McKinsey Survey of Corporate Directors – A Lack of Leadership
Thursday, 9th April 2009 at 4:17 pm
An online survey of directors to find out how boards were responding to the economic crisis has found that only half of board members say their boards have responded effectively to the global economic turmoil.
However, many corporate boards have adjusted their practices, and more want to do so.
The McKinsey Survey found that many boards of directors are not providing the leadership demanded by the global economic crisis.
While half of board members describe their boards as effective in managing the crisis, just over a third say their boards have not been effective; 14 percent aren’t sure how to rate their boards’ effectiveness. At the personal level, roughly half of corporate directors say their boards’ chairs haven’t met the demands of the crisis, and a nearly equal percentage of board chairs believe the same about their board members (Exhibit 2). Though most boards have implemented various changes to their procedures in response to the crisis, 62 percent say their boards need to change even more.
The survey asked directors what areas of business their boards have been effective at addressing, what procedural changes their boards have instituted since the global economic turmoil began, whether demands for leadership have been met, and what changes are still needed for managing the crisis more effectively.
Innovative strategies are the key when corporate directors evaluate their boards’ responses. Among the group who say their boards have been effective in responding to the crisis, 60 percent credit the development of new strategies to manage risk and take advantage of new opportunities .
That same area of management is most frequently cited as lacking among respondents at companies with ineffective boards. (This finding is consistent with the results of another recent survey, in which executives said support for innovation should be the overall focus of governments’ actions in response to the crisis.)
Other areas that have been addressed by many effective boards are financing and operational needs; at unsuccessful companies, respondents say their boards have been particularly ineffective at tackling talent management and restructuring.
The survey says most boards have responded to the crisis by making some procedural changes, such as openly and thoroughly discussing how the crisis affects fundamental strategic assumptions and ensuring that a wider range of detailed information about the company is presented at meetings.
Further, among directors at companies that have already changed their procedures in some way, 62 percent say their boards will continue to change to become more effective in managing the turmoil. The results indicate that directors are willing to shake up board procedures by inviting new participants—including outsiders—to participate in meetings or by increasing board members’ firsthand experience of the crisis—for example, with visits to customers or distributors.