“Board composition lies at the heart of board effectiveness,” reports global executive search firm Spencer Stuart, and it’s true: Having the right mix of directors — along with a collection of skills that meets your company’s unique needs — is essential to board success.
Given PricewaterhouseCoopers‘ finding that 35 percent of directors believe that someone on their board should be replaced, it’s important that companies prepare themselves for a board refresh. Once you have a handle on why and when to take action (link to Part 1), the focus shifts to recruitment. In order to enhance and energise a board, a company must know exactly what skills to look for in future directors.
Identify the Skills You Need Most
In 2015, the National Association of Corporate Directors addressed the subject of board refreshment in a video interview with two experts: Robert Hallagan, the vice chairman and managing director of Korn Ferry’s board leadership services, and Steven R. Walker, the general counsel, secretary and director of board advisory services at NACD. The corporate mindset and trends they revealed remain relevant.
“Boards should be a strategic asset and a source of long-term competitive advantage,” Hallagan said in the interview. Spend “an awful lot of time thinking about the challenges over the next five to 10 years,” he said, and pinpointing what the company must excel at before asking each current board member “what collection of skills and competencies is going to add the highest value.”
According to Walker, boards have to be “extremely nimble” and anticipate potential corporate disruptions three to five years out. This allows businesses to gauge the skills needed to address future challenges.
Diversify Board Expertise
Unearthing the skills currently missing from your board isn’t always easy, but there are tools that can help. For its part, Spencer Stuart uses a skills matrix — an outline of a company’s desired skills, perspectives and demographic requirements. A matrix like this allows companies to envision their optimal board, along with the expertise they’ll need moving forward.
Organisational planning and leadership development firm Armstrong McGuire recommends a similar board composition and recruitment matrix. In addition to member skills, this can also encompass broader criteria such as board intellectual capital.
When it comes to the specific skills that companies should prioritise, diversification is key. Each skill has its advantages and can be strategically applied to assist with corporate growth. Marketing and communication expertise, Armstrong McGuire says, can help a company develop a marketing plan or better connect with local media outlets for publicity purposes. Financial expertise, on the other hand, can inform budget decisions and financial practices. “Fundraising experience is also a key,” writes an Armstrong McGuire staffer, “as every board member should be making a gift to the annual board campaign and have the ability to solicit funds or open doors to funders.”
Go Beyond Hard Skills
In an analysis of family businesses, the Harvard Business Review found that longterm board success doesn’t just rely on hard skills, but also on shared values and a director’s ability to fit into the corporate culture. For the study, a Harvard Business School executive fellow partnered with two experts in global family businesses to assess 50 leading family firms and uncover best practices.
“When we reviewed the transcripts of our interviews, we found a 95 percent overlap in the language that each firm’s family members and nonfamily executives used to describe their corporate ethos: words such as respect, integrity, quality, humility, passion, modesty, and ambition,” the study notes. “Family members told us that when evaluating senior executive candidates, they considered cultural fit above all else.”
Another quality that Hallagan looks for in new board members is the ability to keep “their egos in check.” Get On Board Australia, which focuses on director development and education, agrees this is important, writing “great directors leave their ego outside of the boardroom and truly act in the best interest of the organisation, not themselves.”
When recruiting a new chairman of the board, meanwhile, companies should look for a combination of expertise and leadership prowess. Good listening skills, the ability to read group dynamics, and a capacity to both challenge and coach their board have all been identified by British publication Management Today as vital characteristics.
If board composition is directly responsible for board effectiveness, then it stands to reason that director skills — and knowing which of them are best for your board — will take your company far.