Could the Tea Room be the new Board Room?
Corporate Australia is responding to challenging times with conduct and trust in the spotlight. The light is shone from many directions so it is positive the responses from this year’s KPMG/AICD survey of more than 600 members of the Australian Institute of Company Directors (AICD) indicates people must be put first.
The Survey carried out in December 2018 – and launched at the AICD Summit in Sydney this week on Monday – sought the views of private, not-for-profit, and public sector directors. They were answering questions at the end of a year dominated by headlines of poor treatment of customers by financial institutions.
In almost every survey response, customers – and employees – emerged as the top priority for directors. They were rated ahead of all other stakeholders or issues. This indicates the acceptance that not only is inclusion of people paramount but that boards have a vital role to play in driving change to create and ensure equity.
While business has not always considered people as its first-order priority, the findings of this year’s survey indicate that this is changing. Customers are speaking out strongly, taking action, and communicating expectations. Organisations, and their leaders, are listening – and they are responding. And they are not only listening to customers. The Survey results show that employees, too, are a crucial stakeholder group.
The prioritisation of people by surveyed directors raises some important questions for boards and their organisations.
How can they create value for shareholders while also balancing different stakeholder priorities? How can they communicate a clear sense of purpose that engages today’s employees? What is the entity’s role in social engagement issues? Is the organisation sufficiently robust to attract millennial customers and employees alike who readily transfer allegiances on perceived alignment to their personal values? These are questions that boards and senior management must deal with.
The renewed focus on the customers and employees in Australian boardrooms is real and tangible – and it is a great thing. It will make everyone reassured. But the question will come: does that mean people will no longer be able to get services that they think they really need?
There could be inadvertent consequences: directors and senior management must be alert to these. What happens in a situation where a company in financial services, telecommunications, insurance – or in fact any part of the services sector says that they can see customers need the product but they don’t think the customer can afford it or manage it effectively. Where, then, is the right balance of a company making the right decisions to support and protect customers on the one hand but not be heavy-handed and introduce over-regulation on the other?
This is one of the key areas directors are grappling with.
One way to help achieve better outcomes and truly understand customer needs is for boards to have more external people talking to their stakeholders; they must tap into the views of customers – and employees too.
In my early days as an auditor, I would get a very valuable sense of the grass roots of a company by going to the tearoom. I would read the noticeboard and chat to the people there. In a more informal setting they didn’t filter their responses and it was a great way to read the barometer.
Culture is also recognised as a vitally important area. Cultural initiatives, often focusing on values, have too often failed to lead to positive outcomes for customers. The Final Report of the Hayne Royal Commission released in February 2019 makes it clear that supervision must extend to include non-financial risks and must also include culture, governance and remuneration.
The conversation in boardrooms is changing and decisions are already being made through the lens of what the community will think. Strategies to address the challenges are being developed and delivered.
I hope more directors will consider engaging with the grass roots of their organisations they serve. It can send a strong a positive message to stakeholders and be a practical means of ‘walking the talk’.
Australian boards are not only ready for the task of prioritising people but I believe they will rise to the moment – perhaps over a more frequent cup of tea or coffee with their stakeholders.