Diversity and all that
As some large US corporates are ditching their DEI initiatives to stay on the right side of the new administration you may be wondering what on earth is going on and where it will all end. Most of us won’t be in a position to influence those kinds of decisions but we can still strive for good practice for our own boards and choose not to follow that particular trend.
Following on from my previous posts, once you are clear on the direction of travel to achieve your desired strategic outcomes, it is time for the nominations committee to review the board composition. People issues can always be sensitive but following an objective process gives you a sound foundation on which to base decisions about the future membership of the board. The combination of a skills analysis together with a review of the tenure of NEDs should be sufficient to start the conversation about board succession.
Skills analysis
There will be a core list of skills, knowledge and experience which most boards want. Then there may be other more specialist attributes which tie in to your particular strategic aims. Conducting a skills analysis of your current board members (or refreshing a previous one) has to be the starting point when considering future board composition. I find the best way to do this is to get each director to rank themselves against the list of the top 10 to 12 skills which your board needs and to provide some evidence of what they have done in a particular area to merit that ranking. Most board directors are sufficiently self aware and mature to do this well. The Chair and governance lead can then moderate the results and make tweaks if necessary. I have had more occasions when an increase in the rating was justified than times when someone had perhaps exaggerated their abilities.
The nominations committee can review the output against the future needs of the board and do a gap analysis to inform any recruitment process. The analysis may also highlight some areas on which the whole board would benefit from an expert briefing.
Tenure
The matter of executive director succession planning can be quite a challenge to navigate but boards ignore it at their peril. If the person has only recently been appointed and is performing well, or if they have been in post for a very long time and have indicated their wish to move on, then the situation may be fairly straightforward. Often the tougher call is when someone has been on the board for several years and a decision needs to be made about whether they are still the right person to continue, particularly if the organisation is facing a period of significant change.
NED succession should be easier – at least in theory! Best practice indicates that after three terms of three years NEDs may no longer be considered to be independent and it would be appropriate to plan succession after that. This can occasionally be contentious but you need to start somewhere. There may be circumstances which mean it is desirable for a NED to stay on a little longer (or to stand down a bit earlier). It is the role of the Chair to manage this process and have the courage to have the necessary conversations. This is much easier if they are supported by the deliberations of the nominations committee. When Chair succession is the issue, a Senior Independent Director or if there is none, the most appropriate NED would be tasked with dealing with the matter. Once you have a NED succession plan, the skills you will be losing as individuals stand down can be factored into your gap analysis.
Pitfalls to avoid
Some of the things I have come across are:
“Our board is great, we have four members who have been CEOs.”
“We have lots of CEOs and CFOs to choose from so we are not considering anyone else” (for a NED role).
Boards always wanting people with experience of the same sector, first and foremost (for every new NED appointment).
You can see (I hope) that these approaches will not lead to a board which encourages diversity of thought from individuals with different backgrounds and experience. They can all lead to the dreaded “group think”. If the board is open minded enough to consider a more diverse range of candidates then they may be pleasantly surprised by the unexpected and discover that the board’s effectiveness is boosted by some fresh thinking.
A true story
I will end with an anecdote from an all male board I worked with a long time ago. They were hiring a new NED – they improved diversity on the board by appointing someone who was not called John…
