At a time when companies are buffeted by an extraordinary range of complex and dynamic challenges, their executive teams are under huge pressure. To achieve resolution of many of the unfamiliar issues with which they are wrestling, they require access to new expertise – or, at least, their decision-making process would benefit from fresh perspectives. As a result, many companies are turning to shadow boards to help reinvigorate their strategy development.
Shadow boards can also be a powerful tool for CHROs, allowing the latter to tap into new ideas about how to tackle the challenges they face. Moreover, CHROs have a critical role to play in ensuring that shadow boards are set up for success. Here’s what they need to know.
What are shadow boards?
The concept of the shadow board is a simple one: it is a board that shadows the executive team. However, it can be set up in different ways. Some shadow the board in both physical and procedural respects. For example, if there are eight people on the executive team, there will be eight people on the shadow board. If the executive team meets four times a year, the shadow board will meet four times a year and they will address the same topics in their meetings.
Other organizations may choose to set up their shadow boards with a less structured relationship with the executive team, giving the former a wider-ranging remit to address other challenges of its own choosing, meaning that it might lead the business on certain projects. It is usually the case that these types of shadow board comprise younger employees, Millennials and, increasingly, Gen Zs, who gain valuable experience in the process.
Benefits of shadow boards
Key among the benefits that shadow boards bring is their potential to support strategic renewal. In many cases, they are deployed in businesses whose industries are experiencing major upheaval, such as the disruption currently caused by digitalization, or that which accompanies the emergence of new disruptors in the market. In this context, shadow boards can be valuable in offering senior executives a digitally-native perspective.
This capacity can undoubtedly add value for CHROs, too, as they grapple with the HR implications of strategic challenges, such as the impact on working practices or talent requirements. One major player in the energy sector, which is undergoing major transformations as networks transition from fuel to electric sources and governments push for progress towards net zero, is using a shadow board to consider how the company can maintain its performance levels as its business model transitions. It is asking crucial questions: Which skillsets and expertise will we need in the future? How can we make the business more attractive as an employer to the next generation? And how can we retain employees in the new labor market?
In these respects, shadow boards can have a significant impact in the HR space.
Set up for success
For shadow boards to succeed, there are some essential steps that CHROs should take – and common pitfalls to avoid as they do so.
First, the CHRO should focus on the composition of the shadow board. HR has a key role to play here, as there are two main routes for identifying employees for shadow boards: selection of each candidate is usually either from a group of previously identified high-potential talent, or via an application process. Organizations are well advised to ensure that at least 50% of a shadow board is appointed via an application process; by opening up applications, companies frequently discover new talent. Indeed, in some cases, companies find that the application-route candidates outperform their pre-selected colleagues.
Second, HR should engage top management from the outset, agreeing priorities for the shadow board that will add value to the business. A shadow board that is perceived as a “pet project” devised by HR to engage a group of young employees or provide stretch assignments to high-potential talent will not offer the same benefits to its members – or the business – as one that is spear-headed by the CEO and hence, offered real decision-making influence. If the shadow board is to deliver real value, the CEO and executive team need to be fully committed to building relationships with its members, to sharing strategic responsibility with them, and to engaging with their ideas and insights.
Third, HR should create significant time for onboarding and team building between executives and the shadow board. Forming a shadow board should not be a minor investment and time spent helping to create a common understanding of the company’s strategic issues is essential to its effectiveness.
Companies should also be clear about the expected lifespan of the shadow board. The ideal duration is generally 18‒24 months. Any less and a shadow board struggles to make an impact because it takes time to get up to speed on complex strategic challenges. In addition, if the shadow board is given ownership of particular projects, it will require time to deliver results. However, any more and a shadow board will be too staid and not capture the full range of insights from the new cohort in the organization.
Fourth, be clear about agenda-setting and how the shadow board will interact with leaders. Will the shadow board follow the executive committee’s agenda or have their own focus? Are they going to send a representative to every meeting of the executive committee, or (more rarely) attend en masse? Questions like this need to be discussed explicitly and answers arrived at ahead of time.
Finally, beware of pitfalls such as attempting to use a shadow board to solve dysfunction among the senior executive team. If a CEO does not listen to senior executives, or if a CTO lacks the expertise required to deliver on the business’s new digitally enabled strategy, for example, the solution cannot be found among their non-executive colleagues.
How HR should be involved in setting up the shadow board
How, then, can CHROs help ensure the success of a shadow board? Our research points to some key steps.
Selection: HR has a key role in identifying candidates for the shadow board, whether through identifying outstanding talent among the workforce or managing applications. Whatever the mix of routes, HR needs to ensure the same level of professional treatment is afforded to employees as would be extended to external candidates for job vacancies.
Scheduling: Employees selected for shadow boards are not compensated for the role and are expected to carry on their day jobs. HR should work with line managers to structure employees’ time to prevent their being overwhelmed or burned out, and set realistic expectations in terms of the time they can give to the shadow board.
Supporting: HR can also play a key role in engaging the supervisors of the shadow board. These managers should understand how the shadow board will work and what the role entails. They should be aware of the composition of the board, why each individual has been selected, and the objectives for their involvement. They could also act as intermediaries between board members and their managers, explaining to the latter the benefits of taking star employees away from their day jobs. This also allows shadow board members to cultivate relationships with senior executives and become used to handling a different level and type of information than they would usually be given access to. Engaging line managers’ support from the start can help smooth any tensions.
Shadow boards can be a powerful tool for the business, tapping into the creative insights and varied perspectives of employees, and creating additional energy to address key challenges. The CHRO is integral to the composition and direction of the shadow board and should have a role in shaping both.