Key Takeaways

Top insights from our global survey about corporate governance and talent

1) Many boards could be focusing more on talent-related issues.

The biggest challenge is finding the time amid a growing list of priorities competing for boards’ attention.

2) It’s early days for AI discussions in most boardrooms.

Most respondent organisations are just starting to think about their AI strategies.

3) Amplifying the talent experience will require boards to adopt a broader perspective.

Providing interesting work opportunities and workplace flexibility options and developing a workplace culture that instils a sense of belonging are becoming key focus areas.

Boards, like the organisations they oversee, are being pulled in multiple directions: The advent of innovative technologies like generative artificial intelligence, evolving stakeholder expectations, demands for climate action, the need for progress on diversity, equity, and inclusion, and the changing economic, political, health, and geopolitical landscape are all transforming the role of organisations in society. Ultimately, at the center of all this change are the people inside organisations doing the work.

To better understand how organisations—and boards, in particular—are addressing talent and the future of the workforce, the Deloitte Global Boardroom Program surveyed nearly 500 board members and C-suite executives in more than 50 countries (see “Methodology”). We also spoke with business leaders, investors, and subject matter specialists to get their insights on how boards are addressing this complex issue, where the obstacles lie, and what more boards could be doing to help build a robust and resilient workforce for the future.

The big takeaway? Many respondents believe their boards need to be more proactive about discussing talent-related priorities. But for some organisations, balancing talent discussions among the long list of topics on board agendas could be challenging.

Respondents Want to Have Deeper Conversations Around Talent

The majority of respondents (89%) say their boards are either “very informed” or “acceptably informed” about workforce-related matters. When asked how frequently boards address these issues in boardroom discussions or updates, 50% say they do so at least quarterly, 17% say they discuss talent twice a year, and 34% say they discuss these topics only once a year or less often (figure 1).¹

While most respondents feel well-informed, only 36% say the conversations they’re having as a board are sufficient enough to fully explore the talent agenda. Respondents in Asia-Pacific are most critical about the sufficiency of workforce discussions in their boardrooms: Only 25% say their discussions are sufficient, compared with 33% in Europe, the Middle East, and Africa and 43% in the Americas.

Even if their boards are having regularly scheduled conversations about their organisation’s people, they aren’t confident they’re able to fully explore the talent agenda, which may lead to board directors feeling frustrated. Anna Marks, Deloitte Global chair, says, “This observation is potentially a symptom of the increasing demands on boards in an environment of growing complexity, one where change is becoming more of a constant. Boards need to respond to these evolving challenges while remaining focused on the strategic aspects of governance alongside foundational matters, such as talent, culture, and sustainability. As a consequence, many topics are competing for their attention during any one board meeting.”

In the Deloitte Global Boardroom Program’s research on board effectiveness and the role of board chairs, many chairs lamented about the growing length of board agendas.² For many, this is a big contrast to board discussions during the height of the COVID-19 pandemic, when boards focused heavily on workforce matters. “Right after the lockdown and thereafter, our focus was mostly about people. How can we help our people? How can we keep our sites open while ensuring our people’s safety? How do we adapt our ways of working and policies? How do we keep the link? In most companies, this sort of care for employees and this relationship with our workforce became even more central—and it stayed,” says Angeles Garcia-Poveda, chair of Legrand and board member of several other organisations, including Edenred, Bridgepoint, and NEOMA Business School.

John Rishton, chair of Serco Group and Informa, shares his insights on board discussion on the workforce: “The level of discussion depends on the issues we have, but it comes to the board every month; after all, we haven’t got a business without our people.”

There will likely always be pressure for boards to condense the time allocated to any one agenda item. But given the strategic importance of talent and the workforce, and the ongoing race for talent even with the implementation of advanced technologies, such as AI, boards may want to devote more time and energy to having these discussions.³

Of course, there should be a balance between board members’ direct responsibility and their oversight role. “If you think about what the board is responsible for in terms of people, it’s about succession planning for the most senior people in the organisation. Boards are not management teams; it is the management team that must run the business. The board is there to make sure they’re doing a good job and to provide thoughts, counsel, and guidance on areas where we have knowledge,” Rishton says.

One area where the board gets more directly involved—where it cannot delegate to management—is CEO succession. Michael Vad, a Deloitte Denmark partner who leads the firm’s Nordic Board and Executive Advisory, as well as its Global Board Services practice, believes board oversight of succession planning and building the leadership pipeline could improve. “Boards need to be much more proactive and future-oriented in the way they think about C-level succession,” Vad says. “At the most senior levels, there’s a scarcity of talent and fierce competition; top talent travel across industries much more than they did 10 years ago. Boards should be having frequent discussions around succession preparedness. What is their plan if something happened to the CEO? The CFO? For boards of the future, CEO succession planning is a key agenda item.”

Board Priorities Regarding the Workforce are Wide-Ranging

To understand how boards prioritise workforce-related topics, we asked survey respondents to rank a series of issues to identify the top three priorities (figure 2). The results also illustrate the breadth of topics competing for the board’s time and attention.

