The board recruitment process is slightly different for public, private and nonprofit boards. Private companies usually start with a board of directors that’s made up of either all close friends, all family members, or some combination of both. Corporate boards usually take a different approach. As most corporate board networks are quite large, they tend to rely on who they know or who their peers know. Nonprofit nominating committees take an even more different approach. They tend to use internal and external networking to find the best candidates.
Regardless of the type of company, nominating committees should seek board directors that are best suited to the role and who truly represent the bests interests of the organization, shareholders and stakeholders. Good governance is another factor to consider when recruiting board directors because it has a positive impact on the organization in many ways.
Serving on a board of directors is a rewarding experience. Board recruits need to be aware that it’s also a time-consuming experience that relies on active people to get the job done. While networking and spreading the word can be good ways to identify and recruit board directors, technology provides an easier, more streamlined process for recruiting and nominating board directors and supporting succession planning.
Board Recruitment Process for Corporate Boards
In the corporate world, diversity and independence are important considerations for good governance. Many boards are working to improve gender and minorities on their boards. Boards need diverse perspectives on the board because their decisions impact the company, the community and ultimately the country. Diverse perspectives can only come from people with different backgrounds and experiences. A diverse board brings forth a variety of viewpoints in leadership strategies and problem-solving, and it gives meaningful perspective on the organization as a whole. It’s empowering for employees and customers when a board mirrors the company that it governs.
Boards that lack diversity is a prime reason for boards to take a fresh look at their composition. In a publication by McKinsey & Company called Why Diversity Matters, researchers found that companies in the top quarter for racial and ethnic diversity were more likely to realize financial returns above the national industry median. The report also shows that companies that fell in the bottom quarter for gender, race and ethnic diversity were less likely to realize above-average financial returns than the average companies in the same industry.
Gender is another important consideration for boards that can have a major impact on board performance. A report called “The Bottom Line: Corporate Performance and Women’s Representation on Boards” by Catalyst found that, on average, companies that had the highest percentage of women board directors outperformed companies that had the fewest women board directors by 53% for return on equity. The same companies also outperformed their competitors by 42% for return on sales and by 66% for returns on capital investments.
The results are clear. Diversity is good for business.
In all cases, boards should be quite selective in choosing board directors. The best candidates bring individual strengths to the board and are able to adapt to the board’s unique culture. Board candidates should also be aware of their time commitment and not give way to overboarding. Nominating committees should look for board directors who can get the job done today and in the next three to five years. Candidates should serve the board, rather than the board serving as a resume-building opportunity for board candidates.
Board Recruitment Process for Nonprofits
As with private and public companies, the goal for nonprofit board recruitment is to find the right board members. The term nominating committee implies that the only function of the committee is to nominate board directors. Nominating committees should focus on board recruitment and composition, board director engagement, and on making sure that the board is fulfilling its duties to protect the nonprofit’s assets, reputation, financial and human resources, and mission.
Boards need to be able to advance the nonprofit’s mission now and in the future. In selecting board directors, nominating committees should consider whether candidates have the right kind of expertise that boards need. Boards will need to do an assessment to see if they need someone with financial expertise, someone with community connections, or someone who’s familiar with individuals that the nonprofit serves. The job of a nonprofit board director candidate requires continuous learning about those being served and being an active advocate for the nonprofit’s mission. In addition, nonprofit board directors must make decisions that are in the best interests of the organization, ensure fair use of the nonprofit’s assets, and be forward-looking with respect to the nonprofit’s future.
Nominating committees for nonprofit organizations should think about board director recruiting in two parts — vetting and cultivating. Not everyone is the best fit for nonprofit board recruitment. Some nonprofit organizations ask board director nominees to serve on a committee or task force or volunteer for the organization to help determine if they’re a fit for board service.
To ensure due diligence in recruiting board directors who will contribute to a healthy, well-qualified board of directors, board members should always be aware of people who might make good additions to the board. However, board directors should leave the task of recruiting and nominating board directors to the current nominating and governance committee. The committee is responsible for reviewing the entire list of candidates, deciding who should be asked to join the board, and deciding who is the best person to invite someone to the board.
The committee starts by assessing the current board’s skills, experience and expertise to identify any gaps. In reviewing the board’s composition, it’s also a good time to “right-size” the board. The average size of nonprofit boards is 15-17 members. With a group over the size of 17 members, it can be difficult to keep board members engaged and allow sufficient time during board meetings for full participation. It can also be difficult to obtain a quorum for larger boards. Nonprofit boards that are too small limit their ability to bring a wide variety of perspectives to their decision-making.
Taking Advantage of the Modern Approach to Board Recruitment
The process of board recruitment and nominations should be easier than getting the word out and scanning each board director’s personal and professional networks to find appropriate candidates. Technology has given us a way that it can be with Diligent Corporation’s Nom Gov tool, a digital solution for board recruitment that serves as a valuable complement to traditional, in-person networking.
Nom Gov is a digital software solution that places data and analytics for good corporate governance at the fingertips of board directors. The spotlight on diversity, independence and board composition has only gotten stronger in recent years. Having access to data and analytics in searching for board directors is now more important than ever before.
Diligent’s Nom Gov application delivers the largest global governance data set for boards by giving them access to the profiles of over 125,000 potential board directors and executives. Nominating and governance committees can use the tool to leverage the same information that proxy advisors, shareholders and potential activist investors rely on.
Nom Gov streamlines the process of board director recruitment by offering a way for committees to search and connect with top talent across the world. Committee members gain access to candidates from over 5,500 companies across 24 global markets and 40 indexes. The tool guides nomination committees to the shortest path to connect and the degrees of separation to an individual via people and organizations. With Nom Gov, committee members gain access to the most difficult-to-reach C-level executives and board director candidates. They’ll be more easily able to identify opportunities and reduce governance risks while gaining insight into their board’s composition, benchmark against competitors, and support a strong search effort for board directors and executives — and it happens in just a few clicks.
The tool operates much like an internet search engine where committee members can add granular filters for searching by gender, age, diversity, experience, demographics, region, sector or discipline.
Committees can also use the tool to mitigate governance risk by allowing them a way to do a health check of the board’s composition and effectiveness compared to their peers. Your board’s skills and expertise matrix helps to assess the board’s strengths and weaknesses, which will provide insight for individual directors and make it easier to compare the organization’s expertise against that of its peers.
In addition, the tool helps committees analyze director interlocks by individual or by company. It also highlights overlapping directorships, seats on competing boards and seats on FATF-listed companies.
Diligent designed Nom Gov as an effective board succession planning tool for private, public and nonprofit boards. Nominating and governance committees no longer have to limit themselves to conducting a search for board director vacancies based on who they and their peers know. Nom Gov essentially opens up the playing field to the most qualified board candidates. The tool automatically sorts and filters the profiles down to the most viable candidates, making the board candidate and executive search a win before you even start.