With rapid technological, social and environmental change, boards should be preparing for the future. We outline the major issues directors need to consider.
One of the most significant changes directors need to prepare for concerns the future of work. Which tasks will still be required? Who will carry them out, and what skills will they need? What environments will people work in?
The impact of these changes on governance is profound. The way organisations are governed must adapt and directors will need to take informed and considered steps to take advantage of the opportunities presented. Governance must be flexible in its response to the changing nature of work as well as providing oversight and strategic direction for new ways of working.
The impact of the future of work varies across industries, geographies and business models. To give structure to this complex topic, this guide considers the future of work from three perspectives — the nature and type of work being done, workforce capabilities and composition and the physical, digital, cultural and structural environments required to carry out the work.
The impact of these changes for directors needs to be examined through six lenses based on the key roles of the board:
- Strategy development
- Allocation of resources required to achieve the strategy
- Monitoring organisation performance against strategies and targets
- Legal and regulatory compliance
- Risk management framework
- Accountability reporting of progress and aligning the collective interests of stakeholders.
New technologies and shifting consumer behaviours are redefining what work tasks are required to create value. Manual or physical tasks are still necessary in many industries, but these no longer require as much human input. Instead, employment is more concentrated in service-based tasks. As a result, tasks and roles are less focused on technical and mechanical requirements. Work tasks increasingly require a combination of technical and soft skills to create value.
Evidence (or data) is becoming the basis of more tasks, particularly those that include elements of decision-making or judgement. This evidence is complemented by a growing recognition of the need to look beyond the balance sheet to longer-term value generation. Many businesses now look to align work tasks to an overarching “purpose” and demand is growing for companies to operate in a socially and environmentally responsible way.
Five questions to consider
- Have we quantified what work is being done and how it might be affected by developments in technology?
- How is our data protected against misuse, damage, loss or theft?
- How do we incorporate considerations of purpose into decision-making?
- How do we develop the existing workforce to build capacity in alignment with skills needs?
- Do we recognise development and use of soft skills in our incentive and reward frameworks?
The new workforce includes human and mechanical workers, varying qualifications and skills, and new models of working.
Automation is one of the most commonly discussed topics in the future of work, but augmentation better describes the reality. With technology increasingly able to do manual, repetitive tasks more efficiently, new jobs will be created.
Human workers will focus on higher-value-add roles reliant on skills such as emotional intelligence, judgement and empathy — and their ability to do so will be enhanced through augmentation. Individuals and workplaces will need to invest in continuous learning, rather than “set and forget” qualifications and ad hoc training.
Contingent work, in particular, has become more popular. Simultaneously, workplaces are becoming more diverse across gender, age, ethnicity and sexuality.
Five questions to consider
- Are frameworks in place to support workers as more machines come into the workplace?
- What external education/technology/advisory partners can help support the transition and sustainability of this new workforce?
- How will we maintain workforce culture as more independent contractors begin to replace the traditional full-time workforce?
- Do we need a workforce advisory panel or other mechanism to give insight to the board?
- Have we defined our current skills needs and forecast how these might change?
The physical, digital and organisational context of work occurs includes facilities, infrastructure and technologies, as well as components such as culture and structure. Several of the trends influencing the form of workplaces have been evolving for some time. For example, most large organisations already recognise the costs of silo structures, and remote working has been on the rise for over a decade. It’s also now widely accepted that leaders who display personal power rather than just “pulling rank” are more effective in their roles.
Other trends, however, are still emerging. With consumer preferences evolving rapidly, there is a new focus on organisational agility, and the ability to react quickly to external change. Many of these trends pose challenges for business. Boards are typically not designed for rapid response and remote workforces can make it more difficult to monitor performance, security and health and safety.
However, directors who successfully embrace future workplaces can foster more innovation and informed risk-taking. It can mean better staff engagement and a stronger pipeline of future leaders.
Five questions to consider
- How do our policies, processes and systems encourage or discourage silos in the business?
- Are our high-level strategic goals distributed across the performance framework in a way that incentivises collaboration?
- Is innovation on our board agenda and do we have the data we need to discuss it?
- How do we measure innovation and is it incentivised and rewarded?
- What is our attitude to failure as a business?
Five trends for the board agenda
- AI and outsourcing
- Human capital
- Wellbeing at work
- Move the metrics
The current trend of outsourcing labour to other parts of the world may reverse. With new AI developing each day, demand for cost-effective labour may fall. Freight costs and proximity to other parts of the supply chain may drive decisions about where to locate workforces. These technologies are most effective when they complement, not replace, humans.
Human capital is a core asset for businesses and boards will need to recognise its value. Only one in 10 businesses nominate staff as a top priority for future planning.
Retraining enhances a company’s public reputation and makes economic sense. At the 2017 World Economic Forum, 80 per cent of CEOs investing in AI pledged to retrain existing staff.
Purpose-led businesses are more successful, more likely to grow in revenue and expand into new markets. Directors should seek to define, codify and monitor the impact of business purpose.
In 2017, 88 per cent of Australasian businesses said practising social responsibility helped them build their reputation; 78 per cent said it helped brand positioning. Institutional investors expect companies to have a solid long-term vision. Businesses that don’t pay attention to community expectations may be penalised by investors, consumers and governments.
Boards must consider how their decisions impact employee wellbeing, position it as a performance issue and make resources available to managers. Businesses with the best wellbeing programs see fewer sick days per year and higher productivity.
Directors should consider new ways to align the organisation to its purpose and social and economic impact and check whether traditional metrics impede innovative approaches.
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