Dispensing with the past
The pharma boards of the future
The PMLive article, “Dispensing with the past,” looked at the firm’s research on "Insights into the future of top pharma boards." Russell Reynolds Associates Consultant Christopher Burrows and Global Knowledge Leader Saule Serikova co-authored this piece which shared insights from the research. The article is excerpted below.
To be successful in the changing healthcare environment, pharmaceutical companies need an honest self-assessment. Is the board prepared for the future? Does it have the right structure, mix of skills and experience required to steer the company most effectively in the years ahead?
The driving forces behind healthcare in general, and the pharmaceutical industry in particular - technology, demographics, consumer expectations and affordability, have been challenging and enduring over the past few decades. Yet the current environment has brought accelerating change and complexity, and by implication, pharma companies need to look for innovative new approaches and cutting-edge strategies for success.
Recent global research undertaken by Russell Reynolds Associates (RRA) examines the questions of whether the board leadership of pharma companies is in the best position to face current and future challenges and what the best ways to enhance board effectiveness are. The study is based on an analysis of the board composition of the top 15 pharma companies and their 180 board directors, but the findings and insights could be applicable to a broader range of companies in the pharma industry and in healthcare in general.
Enriched by a series of interviews with executive and non-executive board directors as well as ongoing consulting to the pharma industry at the most senior level, five categories of insights into board structure and composition can be deduced.
1. Board remit and effectiveness
Pharma boards are performing - and need to perform - an increasingly vital role in debating and challenging company strategy. Yet many directors of major public companies indicate that issues relating to governance and financial risk still seem to take up excessive amounts of the agenda and time in board meetings, leaving insufficient opportunity to discuss and debate strategy and innovation.
An effective board empowers a company to develop and execute robust strategic responses to arising and enduring challenges. Three elements will be important in defining a board's effectiveness - corporate strategy (clarity, alignment, contribution), composition (competencies, diversity, both individual and collective board performance) and structure and processes (committees, meeting mechanics, agenda). These three elements are bound together by board culture, characterised by mutual respect, collaboration and transparency as well as an open and independent mindset, constructive challenge, licence to dissent and performance orientation.
Boards need to prioritise the challenges and prepare specific, actionable recommendations for enhancing each of the relevant areas. A benchmark against competitors and leading regional and global companies is also highly recommended.
2. Evolutionary (not revolutionary) change
In response to particular threats and opportunities, the boards of pharma companies must be able to bring a diverse set of competencies, experiences and perspectives to bear. Board members need to understand the current challenges and be able to steer both strategic development and company transformation. It is unlikely that changes in board composition will be either revolutionary or dramatic - but we will surely see evolutionary change.
A closer look at the current board composition, especially the age of individual board directors and their tenure on their board, suggest that 20-40% of pharma board seats could turn over in the next few years. This is an opportunity for pharma companies to create more diverse boards - ones that reflect the changes in the environment, the global patient base and embody a wide range of skills. In this context, there is a need to increase gender diversity further, as well as to extend the talent-sourcing pool for board directors to further geographies, particularly for US-based pharma companies.
Crafted with insights from regular director and board evaluations, they need to plan future board composition well in advance. For this, they need to define future requirements and skill gaps in the current board, and focus on the required capabilities, experience and perspectives to provide effective corporate oversight and governance.
To read the full article, click here.