Recent crises, while requiring immediate action, have paradoxically focused boards on the importance of purpose and long-term value creation. Leading experts and directors from different sectors share their strategies to foster long-term thinking, on a global scale.
When it comes to problems, boards are currently spoiled for choice. Climate change, soaring inflation, geopolitical tensions, digital transformation, labour shortages and supply chain issues are part of a long list of challenges. Many are of a scale and complexity that few directors have ever witnessed, and the pressure for solutions risks diverting attention from an organisation’s long-term vision.
The problems pose multifaceted challenges, with pain points in the short term and looming existential threats in the long run around funding, future-proofing and purpose.
Recent research from McKinsey & Co shows that directors are spending more time on board work due to operational challenges. However, a comparative analysis between its last survey in 2019 shows no material change in the impact a board’s decisions and activities have made on their organisations’ long-term value creation.
While no-one has the luxury to ignore these challenges, certain sectors will experience the pull of both forces, immediate problem-solving and strategic planning, more acutely.
Research from Deloitte Global shows boards are recalibrating their procedures for effectiveness. This comes as a response to a broad call for corporations to change their approach to shareholder primacy.
Via a series of roundtable discussions with senior US chairs and directors, the research found, “many boards have expanded their focus to consider the interests of customers, employees, suppliers and other stakeholders, while also focusing on generating long-term value for shareholders”.
Here, we speak to sector leaders in technology, education, social impact and human capital on their top lessons for directors reeling from the contextual chaos of 2022, and how to keep their head above the fray with a vision for tomorrow.
Technology: Dr Catherine Ball GAICD
Futurist, associate professor at ANU School of Engineering, former non-executive director Aviation Australia, Top 25 Women in Robotics Global (2016)
“Value has social implications, ethical implications, innovation and technological implications. Value has climate implications and political implications. And, if we can look at the idea of redefining what value means, that could be the start of a really powerful conversation.”
Dr Catherine Ball GAICD wants society to keep its innovation momentum. “The pandemic has given us pause,” she says, “I don’t want us to lose that, but I also don’t want us to slow down and it’s just not possible from a technology perspective.”
While long-term value creation may go hand-in-hand with a director’s day-to-day, she argues it has extraordinary potential for impact beyond the boardroom.
“Let’s focus on the problems to deliver long-term value,” she says. “Conservative, slow approaches to change will not survive the advent of exponential technologies and Industry 5.0”
The concept of Industry 5.0 is a relatively new one. According to the European Union, Industry 5.0, “provides a vision of industry that aims beyond efficiency and productivity as the sole goals and reinforces the role and the contribution of industry to society. The European Commission’s initiatives in this area span adopting a human-centric approach for digital technologies including artificial intelligence (AI) upskilling and reskilling European workers, particularly digital skills, modern, resource-efficient and sustainable industries and transition to a circular economy (for example, its Green Deal initiative) and delivering a globally competitive and world- leading industry by accelerating investment in research and innovation.
Its activities link tightly with Ball’s core contention.
“Value has social, ethical, innovation and technological implications,” she says. “Value has climate implications and political implications. And, if we can look at the idea of redefining what value means, that could be the start of a really powerful conversation.”
How can we apply this ethos practically to emergent challenges? For Ball, solutions present themselves when a problem is thoroughly understood.
“If we can understand the multifaceted nature of a problem, rather than just the ways that we can fix it, we’ll stop buying square pegs for round holes and whacking them hard enough until they fit.”
What do we need to give up in order to create the change that we need to see? This is a question she suggests more directors should ask when embedding long-term thinking into organisational strategy.
“For directors, this comes down to a financial cost,” says Ball. “What are we willing to pay to have long-termism embedded in our companies? But, to quote Star Wars, we need to dump the garbage before we go to light- speed, and this means exfoliating some of those business models that were just never going to work in a post-pandemic economy. The supply chain model of importing cheap stuff and expecting it to arrive quickly from overseas is just one of them.”
