In some markets, there’s an expression that you make your money when you buy. In real estate terms, that comes down to not only your purchase price and your timing, but also your selectivity in your choice of property.
Selectivity is also critical when it comes to recruiting the right members for your board. The quality of your board and, therefore, the leadership of your organization, will come down to having made the right recruitment choices in the first place.
Consider the expertise that’s ideally invested in recruiting your CEO and senior executives. Then assess whether your board invests comparable levels of care and expertise in its own succession planning and recruitment.
Recruiting the Right Board Members
Ask any corporate secretary or other governance professional who has witnessed board underperformance or unnecessary attrition. These can sometimes be the result of ineffective – however well-intended – recruitment practices. While onboarding and ongoing education play key roles in your board’s culture and success, there’s frustration in knowing that not even the best such programs can compensate for having failed to recruit for the right balance of expertise, commitment, diversity and fit.
If your board is perceived as prestigious or offers an attractive directors’ compensation plan, you likely have a deep candidate pool. In other environments, effective recruitment may be more challenging. There’s also the public sector; for some government (crown) organizations, a board’s recruitment recommendations will be vetted by an external authority. Some final decisions will be made for, and not by, the board and its Nominating or Governance Committee. On the other hand, public sector boards and others where periodic turnover is the norm have the benefit of experience when it comes to recruiting.
Whether or not stakeholder activism and influence have already impacted your organization’s board refreshment practices, you want to get recruitment right. What, then, is a governance professional to do when it comes to supporting your Nominating or Governance Committee?
You can begin by encouraging attention to proactive succession planning, and recruitment based on alignment with both current and anticipated needs. In the past, it has not been uncommon for boards to identify an upcoming vacancy and then recruit prospective candidates whose experience and expertise aligned with those of the incumbent. Today, a board would be well served to broaden the scope.
What to Look for to Recruit The Right Board Members
There are a number of considerations, beginning with the board itself. Does the board have a succession plan, formal or otherwise, in place for its Chair, Vice Chair(s) and Committee Chairs? Are there suitable candidates among the current directors? It’s not unusual to see Committee Chairs and Vice Chairs move up the leadership ranks of a board, and such transitions inevitably create a need for someone else to step up into a vacated role. Does your board anticipate any such changes in the next two to five years? If so, current recruitment efforts should also reflect the need to fill a future leadership role within the board.
You’ll also want to consider the evolution of governance itself, and whether the board has the requisite talent. Does your current board composition reflect technology strategy expertise? When it comes to digitization, artificial intelligence (AI), cybersecurity, customer relationship management (CRM) and investments in technology as well as (or in lieu of) bricks and mortar, boards need to exercise oversight. Without the presence of technological expertise, how will a board know what it’s looking for or what questions to ask?
Your board also needs to be equipped to provide oversight of environmental, social and governance (ESG) issues, and to be prepared for shareholder activism and expectations. In recruiting for directors with technological, ESG or social media qualifications, there’s a likelihood that this will bring greater age diversity to your board. That’s a good thing, but it requires that current directors be prepared to welcome, accept and support younger directors. Mentors can ease the transition, as can you, and the board may want to make specific investments in governance education for any novice directors.
Nor is it solely the board’s succession planning that you and your Nominating or Governance Committee should keep in mind when it comes to recruiting your new board members. It’s important to secure the CEO’s insights and to assess the likelihood of any significant management changes within the next two to five years – be it a change of CEO or another senior executive position. Either has the potential to impact the strengths required of the board and can add another layer of complexity to its succession planning.
Your Nominating or Governance Committee will benefit from a current and relevant board matrix. Such matrices have expanded beyond simply listing requisite and desirable areas of experience and expertise. Increasingly, boards are providing opportunities for identification and consideration of diversity. There’s also consideration of individual directors’ tenure on the board itself and, again, the need to ensure that your matrix reflects future, as well as current, board and organizational needs.
While independence may not appear as a box to be checked on your matrix, it’s critical in recruiting the right board members. Not only will independent directors not be current or recent employees of the company, they will be unrelated to management and will not be current or recent employees of one of the company’s suppliers or professional services providers. Your board may stipulate other considerations in defining independence, but the bottom line is that an independent director has no connection to management or the organization other than through service as a director.
As the Committee contemplates your board matrix, it would be well served by reviewing board evaluation results. Do directors themselves view the board as cohesive, committed and well equipped to fulfill their individual and collective obligations? Or have evaluations highlighted the need for new expertise or suggested the replacement of a specific director?
Board recruitment is just one more aspect of governance operations that can benefit from Enterprise Governance Management (EGM), the application of technical tools and resources to meet your board’s needs. Diligent’s innovations extend far beyond secure communications and remote access to meeting materials.
Diligent’s Board Assessment Tool enables you to create and customize all of your board’s evaluations, and directors can have confidence in knowing their evaluations are both distributed and collected securely. With a secure board portal, your Nominating or Governance Committee can have ready access to the board’s succession plan, matrices and evaluation reports. Ideally, these matrix reviews and succession planning discussions occur on a regular basis and well in advance of actual need.
Your Nominating or Governance Committee will need to identify and meet with prospective candidates in a timely manner, not at the eleventh hour. This will serve as an opportunity for your board’s representatives to further assess fit, thought processes and whether director independence is likely to extend beyond the technical description and encompass respectful debate and appropriate challenging of assumptions. What depth of governance expertise can a given candidate bring? If new to governance, does a candidate have a firm grasp on the oversight aspects of the role and understand what they’re signing up for? Have any candidates already taken the initiative to invest in a director education program? Your board’s representatives may want to assess less experienced candidates with an eye to providing additional education and networking opportunities that will enhance their capacity to contribute.
Board Recruitment Final Thoughts
When it comes to recruiting and vetting candidates, it’s important to encourage frank assessment of the degree of commitment. What does the board expect and need of its directors? Are the requisite time and other commitments realistic from a candidate’s perspective? Or are there constraints on their availability? While it may be disappointing to learn that your preferred candidate can’t or won’t meet the commitment that your board requires, that’s better than finding out after the fact and having to deal with the ramifications then.
When recruiting board members, it’s also helpful to remember that this assessment is likely a two-way street. Good candidates will assess what they can of the strategic plan as well as board and organizational culture and diversity. They’ll also want to determine fit, potential to make an impact, and opportunities for professional and perhaps personal growth. In addition, they’re likely to consider how well resourced the board is, not only in terms of governance expertise and support, but also in terms of enterprise governance management (EGM), whether or not they’re already familiar with the term.