The top two priorities—“aligning workforce-related investments with strategic priorities” and “maximising benefits by combining technology and the workforce”—are tied at 42%, and the third—“building a resilient pipeline of talent for top leadership”—is nearly an equal at 40%.

For the next group of responses, about one-third of respondents say “creating a sense of belonging” and “embracing new ways of working that challenge existing modes of working” are their organisation’s top talent-related priorities.

These responses are more closely related than they may seem. Strategic alignment of workforce-related investments should go hand-in-hand with other priorities, particularly retraining and upskilling the workforce and operationalising advanced technologies.

Meanwhile, to help create a sense of belonging, organisations should focus on “aligning the workforce with the strategy and investment,” says Rishton. “Leaders need to make sure they’ve got a clear strategy; they invest in the strategy that everyone supports and works toward delivering it. That’s essentially what the board and senior management are about.”

Sara Mathew, non-executive chair at Freddie Mac and on the board of investor State Street, explains the powerful tie between nurturing a sense of belonging and boosting employee engagement and retention outcomes. “You can throw money at people, but I don’t think people leave just because of money,” she says. “People stay because they feel a sense of connection, belonging, and a sense of purpose in the work that they do. When they’re growing and learning, they feel connected to the organisation. And people stay because they believe they’re at a winning company.”

Leon Kamhi, head of responsibility and EOS at investor Federated Hermes Limited, agrees. “Inspiring and creating a sense of belonging is particularly important in building a resilient workforce,” he says, asserting that if organisations are able to get that right, “many of the other issues will take care of themselves.”

Importantly, embracing new ways of working will likely require leaders to cede some control. This can enable employees the freedom to “cocreate” the work experience, according to Deloitte US’s 2023 Human Capital Trends report: “In a boundaryless workforce ecosystem, where workers have greater agency than ever before, problem solving is a team sport—and the best solutions are cocreated … Cocreation must be viewed as an opportunity for leaders to tap into the full knowledge and experience of workers in your organisation’s ecosystem, resulting in better solutions.”⁴

Companies need to foster a sense of belonging and purpose to unlock that sense of agency in employees, so they feel empowered to cocreate their work experience, Garcia-Poveda says. “If people understand why they do what they do, they are able to make decisions by themselves. Then you don’t need a playbook for every single minute of the day,” she says. “At the same time, it also enhances the sense of belonging, satisfaction, and pride.”

This finding resonates with responses to the question on future workforce-related risks. Here, a large majority of respondents (78%) regard skills and talent availability as a major source of risk (figure 3).

This likely reflects ongoing talent shortages many organisations have been experiencing. “Open positions and vacancies are hovering about 10 million in the United States.⁵ It has been that way for two years and has only begun to cool slightly very recently. Similarly, the unemployment rate across the OECD has been near 4%.⁶ Labor markets have been tight for a while,” says Steve Hatfield, principal and executive advisor of Deloitte Consulting’s Global Future of Work program. The second and third most frequently mentioned risks are the rising costs of compensation, benefits, and welfare (44%) and changing workforce expectations (37%).

“The one big challenge is talent scarcity and the need to upskill and reskill a big proportion of our workforces—to rethink with a broader perspective. As business models evolve, worker expectations have become very important. It’s not only worker expectations about the company; it’s worker expectations about the work itself, how important it is in the balance of their lives, what they want and seek, where they put development, recognition, purpose, and well-being compared to wages,” says Garcia-Poveda.

AI and Talent: It’s Very Early Days

As generative AI grows from its initial phases to larger-scale implementation across industries and geographies, it’s already transforming the way work gets done. Recent Deloitte US research sums up this moment: “The advent of generative AI has delighted and surprised the world, throwing open the door to AI capabilities once thought to be still far off in our future. With a remarkable capacity to consume and generate novel outputs, generative AI is prompting excitement and stimulating ideas around how this type of AI technology can be used for organisational benefit. Far more than a sophisticated chatbot, generative AI has the potential to unleash innovation, permit new ways of working, amplify other AI systems and technologies, and transform enterprises across every industry.”⁷

How are directors thinking about AI and its impact on people, productivity, and jobs? Nearly half of respondents say operational efficiency and productivity pressures (48%) and technological developments, including AI (46%), will impact their organisation’s future workforce (figure 4). “Companies say that the productivity effect of AI will be more powerful than the displacement effect. But I would say it’s just far too early to know the answer to that question,” Kamhi says. “AI is changing very rapidly. And I think it’s difficult for us or for any management team to really have a clear picture of what that is going to look like in three years’ time.”

More than half of respondents (58%) say their organisations are just starting to explore how integrating AI will impact their workforce. Only 2%—a strikingly low number—say they have introduced a long-term strategy for AI, while 6% say they have a short-term to medium-term strategy for AI.