Moving with the times
The concept of light-speed may be a challenge for many boards, but, in her new book Converge, Ball considers the potential of our world as technology and humanity collide.
“If you are a director who can’t see that changes are coming, or you’re not at least willing to listen to the people who can see the changes coming, then you need to step aside,” she says. “Change is the only thing we can be sure is going to happen. We are moving from the Internet of Things to the Internet of Bodies because of implantables. We may have drone transport in Brisbane for the 2032 Paralympic and Olympic Games. We will have all of these things, because they’re already here and they’re just now starting to scale.”
To remain focused on the big picture, Ball says boards require more directors with a sound level of STEM literacy. “Only about 10 per cent of the people who are in control of our stock exchange understand fundamentally the technologies that are in control of 80 per cent of global GDP,” she says. “If that is not a diversity issue at board level, I don’t know how else to describe one, quite frankly.”
Investing in innovation
Ball reflects on a recent conversation that she says highlights the limitations of short-term thinking, where a senior leader considered the restrictions in their sector, healthcare, caused by staff shortages.
Ball posed a different solution. “If there was an AI system where someone was given a wearable that red-flagged that the nurses had missed a particular test at a particular time, and that red flag was put into a system for a doctor in a different department, we’d be more likely to address failings in the system.”
She says this scenario can be translated into the business environment.
“How fast are we at using AI to bring back local manufacturing in Australia?” she asks. “How are we becoming the solar battery pack for South East Asia?”
Another question is how leaders can allow for this level of innovation. Ball says it all comes down to “collaboration globally with our friends where we have free-trade agreements, and recognising the power of change and the power of doing things differently”.
Social Impact: Paul Ronalds
Founder and CEO of Save the Children Global Ventures, non-executive director for the Centre for Social Impact
“It can’t just be about the shiny new things. We need to ensure we’re thinking about innovation in a holistic way and that includes constantly improving how you approach current markets and current products, as well as thinking about radical transformation through new products and entering new markets.”
Save the Children Global Ventures sets out to harness the investment power of philanthropic, corporate and high-net-worth partners to fund impact-led startups. Ronalds says that while most organisations are feeling the tension between short-term pressure and long-term goals, the humanitarian sector faces “particularly acute challenges”.
“At a board level, it is literally a life-or-death trade-off between how much money is put into humanitarian funding, which will save lives in the short term, but may not help resolve the issue in the long term, and may undermine the future viability of an organisation like Save the Children,” he says. “I see some boards, even in our sector, who don’t really grapple with the tension between the short and long term. The preference is often to err towards the side of short-termism because almost always, the urgent crowds out the important.”
At Save the Children, embedding long-term thinking into the organisation’s strategy has included the development of a new funding mix and investing in what Ronalds describes as “continuous improvement”.
“It can’t just be about the shiny new things,” he says. “We need to ensure we’re thinking about innovation in a holistic way and that includes constantly improving how you approach current markets and current products, as well as thinking about radical transformation through new products and entering new markets. Boards should be coming back to management teams and asking, have we got the right balance of investment across these areas?”
Eyes on the (long-term) prize
How did a 100-year-old charity like Save the Children score a place on Australian Financial Review’s 2022 Most Innovative Companies list? Paul Ronalds puts it down to a new funding model that addresses a long-term humanitarian need. Save the Children Australia was ranked ninth in the government, education and not-for- profit category for its Impact Investment Fund, which is the first of its kind in the country’s NFP sector. It raises funding from investors to provide loans and equity investments to enterprises that are directly improving the lives of vulnerable children and families.
Funding a new approach
Ronalds served as CEO of Save the Children Australia for nine years. In 2020, he founded Save the Children Global Ventures, which administers the fund, after securing backing from insurance giant QBE and a range of existing supporters to raise $7.4m. To date, the fund has invested in six innovative companies across edtech, health tech and data science — focusing on fundraising and child protection.
“Our traditional funding model and methods, such as government grants and private philanthropy, are under pressure,” says Ronalds. “Giving to overseas aid in Australia has been declining since the 2004 tsunami in Asia, but we have experienced increasing demands for our services over this period. At the same time, we could see that there were very large, alternative pools of funding we were not tapping into at all.”
