In the boardrooms of UK public companies, only a select few leaders are making decisions. According to research from Women on Boards and Protiviti, 97.7 per cent of executive board members in the FTSE All-Share Index are chief executives, chief financial officers or company secretaries. Only 2.3 per cent hold other roles.

The majority of these are chief operating officers and chief technology officers; fewer than 30 boards in 585 firms include chief information officers, chief strategy officers or chief people officers.

The Hidden Talent report raises important questions about the diversity of skills at a time when businesses face big challenges and widening responsibilities. Inflation, modern technology and changing employee expectations have created a volatile operating environment.

Regulators also are calling for board-level oversight of diversity and sustainability by 2025. So why are so few executive leaders on listed boards? Do they have the skills to navigate these challenges? Where do they go from here?

Broaden the focus

It’s worth reflecting on how boards have evolved and why they might need to change now. The diversity of skills and experience in the boardroom is closely linked with the remit of an executive board; understandably, accountancy and finance skills are required when addressing the core focus of good governance, finance and risk.

Board appointments are usually based on related experience, too, so executive board members tend to be older. In the FTSE 100, chief executives are often promoted from similar career backgrounds, including divisional director, chief financial officer and chief operating officer positions.

But changing priorities are challenging the status quo. In addition to finance and risk, businesses are responding to broader economic and social issues. Investors, employees and customers are scrutinising environmental and social impact; they are also asking questions about diversity, equity and inclusion (DEI).

Members of generation Z, born between 1997 and 2012, have grown up during the climate crisis and are entering the workplace as digital natives with an identity and voice built on social media. They want good work-life balance and are focused on well-being and culture. They are shining a light on values and ethics, and on the broader role of business in society.

As a result, environmental, social and governance (ESG) issues, people and culture, and DEI are now board-level priorities. So the skills that boards previously relied upon are no longer enough on their own.

Develop the right skills

I believe executive boards can positively respond to this challenge by focusing on three things: identifying the skills they need; gaining buy-in for change; and widening the net for executive board recruitment. In each case, there are key questions for boards to consider.

Skills: What are the board-level skills needed now and in the future? How are these skills aligned to the strategy of the business and the risks it faces? These will be different for each business. But with a long-term focus on technology, sustainability, culture and diversity, all these elements should be represented—through chief technology officers, chief people officers and chief sustainability officers, for example.

Buy-in: This isn’t a tick-box exercise. Boards will need to gain buy-in across the business for the changes they would like to make. They can do this by taking a step back and looking at the outcomes they are trying to achieve. They should link any new appointments to the strategy of the business and the composition of skills needed to achieve it. Employee representatives at board level can also help to gain buy-in and give people a voice.

Recruitment: The net for board recruitment should be widened, both internally and externally. How can the right people be found and developed? How can they be prepared for a board appointment? It is important to look at all aspects of diversity, but particularly skills, experience and age groups, allowing for a range of professional backgrounds and younger voices. This will broaden executive minds to different possibilities and improve decision making.

A new perspective

Change won’t happen overnight. But now is the time for executive boards to continue their evolution and build a group of people that can make effective and wide-ranging decisions. Yes, there is greater scrutiny and focus from regulators, but what happens now really comes down to the purpose, priorities and spirit of executive leaders.

If boards of the future can become more diverse in their skill sets, they will be better equipped to deal with the myriad challenges they face—and for the priorities of their colleagues and customers. The impact of their decisions will have a profound impact on the fortunes of their businesses. That’s why diverse skills on executive boards really matter.