companies differ sharply from young enterprises in the age-makeup of both management and staff, and decision making and its communication is often easier in small enterprises where most staff are on personal terms.
There is the danger an Internet-of-Things-Guru will bring attractive sounding ideas to the table, but will be unable to realize them in practice.
Another problem is the availability of such 30- to 50-year-olds, who simply don’t have the time for supervisory board mandates. Flexibility and availability are key during challenging periods of change, both within the board, and in its relationship with management.
«The Swiss economy has lived through crises, globalization and sector-specific shocks»
Furthermore, young, well connected entrepreneurs who bring the right skills, often also bring conflicts of interest with them. It is also argued that young digitally savvy board members would strengthen diversity through more thorough discussion and better identification of risk.
However a greater mix of age and skill also carries its price since it takes time to integrate new members, particularly when they come from a different background or industry. One should also not forget that diversity can depend on the personalities and their individual performance spectrums.
Digital transformation depends in the first instance on people who bring experience of exposure to change processes, and their ability to take considered decisions in times of uncertainty.
The Swiss economy has lived through currency crises, like the latest franc appreciation, globalization, the 1970s oil crisis, and sector specific shocks like those in the watch industry during the quartz revolution and the most recent slowdown in China.
«A pair of steady hands worth its weight in gold»
Such upheavals have always put companies under existential pressures and where a circumspect supervisory board has been vital for their survival. A board needs to work with management in developing new business areas and stabilizing existing ones: like operating without an anesthetic. A pair of steady hands is worth its weight in gold.
Responsibility for a far-reaching transformation of a company requires not only technical, but also organizational and social skills. Setting future strategic goals is complicated by the fact that the fruits of the exercise will only become apparent in the distant future.
That is why good communication, sensibility and honesty are demanded from a board member, and the entire board needs to choose the right people to oversee the transformation in management.
Guido Schilling is managing partner of the eponymous Zurich-based executive search firm. After studying business economics, he held several executive roles in multinational corporations before joining the search firm as a partner in 1987. He is the founding president of the Rotary Club Turicum in Zurich.
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