Data from the Global Impact Investing Network shows the impact investing market has reached more than US$1 trillion worldwide and represents a valuable source of patient capital for funding long-term innovation.
“The average grant to Save the Children is only about 18 months long,” says Ronalds. “We all know you cannot create true innovation and take it to scale in that time, so we need to find these pools of patient capital to help us fund things like digital transformation.”
He says the capital will also help the charity meet growing stakeholder expectations. “When there is a humanitarian crisis, we see criticism that aid agencies are not responding quickly enough and there are expectations around the use of technology and demonstrating ever- more rigorous evidence to support our impact. These are often quite reasonable expectations, but, in the overall context of a humanitarian organisation, you can see where that perfect storm of disruption starts to come from when your financial model, the demand for your services and the expectations and costs associated with delivering those services are simultaneously under pressure.”
Ronalds says his understanding of governance has shifted in recent years. “I’m much more conscious of making sure that I am balancing the long-term strategic challenges and I’m placing a lot more pressure on the management teams I’m working with to make sure that they’re balancing them, too. Many CEOs often feel swamped right now, but one of the many roles of board members is to help management maintain sufficient focus on the long term, despite ongoing crises. The aid development sector has certainly seen its constant share of ongoing crises that could easily distract management from the big picture.”
Education: Professor Margaret Gardner AC FAICD
Monash University president and vice- chancellor, and chair of Group of Eight Universities
“Student numbers will go up or down and costs are getting higher, but the key thing is that we have purpose. We know what we are committed to doing, we know why we are doing it. And it’s important. That’s the long term, that’s the thing that matters.”
Monash was delivering education through digital channels long before the pandemic, but Gardner says the scale and impact of the crisis demonstrated the need for both clear vision over the long term and urgent short-term solutions to new challenges.
During the lockdown period, Monash developed a 10-year strategic plan called Impact 2030, which focuses on the purpose of its education and research and how they may contribute to the betterment of communities. Gardner says much of the strategy focuses on the intrinsic nature of Monash.
“We are deeply international and that makes us a very unusual university,” she says. “We have a series of campuses outside Australia and are building them into a network — so we truly understand what is international about education and international about research.”
Impact 2030 includes Monash’s flagship international study initiative, the Global Immersion Guarantee, a funded, two-week fieldwork elective unit that takes students to one of six countries at the end of their first year.
“This says to our students, you will have an experience where you think about the world, you work with others and you are in a place other than your home campus,” says Gardner.
As part of its 10-year strategy, Monash is also giving all undergraduates an opportunity to join its Generator program that fosters startups and entrepreneurial thinking.
“To be excellent, international, enterprising and inclusive are the things that make Monash Monash,” says Gardner. “But our Impact 2030 strategy commits us to a bigger purpose of addressing three global challenges of climate change, geopolitical insecurity and how we foster thriving communities.”
Aligning stakeholders around Impact 2030 did not diminish the urgency of the short-term challenges the university faced. A crisis kept the university “on its toes” for more than two years, says Gardner.
Australia’s higher education sector was among the worst hit during the pandemic, with border closures impacting international student numbers and slashing revenue by almost half. International education generated $40.3b in export income in 2019, according to ABS data, but that figure declined to $22.5b in 2021.
At Monash’s Australian campuses, international students comprise about a third of all enrolees. However, Gardner says the crisis went well beyond the financial loss. “How did we deal with research, with education, with the students? What [could] we tell them about what was available to them and what would happen next, when we didn’t know either?”
When Australia’s borders closed in the early months of 2020, Monash put a crisis management committee into action, which remained in session for the next two years. “This is not how you normally think of crises,” says Gardner. “But we could not predict with any real certainty what would happen — and, unlike the Northern Hemisphere universities, all of our international students were due to arrive when the pandemic first hit.”