We also asked what impact AI may have on workforce size. Nearly half (46%) of respondents believe AI will impact workplace responsibilities and eliminate some jobs, whereas 24% anticipate AI’s impact on jobs and responsibilities will be limited. The fewest number of respondents (7%) say AI will impact workforce responsibilities but increase the size of the workforce, and another 14% believe AI will have a “fundamental impact” on workplace responsibilities and jobs but didn’t indicate which direction the workforce would head. Meanwhile, 8% weren’t sure.

“This is still in its very early stages. We are all figuring out what it is going to mean before we zoom in on the actual consequences for the workforce,” Garcia-Poveda says. “The most significant impact lies not in the size of the workforce or organisation redesign but in the fact that we need to unlearn and relearn how we do things, redefine our roles, and consider the critical question of education. This extends beyond just companies; it also concerns what we do before they join the workforce, including schools, colleges, universities, and business schools, and how we incorporate AI into the training of our young people.”

We analysed the data further by industry to explore variations in workforce impact.⁸ Regarding organisational preparedness for the impact of AI, respondents in the technology and financial services sectors appear to be most prepared: Twenty percent of technology industry respondents and 11% of financial services respondents say they already have a mid-term to long-term AI strategy in place. In contrast, more people in the manufacturing (25%) and consumer (19%) industries say they are unsure if their organisation has an AI strategy. We excluded industries with a lower number of responses from this analysis, such as health care and pharmaceuticals; energy and resources; business and professional services; telecommunications, media, and entertainment; and real estate.

“AI is about using data to automate and augment decision-making so decisions are better, faster, and more personalised. This is why AI could be far more impactful for data-intensive and knowledge-driven industries, such as financial services or professional services,” says Mark Lillie, leader of the Deloitte Global CIO Program.

Amplifying the Talent Experience Will Require a Wider Lens

The survey shows organisations plan to pull multiple levers to attract and retain talent over the next three years (figure 5). These results align with priorities and concerns employees have said are critical to their engagement and retention, according to recent Deloitte US research on well-being,⁹ and what interviewees have told us about employee-driven talent priorities (see below).

Creating interesting work tops the list (44%), while emphasis on flexible working arrangements comes in a close second (40%). Other areas of planned investment include focusing on purpose and culture, including the diversity, equity, and inclusion agenda (36%); offering more attractive pay or other financial benefits (34%); and prioritising advancements in sustainability and environmental, social, and governance initiatives (26%).

It may be worth considering this from the perspective of the talent pipeline: how organisations ensure they’re bringing in enough employees to meet future growth and challenges, and how they afford their people enough opportunities to grow and advance. Does the organisation understand the needs of all of its workforce and invest accordingly? A recent Deloitte US report found that remote work “may create new challenges and considerations for leaders to think about, particularly for systematically disadvantaged groups and diversity, equity, and inclusion imperatives.” But it could present a strategic opportunity to help organisations broaden their talent pool if leaders understand the nuances of remote work experiences and seek feedback from their workforce.¹⁰

Five Key Questions to Help Structure Board Discussions Around Talent

How can boards carve out enough time to fully explore the talent agenda at their organisations? Anna Marks, Deloitte Global chair, says it’s about “being clear and focusing on which specific aspects of ‘talent’ are important to both the strategic objectives and the purpose and culture of the organisation, rather than trying to tackle the whole talent agenda. Depending on their nature, matters can be charged to a committee to get into the appropriate level of detail or boards can make time on the full board agenda, as appropriate.” Since talent is such an interconnected topic, it should be standard practice to make it a key consideration when discussing topics such as AI and sustainability.

Here are five key questions directors can ask to assess whether, and to what extent, their boards are appropriately addressing talent and the future of the workforce:

1. How has the board considered the talent strategy as an integral part of the overall organisational strategy and purpose?
2. Does the board have clarity, through working with executive management, over the key elements of the talent agenda with an impact on strategic ambition (from immediate operational challenges to longer-term strategies and considerations)? Considerations may include:
   • Workforce capabilities and capacity
   • DEI vision, strategy, and culture
   • AI’s impact on talent
   • Horizon scanning to identify key risks and opportunities related to the workforce
   • Succession planning for key leadership or management roles
3. Has the board allocated sufficient board meeting time to consider those prioritised talent aspects?
4. Has the board considered the appropriate cadence to reconsider or review the talent strategy alongside the broader corporate strategy?
5. How do you ensure your board has the necessary knowledge and experience, or has access to external specialists or other means to understand the workforce views, to oversee workforce strategy adequately and in a balanced manner?

All in all, the research findings reveal many directors understand the increased importance of non-financial rewards in the future as well as in the past. While challenges related to balancing financial rewards and workforce requirements have been a familiar topic for many businesses, creating a workplace that gives something more—meaningful work, the organisation’s purpose, and the sense of belonging—has become an important task and will likely remain so for boards in the future.

Garcia-Poveda sums up why any organisation’s people should be a top board priority: “I think work is more than a job; it’s a way for human beings to grow, to have autonomy, to gain freedom, to socialise, to realise themselves, to find a mission in life.”

The article was first published by Deloitte Insights.

Photo by Tiger Lily on Pexels.com.