Happening at a Board Near You: New Director Skills to Support the CEO and the Strategy
By Nels Olson and Tierney Remick
It takes a great board to provide CEOs and the strategy the support required for success. No matter how capable the CEO, a carefully selected board provides a definite competitive edge.
Running a company is increasingly a team sport – better represented not by the old, hierarchical organizational triangle but that same triangle turned upside-down. And in a rapidly shifting 24/7 business environment, CEOs need all the resources they can get to ensure they recognize, seize and properly leverage the right opportunities.
A recent Korn Ferry survey of heads of nominating committees and board chairs of Fortune 500 companies holds some good news to CEOs. In addition to the CEO directors who have been and will continue to share indispensable operating wisdom and will continue to be in great demand, boards are eager to recruit diversity to their boards in the form of new directors with the specific functional skills and experience they require.
The best news is that – according to our survey and borne out by our own day-to-day experience working with boards and CEOs – boards are taking a far more strategic approach, focusing on board succession planning and not merely one-off recruitments.
Recruiting new directors may sometimes be an urgent matter but, on the best boards we know of, it is part of a thoughtful, ongoing process – board succession planning, which is much like CEO succession planning. It entails, keeping track of individual directors plans, such as retirement, to maintain awareness of when seats may open up. At the same time, boards maintain a board skills matrix that indicates the skills and experience currently represented on the board team as well as those they are needed but not represented.
This approach enable boards to create a pipeline of potential directors who are particularly desirable, and maintain contact and relationships, rather than waiting for when they must recruit a director.
In our survey, nearly two-thirds of respondents indicated that they have identified skills needed on their board in order to compete. Additionally, two thirds of respondents indicated that they are not satisfied with the composition of their board, primarily because it lacks the diversity of skills and experience they deem desirable.
Who are these new directors and where will they come from? After financial experience, global experience, regulatory experience, and cybersecurity experience are the most in-demand experience profiles for new directors. Also sought by a significant percentage of respondents are directors with marketing, specific geographic market, online retail, human capital, and social media expertise. In other words, boards are seeking a mix of functional and industry expertise to help with the strategic challenges they face.
Of course, adding new profiles of directors beyond traditional CEOs – who can support the CEO – comes with challenges of its own. A sizable number of directors surveyed perceive or anticipate challenges in integrating new directors – one potential stumbling block. An overwhelming majority of respondents recognize that first-time directors require additional support, some indicating that their board requires a change in culture among existing directors to integrate new board members.
For CEOs recruiting and integrating this new generation of directors should be well worth the effort. CEOs we know will welcome this added diversity on their boards, best tailored to the company’s and board’s needs. Precisely what that will look like will be determined by the strategy. A strategy that is targeting a new geographic or product market will benefit from a director with that relevant experience, while many boards now seek cybersecurity and social media expertise.
Boards that result from this sort of advance, continuous planning can prove to be the strategic arsenal CEOs have dreamed of.
One sticking point: Adding new directors usually means making room by subtracting others on the board, if boards are to remain lean and agile – the decades-long trend. That raises the issue of board assessments, including especially sensitive individual director evaluations.
How boards can effectively deal with that challenge is a subject for another time.