More than two thirds of business directors have doubts about how prepared their organisations are to handle the digital future, a new survey has found.

The fourth Annual Director Sentiment Survey, released today, shows that just 30 per cent of directors think their boards have the capability to lead the digital future of their organisation.

At the same time, 58 per cent felt they would face disruptive technological changes in the next two years.

"The ability of directors to navigate the rapid changes caused by the digital revolution is a key challenge, and should be a priority for boards," said Institute of Directors (IOD) governance leadership centre general manager Felicity Caird.


"Social media and the risk of cyber breaches also mean that companies operate in a more complex environment where comprehensive ethics reporting and risk management is vital to sustainable success."

The results indicated a growing awareness that new skills would be needed around boardroom tables, something that may result in personnel changes, Caird said.

"It should always be a constant focus of boards to be checking that they have the right capabilities and skills to drive their business forward and this is the new gap: it's now about building digital capability in the same way that 10 or 15 years ago it was about building financial literacy across the board."

ASB chief economist Nick Tuffley said businesses around the country were becoming increasingly aware that digital disruption was going to be a major issue in the future.

"It's not necessarily just a technology-based issue; a whole host of business models could get up-ended by new technology or new players coming in and completely upending their industry," he said.

"You may be top of the pile at the moment but you can easily have someone coming through doing the same thing in a much more innovative, nimble and customer-friendly way."

Uber was a prime example of this.

Another key theme to emerge from the survey was concern among directors about the capacity and quality of labour available to businesses.


With unemployment forecast to edge down, this would see the labour market get tighter still, Tuffley said.

"The issue of businesses finding the right people is going to be one of their challenges and we will see it intensifying in the next couple of years."

Another interesting issue unearthed by the survey was the notable difference in the importance that various sectors placed on diversity as a consideration in board appointments.

In government organisations it was 76 per cent, 75 per cent in not-for-profit organisations and 70 per cent in listed companies. In larger, private companies and small-to-medium enterprises it dropped to 54 per cent and 50 per cent, respectively.

Tuffley said that despite the survey highlighting uncertainty around the overall economy, it indicated strong business confidence.

The uncertainty was no doubt due - at least in part - to the timing of the survey, which was carried out during post-election government negotiations.

"We're seeing quite a dichotomy there in the sense that confidence in the outlook for the general economy is down a fair bit from last year ... but when you actually look at what directors have a strong handle on, which is the businesses that they're involved in, we're seeing quite a lot of confidence," Tuffley said.

"It's really encouraging to see that directors' expectations for the performance of the business they're involved in is still very upbeat."

The survey, completed by the IOD in Partnership ASB, was conducted during October with 934 responses from IOD members.

Directors Sentiment Survey 2017: key findings
Economic Performance: 30 per cent of business directors expect economic performance to improve in the next year, down from 50 per cent in 2016
Business confidence: 69 per cent expect their organisation's performance to improve in the next 12 months, down from 74 per cent
Stakeholder interests: 91 per cent said stakeholders were very important to their organisation, up from 86 per cent
Digital capability: 30 per cent thought boards had the right capabilities to lead their organisation's digital future