Directors with a background in science and technology ask the "dumb" questions others don't.
They are used to taking the emotion out of judgments and making hard decisions based on the evidence available.
However, a recent report on the role of Australian boards in driving organisational innovation – which painted a sobering picture of boards struggling to prioritise innovation – showed that only 3 per cent of Australia’s directors have a background in science, technology, engineering and maths (STEM) background.
The study, prepared by the Australian Institute of Company Directors in partnership with the University of Sydney Business School, is the first of its kind in Australia and one of only a handful of reports globally to examine the role of the board in driving organisational innovation.
The Driving Innovation: The boardroom gap study, which was completed before COVID-19, showed that Australian boardrooms are struggling to prioritise innovation and lagging their international counterparts.
It found that while Australian directors recognise the importance of innovation, more needs to be done to prioritise its delivery.
The report pointed to low innovation and digital literacy levels on Australian boards, a lack of critical technical and innovation skills, and the need to increase boards’ access to specialist advice.
It recommended that more must be done to broaden the director talent pool to include individuals with science and technology backgrounds and to bring in directors with stronger international experience.
Addressing the skills gap
The need for a wide range of voices in Australia’s boardrooms is critical – now more than ever.
While boards can take steps to address these specialist skills gaps by, for example, establishing a specialist committee or advisory panel, it remains each director’s responsibility to understand how technology will impact their organisation.
In a world changing as fast as this one, that's a real hole.
— Katherine Woodthorpe
Dr Katherine Woodthorpe, who chairs the Antarctic Science Foundation and the Bushfire and Natural Hazard Co-operative Research Centre, agrees.
She says that along with diversity in gender, age, background and experience, boards need diversity in skills, including STEM knowledge.
"We have this hole in our skills matrix around science and technology," Woodthorpe said in a session on STEM in the boardroom at the 2020 Australian Governance Summit earlier this year.
"In a world changing as fast as this one, that's a real hole."
Professor Matthew Vadas, executive director of medical research body the Centenary Institute, pointed to the value of scientists and engineers who can understand and interpret evidence.
"Evidence is actually really difficult to grasp, especially when it comes to statistics," he says.
"You hear that the breast cancer screen has 90 per cent positivity, but you really don't understand what it means.
"Unless you understand both the statistics and the basis of what the data is, you can be taken in by the people trying to present a rosy picture."
STEM in the boardroom
STEM-trained directors are used to taking the emotion out of their decisions and making decisions based on evidence rather than personal experience.
Vadas says that while it is important for humans to have empathy, this can be a driver of bad decisions.
Jackie McArthur, an aeronautical engineer and director of Tassal Operations, InvoCare, lnghams Group and Qube, says, "Engineers and people with this data-gathering background have a different lens through which to view the commercial business case.”
McArthur is seeing a growing appetite for the mindset that engineers can bring to boards to help deal with the growing complexity of the business and regulatory environment.
“There’s a nice connection with the systemic design thinking of a good engineer and multivariable analytics of risk management,” she says.
“And you need an open mindset to drive innovation.
“We are so negative about failure that innovation gets quashed,” adds Woodthorpe. “That’s why Australia is a great adopter but not a great leader.”
Woodthorpe, who has a PhD in organic chemistry, agrees that directors with a STEM background approach risk differently, saying they dive into areas of risk that are broader than financial and compliance risk and instead look at the risk of "what could possibly happen".
"You're trying to work out what is an acceptable level of risk given the environment the company is operating in and given what we think shareholders are going to be able to stand,” McArthur adds.
Improving STEM skills in the boardroom
With only 3 per cent of Australian directors having a STEM background, the question must be asked as to how this number can be raised.
“If you see it you can be it,” says McArthur, encouraging directors with a STEM background to act as mentors to future directors.
The Driving Innovation study made several key recommendations to support boards in priorisiting innovation. They included: lifting directors’ technology and digital literacy, setting clear expectations of management regarding calculated risk-taking to drive innovation, ensuring innovation features regularly on boardroom agendas, and establishing a budget and executive incentives for long-term innovation.
Directors without a scientific or technical background can educate themselves with online courses from universities, but McArthur says they should also draw on their networks of fellow directors, simply by phoning the experts.
"You can upskill just by having a network that maybe in their sleep looks at the sort of data sets that you could only dream of," she says.
"You're crazy if you don't use that. That's the secret sauce."
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- Natasha Boddy