The COVID-19 pandemic has resulted in a shift in workplace culture, forcing organizations to embrace digital transformation and adapt to new ways of working in the context of the fourth industrial revolution. These advancements necessitate changes to the skill sets required from the workforce, and the way firms provide their products and services to clients. Corporate actors have long known that the younger minds in organizations tend to face and embrace the challenges of the digital era with most zeal and, in an effort to harness this resilient and innovative thinking, some companies have introduced the concept of a “shadow board.”
An association of younger non-executive employees who engage with senior executives and management on strategic initiatives, the purpose of a shadow board is to leverage the acumen of younger minds to modify and diversify the insights available to senior executives in the workplace. Not an entirely novel practice, the positive impact of shadow boards had been evident before the advent of the COVID-19 pandemic. A recent Harvard Business Review study revealed that organizations that adopted a shadow board before the pandemic were better able to respond to the fallout from COVID-19 and the acceleration of digital transformation within the workplace.
Within the fashion context, Gucci – under the direction of CEO Mario Bizzarri – established a shadow board in 2015, consisting primarily of younger employees tasked with addressing strategic oversights and providing a fresh perspective on sales strategies and products. (According to Bizzarri, “the shadow board includes people drawn from different functions; they’re ‘the most talented people in the organization — many of them very young.’ They talk through the issues that the executive committee is focused on and their insights have ‘served as a wakeup call for the executives.’”) With this group’s insight (and presumably, the appointment of creative director Alessandro Michele in 2015), Gucci embraced the various internet-centric and other digital strategies, and between 2014 and 2018, Gucci’s revenues rocketed, salvaging the Italian fashion brand from its sales slump.
Fast forward to 2018 and KPMG implemented a shadow board of its own consisting of millennial-age employees, with the professional services firm reporting that the creation of the “next generation council” resulted in a more robust decision-making process during which traditional norms and views were challenged. KPMG adopted an active approach, meaning that the council was a dynamic party in contributing to strategic initiatives and providing recommendations and solutions to the executive board on matters relating to the organization. Meanwhile, members of the council benefited personally through increased visibility, which boosted their career opportunities within the organization.
Implementation of a Shadow Board
For the most part, there is no prescribed manner that organizations are required to follow for the establishment of a shadow board, which means that organizations can adapt the models used in other jurisdictions or by other organizations, with reference to the dynamics and the culture of their own operation. As HBR asserted back in 2019, it is generally recommended that organizations that wish to establish a shadow board should seek the involvement of the CEO or executive committee to ensure that the shadow board can have a real impact and provide meaningful input.
Companies are encouraged to adopt terms to govern the structure, purpose, and role of the shadow board within the company’s operations, and the extent to which members of the shadow board are delegated powers and authority, something that should be formally delegated by a company’s directors. Additionally, it is recommended that the scope of power and authority delegated to the shadow board by the executive management be governed by such terms, bearing in mind that this delegation of power does not absolve the board from ultimate responsibility.
To ensure that the shadow board is able to fulfil its purpose effectively, members should be selected from a diverse group of professionals from different demographics, organizational levels, functions, cultures, and skill sets – with an open application process recommended in order to increase employee engagement. Membership of the shadow board could be on a rotational basis as a means of providing as many employees as possible with an opportunity to gain experience.
Ultimately, the main benefits of shadow boards are a fresh perspective and potentially, a more enthused workforce, which will, in turn, help corporates keep up to date with market changes and competition. As for the decision about whether to establish a shadow board, and the manner of its establishment, that will be dependent on the cultural dynamic of a company and the existing management structure.
Savanna Stephens is a Senior Associate as CMS South Africa, where she areas of practices include general corporate and commercial law with a focus on mergers and acquisitions, equity capital markets and technology and data protection laws.
Pooja Pundit is a Candidate Attorney at CMS South Africa.