Gardner explains that the university also put together a taskforce at the start of the crisis to contact its international students. “In 36 hours, we tracked everybody and we were speaking to them about how they could continue to study,” she says. “We put up 7000 individualised study plans and had to keep changing the advice that we put out to students in response to changing government directives. The one thing we knew was that we had a decline in the number of international students joining us and that, because commencements fell dramatically in 2020, with each year we would have fewer international students enrolled because students are typically here for a three- to four-year period. When borders opened, it didn’t mean that the challenge was over. This is the year when we have the least number of international students enrolled.”
Fit for purpose
Gardner says a crisis like the pandemic focuses the mind on what matters most. “Sometimes you can say, oh, we should be really worried about the crisis. But often you say, let’s be clear about the bigger goals we’re trying to achieve. Student numbers will go up or down and costs are getting higher, but the key thing is that we have purpose. We know what we are committed to doing, we know why we are doing it. And it’s important. That’s the long term, that’s the thing that matters.”
Human capital: Lynn Dang
Board member of Australia for UNHCR and HR director for Microsoft Singapore
“My questions to the senior leadership team and our CEO are always around what’s happening within employee engagement. How is morale? How do our people see their impact on our overall mission? Who will we be developing as our future senior leaders?”
“Boards need to ensure they can bring different capabilities and lived experiences to the table, so they can ask a wider range of questions,” says Dang, who joined the board of Australia for UNHCR in 2019.
In 2021, Australia for UNHCR — a NFP organisation with a long-term vision to empower refugees around the world through private fundraising — raised $43m for UNHCR’s global humanitarian programs, an increase of 30 per cent on the previous year. The body also provided the largest private sector contribution to the UNHCR’s emergency response in Afghanistan, which it says exceeded funds pledged by many governments.
“Every time I sit with our board and with senior management, we acknowledge that we exist for a very unfortunate reason,” says Dang. “So, how do we continue to be relevant and continue to serve a global market?”
She says much of the answer rests in ensuring that the charity’s workforce of almost 70 people remain engaged with its long-term vision. “I know this is because I come from an HR background and I’ve always advocated for more people-and-culture conversations in the boardroom,” she says. “Organisations in every sector are facing the challenge of talent attraction and retention, and people not understanding the overall vision and the role that they play in it.
“My questions to the senior leadership team and our CEO are always around what’s happening within employee engagement. How is morale? How do our people see their impact on our overall mission? Who will we be developing as our future senior leaders? In the past, these were not questions boards asked CEOs. but I certainly do, because I see them as very important topics for us to think about for the long term.”
Dang describes herself as a “five-year planning type of person”. “My planning has been known to stretch to 10 years, and maybe that’s because I work in HR and the nature of work is always shifting, so you have to think ahead.”
Her own 10-year goal for Australia for UNHCR is that it continues to grow its financial resources and help to create “a space where refugees and displaced people are just seen as ordinary people facing extraordinary circumstances and who need help”.
“I also want Australia for UNHCR to be seen as the best place to work in the not-for-profit space,” she adds. “This is what underpins success for the long term.”
Data from the latest global trends report from UNHCR shows that at the end of 2021, more than 89 million people worldwide had been forced to flee their homes due to conflict, violence, fear of persecution and human rights violations. This is more than double the 42.7 million people forcibly displaced a decade ago, and the most since World War II.
“I cannot think of an organisation that needs to exist for the long term and continue to create long-term value more than UNHCR,” says Dang. “The number of displaced people globally is only increasing due to conflict, and climate change is also going to add to the number significantly.”
She understands the current scale of a humanitarian crisis and the need for a long- term vision on a deeply personal level. When Dang was four years old, her family was forced to flee Saigon in the aftermath of the Vietnam War, finding refuge at the Pulau Bidong UNHCR camp in Malaysia. “We lived there for almost a year before we were settled in Australia,” she says. “We left Vietnam in a boat, so when I hear of refugees fleeing to safety in a boat, it breaks my heart. I feel a strong need to use my privilege and skills to give back in a meaningful way.”
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