There are a number of ingredients that go into making a board truly successful. Of them, I believe a relevant board composition, a collaborative culture, and highly committed board members are three of the most important success factors.
My colleagues and I spend a great deal of time advising our clients on their board composition and recruiting directors who best meet their criteria. What has become even more important than ever is for directors to be relevant to their boards and the corresponding companies through, for example, contributing relevant experience (e.g. industry, international, regulatory, government, academia, etc.) and/or skills and expertise (e.g. financial, manufacturing, marketing, technology, etc.). By definition, boards govern corporations with shareholders’ best interests at heart. Yet, to be even more valueadded to its constituents, including shareholders, management, employees and fellow directors, boards should be comprised of directors whose combined collection of backgrounds, experience and skills are relevant to and therefore align well with what the company does, its strategy, opportunities and challenges. While this sounds obvious, if you were to review a wide collection of boards, you might conclude otherwise.
The board could therefore better assess how the management and the company are performing and more effectively probe and ask the right questions. Just as important, relevance enables a board to be a much more effective strategic discussion partner with the CEO and his or her executive team. For instance, a company is in the process of expanding into China and is making a big investment and commitment of talent to this major initiative. It would be very helpful to have on the board an active senior executive who has successfully built and led her company’s Far East operations and who can provide a value-added perspective on what was learned in the process and what her team is seeing real time in that region of the world. Such examples are potentially endless. In addition to the CEO, other members of the senior management team could reach out to specific directors with equally important types of topics to discuss.
When thinking about composition, “employed versus retired” are very important attributes. Boards should be comprised of both types, and there’s no specific formula for how many of each a board should have. It depends on what a board is looking for in each of its directors. For example, a board seeking a real-time perspective in a certain industry or region of the world would likely prefer a director who is an active senior executive or CEO than a former senior executive who has been retired for a number of years. Financial expertise could be gained from a retired financial expert. However, the board might benefit even more from having an active and multi-dimensional public company CFO who is very involved and current on what is going on in the financial and accounting world on a real-time basis. Given the ever-shrinking pool of active CEOs who have capacity for board service, retired CEOs are a logical alternative. The composition of active versus retired directors can therefore be somewhat unique to each board.
A board should possess a culture that is based on independence of thought, collaboration, honesty, mutual respect and transparency. Oversized egos and prima donnas who demand attention and like to hear themselves speak are seldom, if ever, welcome. Arrogance and distain for others’ opinions can be quite destabilizing to the group. Accomplished at a very senior level, balanced, doesn’t take him or herself too seriously but does take the role of being a director seriously are key foundational attributes of the types of directors who can foster the ideal board culture. Along those lines, additional ideal director attributes include but are not limited to: high intellect, the highest integrity, sound judgment and good old fashioned common sense, team player, ability to challenge in a constructive way, calm under pressure, think strategically and get down into the weeds when absolutely necessary. When bringing a new member on to a board, it is critical to assess him or her for
these attributes, while taking multiple references.
Board members have to possess a strong level of commitment and corresponding work ethic. They are expected to prepare for and attend all board and committee meetings (both in-person and telephonic). But often, more is required of directors. Major corporate events (e.g. a major reorganization/restructuring, merger or acquisition, etc.) can yield many more in-person and telephonic meetings than anticipated. As part of the succession process, board members can be asked to meet with and get to know high potential senior executives, sometimes outside the normal board meeting schedule. I have known of boards where directors are asked to mentor up-and-coming stars, meeting with them on multiple occasions throughout the year. Directors can also be asked to visit different company site(s) annually.
The point of this is that when serving on a board, there is a certain amount of unpredictability and an unwritten requirement to go above and beyond the call of duty when the need arises. While directors may not have the time or necessarily the capacity for the additional work, they have to pull their own weight, particularly in moments of crisis. At the end of the day, a board is “in it together.” If there are director(s) who choose to do less than they’re asked, then the board’s effectiveness and the collaborative and team-oriented aspect of its culture well may be compromised.
Carter Burgess is a Managing Director and Head of the Board Practice at RSR Partners, a leading corporate board and executive recruiting firm founded in 1993 by Russell S. Reynolds, Jr., based in Greenwich, CT. The firm partners with both public and private companies across a wide variety of industries including financial services, healthcare, industrials, consumer/retail and technology.
Excerpted from: www.boardmember.com