Board Best Practices Series: Onboarding for Excellence

Ask a public company director what their onboarding process was like 15 years ago and you’ll likely be met with a quizzical look or laughter. Even as recently as ten years ago, few companies conducted what could be described as a robust or thorough onboarding process. I have interviewed directors who’ve quipped that their onboarding process was 18 holes and a couple of bourbons. Even today, you are likely to find that the notion of onboarding for excellence has yet to appear on many boards’ lists of governance best practices, or practices in general.

Boards that do have robust onboarding programs understand that effective onboarding is an essential element of effective governance and that boards need to be strategic about their onboarding process. Organizations of all kinds – public corporations, private companies, utilities, nonprofits, etc. – should understand that governance is as much about opportunity as it is about risk and compliance. Strong  governance frees an organization to pursue its business and strategy objectives, innovate, and differentiate itself in the marketplace. Each new director or trustee recruited by the board is an opportunity to advance the board’s effectiveness in all aspects of governance.

What has changed?

Until we were midway through the 1970s, public company directors were almost exclusively hand-picked by the CEO from within the company’s ranks and they had a largely passive role. Orienting directors focused on the nuts and bolts of their new role and consisted of handing over volumes of information and setting up meetings with the other directors. In the 1970s, when the board’s role had shifted to one of monitoring management (rather than being composed of management), boards began recruiting independent directors from outside the company. The intervening decades ushered in other significant changes in corporate governance, but as we’ve seen from a series of corporate crises, there is always room for improvement.

A board’s ability to effectively carry out its oversight responsibilities, and each director’s ability to honor their fiduciary duties of care, loyalty and obedience – the bedrocks of good governance – begin with board processes that support those goals. Boards spend a lot of time, thought and effort recruiting qualified new members who will bring valuable expertise and experience and who have the capacity to elevate the board’s effectiveness. Onboarding those new members should be done just as intentionally.

The challenge of getting up to speed

In the past, boards gave new members up to a year to attend meetings essentially as board observers, with no expectation that they would participate substantively in board discussions during that time. The days of easing in to things are over; new directors need to and want to contribute from the start.

Successful onboarding requires a commitment from both the board and the new appointee. A weak process can’t adequately prepare even the most dedicated director, and an otherwise strong process won’t be enough if a new board member is unwilling or unable to rise to the challenge.  Onboarding for excellence requires that all parties commit fully to a robust onboarding framework so that both the board and the new board member derive the most benefit from the presence of that new member on the board.

A formal new director orientation program is a good place to start, but onboarding is a process that requires more than handing over thick binders of information and scheduling meetings and presentations before the first board meeting. An onboarding framework takes into consideration each new director’s unique situation, with input from the director, to customize a framework that will provide a foundation for success for both the new director and the board.

Every onboarding process will include core components, including information about the organization, its industry, regulatory and compliance matters, board structure, administration and policies. However, onboarding for excellence must go beyond the nuts and bolts. Onboarding must also provide an opportunity for the new director to understand the fundamentals of corporate governance, his/her fiduciary duties as a board member, and the board’s role in governance and strategy. One of the hardest challenges for a first-time board member is understanding the distinction between the role of management and the oversight role of the board. This may be particularly true for new directors who are active in a CEO or other executive officer capacity.  

Onboarding must align with the board’s efforts for continuous improvement and should be framed as a dynamic process. To address questions that are perhaps outside the scope of the onboarding manual, a mentor can be a valuable source of insight, information, feedback, and connection for both first-time and more experienced new board members. Site visits and meetings with teams throughout the organization provide opportunities for new directors to understand the business of the organization, but they are also an opportunity for new – and incumbent – directors to gain a sense of the organization’s culture and tone from the top. Participation in continuing education for all board members should be encouraged – from conferences and seminars geared specifically for directors and trustees, to board retreats, and presentations by experts on relevant topics.  

Perhaps one of the most impactful and effective tools for continuous improvement is an annual board assessment that includes individual director assessments and a director skills matrix. It provides an opportunity for candid self-reflection and constructive peer feedback, yielding valuable insight that is focused on improving effectiveness and directors’ ongoing professional development. For new board members, in particular, the process of a peer and self-assessment offers a valuable gauge of their performance early on.

Summary

Governance is about opportunity. Boards of today are starting to look different from boards of the past. In an effort to increase diversity of background and perspective and to bring on much needed expertise in innovation and emerging technologies, boards are looking at candidates who are more likely to be first-time directors and industry outsiders who are younger and still working. Between 2017 and 2018, less than one third of new directors appointed to Fortune 500 company boards had prior board experience. Regardless of their background, however, the goal of every new board member must be to become educated and knowledgeable about the organization’s business plan, its customer acquisition strategy, regulatory environment, and operational challenges as quickly as possible. The goal of an onboarding program is to provide that opportunity. Onboarding should excite a new director to contribute to the governance value chain.  

Benefits of Onboarding for Excellence

  • Full engagement and active participation
  • Ability to properly challenge
  • Understanding of board and company culture
  • Focus on principles of governance
  • Clarity on the distinction between the board’s oversight role and management’s role

Orientation and Onboarding Topics

  • Fundamentals of corporate governance and the board’s role in governance and strategy
  • Directors’ fiduciary duties and responsibilities
  • Company history, mission, vision and goals
  • Culture of the company and the board
  • Short- and long-term strategy, priorities, and challenges
  • Financials
  • Company industry, competitive landscape, and risk
  • Board structure, administration, and policies
  • Regulatory, compliance, and related matters

Dos and Don’ts

  • Don’t bury new directors in volumes of information
  • Do provide a series of well-planned focused presentations with references to resources for additional information
  • Don’t fast-track the process
  • Do be intentional and allow adequate time for processing and understanding information
  • Don’t count on new directors to feel comfortable asking questions right from the beginning
  • Do partner new directors with a mentor who can serve as a go-to for questions and guidance
  • Don’t assume new directors will discern the company and board culture in time
  • Do schedule site visits and meetings with management and other personnel for a first-hand look
  • Don’t assume the learning is ever done
  • Do provide ongoing opportunities for continuing director education

New director’s responsibilities

  • Ask questions and actively listen. After Board meetings, ask the chair and the CEO if your questions hit the right tone.
  • Attend all board meetings and as many committee meetings the board allows
  • Meet with board and company leaders, external advisors, e.g., auditors
  • Visit headquarters and other company sites
  • Seek out a mentor on the board for insight, guidance and feedback
  • Read, read, read and be prepared to read quickly

Resources for New and Seasoned Board Members

  • Ira M. Millstein Center for Global Markets and Corporate Ownership at Columbia Law School – Board Leadership Forum here and Governance Leadership Forum here
  • John L. Weinberg Center for Corporate Governance at University of Delaware here
  • Kellogg Executive Education at Northwestern University here
  • Rock Center for Corporate Governance at Stanford University here
  • UCLA Anderson Executive Education – Corporate Governance here
  • Harvard Law School Forum on Corporate Governance and Financial Regulation here
  • Nasdaq Governance Solutions here
  • Corporate Board Member here
  • Society for Corporate Governance here
  • Commonsense Principles 2.0 (2018) here

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