Along with diversity in gender, age, background and experience, boards need diversity in skills, including science, technology, engineering and maths (STEM) said Dr Katherine Woodthorpe AO FAICD, chair of the Antarctic Science Foundation, Bushfire and Natural Hazards CRC and Fishburners, a panellist at this year’s Australia Governance Summit.
"We have this hole in our skills matrix around science and technology," she said. "In the world changing as fast as this one, that's a real hole."
Professor Matthew Vadas AO, 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 said. "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."
"Engineers and people with this data-gathering background have a different lens through which to view the commercial business case.” Jackie McArthur MAICD
STEM-trained directors also are used to taking emotion out of their decisions and making decisions based on evidence rather than personal experience. Vadas said that while it is important for humans to have empathy, this can be a driver of bad decisions.
Jackie McArthur MAICD, a director of TassaI Operations, Invacare and lnghams, outlined an example of how an engineer would approach the introduction of a new enterprise resource planning (ERP) system. "It is often the STEM person who pursues a logical train of thought and tries to understand from both a technology and a process perspective how the business really will benefit," said McArthur, who has a degree in aeronautical engineering from the University of Sydney.
"Engineers and people with this datagathering background have a very different lens through which to view that commercial business case. Because it's not about the fluff of a great software, but it's about whether or not the human systems are capable of actually extracting value out of it,” said McArthur.
Engineers also approach risk differently, because they are used to working with confined risk factors and are not expecting risk to be zero. "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,” she said.
“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.”
A matter of risk
Woodthorpe, who has a PhD in organic chemistry, said STEM directors view risk differently to other directors, 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". Additionally, those with a technical background can disentangle the purpose of a business from the technology that underlies it, she said, adding that technology is not a business model, but an enabler of the business.
For example, Koala Mattresses, a low-cost mattress provider, which came out of start-up hub Fishburners, is not actually a mattress company, said Woodthorpe. "They're a logistics company with brilliant underlying technology enabling them to deliver a mattress to your house in four hours."
A STEM skills shortage in the boardroom
According to a recent AICD survey, only 3% of Australian directors have a STEM background. How do we raise this number? “If you see if you can be it,” says McArthur, encouraging current directors to act as mentors to potential STEM directors.
Directors without a scientific or technical background can educate themselves with online courses from universities, but McArthur said 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 said. "You're crazy if you don't use that. That's the secret sauce."
The AICD, in partnership with the University of Sydney Business School, completed Australia’s first in-depth look into director practices on innovation. The Driving innovation: the boardroom gap study revealed a sobering picture of Australian boardrooms struggling to prioritise innovation and lagging their international counterparts.
Read more insights here.