It has never been more important for board members and the C-suite to align on the issues that pose the greatest challenges to their organizations. New research shows that while boards and C-suites align on governance priorities in the boardroom, a handful of “perception gaps”—specifically concerning how CFOs and directors address and prioritize talent-related growth impediments, crisis management, and innovation—demand finance leaders’ attention.
Research reveals where CFOs and boards align—and diverge—on priorities and risks
The inaugural Global Board Governance Survey—developed by Protiviti, BoardProspects and Broadridge—offers insights regarding the board’s priorities and governance practices from the different perspectives of 1,000-plus directors (including those with dual director/executive roles) and C-suite leaders.
Overall, the survey findings show that board members and C-suite executives view the following challenges as posing the greatest threats to the growth of their organizations:
- Talent (recruiting, retention and skilling)
- Access to capital and/or liquidity
- New and emerging technologies
- Central bank monetary policy, inflation and rising labor costs driving economic uncertainty
- Rapid change from disruptive innovation
However, when comparing the responses of CFO participants to the overall results and responses from board members, four points of significant divergence are evident:
- Board members and CEOs are more likely than CFOs to view recruiting, retention and skilling as a significant threat to the organization’s growth prospects during the next two to three years.
- CFOs are much more likely to identify the impact of compliance/regulatory requirements, including data privacy, as a top threat to organizational growth.
- According to responses to the survey question regarding the top three priorities for boards, directors and CEOs rate innovation, along with research and development, at a higher level than CFOs.
- Compared with the views of CFOs, board members are more concerned that they do not devote enough time and attention to crisis management activities, including contingency plans and scenario planning.
These gaps in perception between the board, CEOs and CFOs require thoughtful consideration from finance leaders, who can get a firmer sense for how to align themselves more effectively with directors and CEOs by addressing the following questions:
Do I have a sufficiently comprehensive view of the board’s priorities and the threats directors perceive as potentially impeding our organization's growth?
As they consider this question, CFOs should assess whether their own biases and areas of emphasis (e.g., regulatory compliance) might color their view of what the board’s priorities should be.
Should I refocus the information I share with board members and/or how I communicate with directors during meetings and in offline discussions?
Rigorous, objective reviews of board packets and presentations may reveal to CFOs new ways to make written and face-to-face communications with directors more succinct and compelling—as well as aligned with their real interests.
Are there opportunities for me to bridge, or clarify approaches to, related priorities?
Board members view crisis management and scenario planning as an area to which they do not devote sufficient time and attention. CFOs view compliance requirements, including data privacy, as a top board priority. Can CFOs discuss data-breach scenarios (or the fallout of a major compliance failure) in the context of issues requiring contingency plans when the board addresses crisis management? Similarly, can CFOs ensure directors have visibility into the finance organization’s use of advanced technologies and their outputs that support the board’s emphasis on innovation?
In addition to addressing these questions, finance leaders can foster greater alignment with board members through specific steps, such as the following:
Elevate and expand their involvement in managing talent risks
In recent years, CFOs have enhanced and refined how they address talent-related risks, particularly in the finance function. In fact, the ability to attract, develop and retain top talent, manage shifts in labor expectations, and address succession challenges represents a top concern for CFOs this year. That said, CEOs and board members in this recent study view talent as one of the top threats to the organization’s short-term growth prospects; CFOs do not.
If this gap exists in the boardroom, it behooves the CFO to engage with the board in focused strategic conversations regarding the shortage of talent and skilled labor. Boards will be evaluating and advising executive leaders on investments needed to upgrade the organization’s talent strategy and talent management so that they are aligned with market realities and the company’s overall strategy. CFOs should also expect their boards to subject succession planning and leadership development activities to more stringent oversight.
Fortunately, the survey indicates that CFOs, CEOs and boards agree that corporate culture warrants more board attention. This alignment on corporate culture can be leveraged to build and refine an authentic, connected and transparent culture that turbocharges recruiting, reskilling and retention activities.
Prioritize crisis management
Board members see a need to devote more time and attention to crisis management. This point of view likely associates the specter of crises with the disruptive change and uncertainty from surging geopolitical, economic, environmental, social and cyber-related threats, as well as the potential disruption from the record number of national elections occurring worldwide this year. CFOs should leverage and explain their risk management, scenario planning and continuity management expertise and activities to support the board’s desire to better address various crisis management scenarios. More importantly, they should be prepared to explain what the company is doing in evaluating plausible as well as extreme scenarios affecting execution of the company’s strategy.
Make a stronger case for organizational resilience
Boards and C-suite leaders also need to become more aligned on how they prioritize organizational resilience. Executives rate board preparedness in this area to be lower than do directors. This disconnect can result in insufficient resources allocated to third-party risk management, innovation, cybersecurity and other areas that bolster resilience. CFOs should ensure that their board communications include periodic risk updates to the board while clearly articulating how the management of these risks generates value and preserves the company’s reputation, brand image and market permission to play.
Enable director preparedness and engagement
The survey results show that CFOs and other C-suite respondents are less likely to agree that board members are sufficiently prepared for meetings and are constructively engaged during those sessions. CFOs can help facilitate board preparedness and engagement by being more selective and timely in submitting pre-meeting materials to the board. CFOs and their colleagues can also encourage post-meeting feedback from directors regarding the quality of meeting materials.
To be sure, the primary difficulty of establishing and sustaining alignment between the CFO and the board stems from the high volume of strategic and operational risks the organization confronts. Overcoming this challenge requires better communications as opposed to a major shift in mindset. CFOs are well-positioned to assume a leading role in board discussions of the above topics, including the implications of major crises in recent years. These interactions bolster the critical communications skills that CFOs need to ascend to the CEO position. In other words, getting the C-suite and board members on the same page regarding board priorities is a critical imperative. CFOs can contribute considerable value in achieving this alignment.
