UK boards lack tech expertise says Russell Reynolds report
The Angel News article, “UK boards lack tech expertise says Russell Reynolds report,” featured the firm's research and quoted Russell Reynolds Associates Consultants James Roome and Laura Sanderson on the importance of technology expertise on the board. The article is excerpted below.
UK boards are seriously lacking non-executive directors with skills and expertise in technology, new research from Russell Reynolds Associates a leading global leadership advisory and search firm, reveals.
Fewer than half (44 percent) of FTSE 100 companies have a technology expert on their board, falling to 37 percent for FTSE 350 businesses (excluding technology and telecoms companies). Russell Reynolds Associates defines a technology expert as someone with substantial technology experience, gained through either a senior commercial role in a technology company or a technology role in a corporate (e.g., CIO or CTO).
It’s widely recognised that technology is disrupting every industry at some level, with most businesses undergoing some form of a technology-enabled transformation. Almost every company in every sector will need to disrupt their own business through technology and navigate the rapid disruption that other businesses, including competitors, are creating. Along the way, companies are making decisions on strategy, investments and partnerships that relate to emerging new technologies such as AI and automation. The expertise of non-executive board members does not yet seem to reflect that challenge.
Interestingly, despite the rise of competition from FinTech businesses, the financial services sector is lagging furthest behind other sectors when it comes to having technology experts at the board level. Just one in four (26 percent) financial services FTSE 100 companies has a technology expert on the board as a non-executive director. This slowness in recruiting technology expertise to boards may be due to the commitments and regulations associated with board director responsibilities in financial services. It is possible that the recent changes to the regulatory regime will allow for financial services organisations to be bolder in appointing individuals without extensive prior financial services experience to the board and this might help to shift the balance.
The consumer sector, in comparison, is leading the way by some distance, with three-quarters (74 percent) of boards of FTSE 100 consumer companies having a technology expert as a non-executive. This is probably driven by the consumer sector being “early to the party” in digital following the shift towards online retail many years ago. Other sectors are way behind. For example, the second-highest sector, industry and natural resources, has a technology expert as a non-executive on only 45 percent of its boards.
In positive news for diversity, nearly half (46 percent) of the technology experts found as board members in the FTSE 100 are female, suggesting that adding technology expertise to boards may be one route to improving gender diversity. This perhaps reflects technology experts as being part of the “next generation” of board talent.
James Roome, the firm’s Country Manager for the United Kingdom and one of the leaders of the Global Technology Sector at Russell Reynolds Associates, said: “It appears from our research that there is a significant lag between companies recognising technology as a major disruptive force and having the right expertise in the boardroom to advise on these topics. It’s difficult to argue against the need for more technology expertise on boards in general. There are some positive stories from our research. Three-quarters of consumer companies in the FTSE 100 have a technology expert on the board, driven by consumer companies reacting early to the threat of digital. It is also reassuring to see the relatively high level of gender diversity amongst technology experts on boards, going against the tide of executive talent in technology companies.”
The research found that despite the current digital landscape, technology experience is still not being fully valued by boards. Overall, of all FTSE 350 board members (over 2,500 individuals), only 2 percent have a career background in a specialist technology role such as CIO or CTO.
Roome continued: “It is quite surprising that there is not more in-depth technology expertise on boards given the widespread recognition that, at some level, every company is a technology company. However, it takes time to recruit new board members with this expertise. Technology experts comes in many shapes and sizes. Our clients find it a quite complex requirement to define.
“The supply of rounded, board-ready technology experts is growing alongside the importance of technology issues. Technology leaders are being promoted into broader leadership roles and are involved in strategic topics more often. It is important that these technology experts, if they are to be successful non-executives, be able to contribute broadly across the company’s agenda.”
Laura Sanderson, one of the leaders of the Financial Services Sector and the Board and CEO Advisory Group at Russell Reynolds Associates, said: “Given the pace of change in financial services, the strategic opportunities and the operational risks associated with technology, it’s vitally important that UK financial services companies take full advantage of the opportunities created by changes in regulations to appoint more non-executive directors with deep expertise in technology. This expertise will be needed to guide boards, and the companies they lead, to sustainable success.”