Why Board Refreshment is Critical to Success
As boards today face issues related to growth, globalization, and technological change, board refreshment is becoming more and more critical. The model of board-member-for-life — the proverbial pale, male, and stale — is likely to miss the boat as far as possessing the skill set and familiarity needed to address emerging crises and changes in investor and customer profiles. In fact, any board that defaults to the status quo and does not plan for the future is notholding its own; it is actually falling behind.
In a February 2016 article in Agenda, I address how board refreshment is crucial not only for a company’s effectiveness and survival in a changing world, but for protecting it from encroachment by activist investors and other outsiders. The skills that any board should comprise in order to be able to position the company for growth include:
- IT strategy
- Cyber-security understanding
- Financial expertise and independence
- Understanding of business and customers
- Demographic understanding
- Social media insight
- Geopolitical expertise
(Agenda, February 2016)
Some skills that are critical in cultivating new board members are those on the forefront of new technologies. It’s essential to not simply catalogue the tech know-how a board needs, however. These skills need to be paired with an ability to contextualize how they can move the company forward strategically and compete in current market environments.
A key starting point is board self-awareness. Are the directors as a group addressing current and future needs of the company? Are they responsible stewards, able to communicate effectively with the technical officers and the CFO? Are they aware of their responsibility for ensuring compliance with reporting and regulatory agencies?
If not, it may be time to make room for fresh perspectives, especially ones that reflect a more technologically adept and more diverse demographic. Millennials are comfortable with the rapid pace of change in technology and social constructs, both of which impact a company’s customer base. They also embody a new approach to entrepreneurship, often melding social media and cyber-savvy with social consciousness and a greater openness to diversity.
Diversity embraces race, ethnicity, age, and gender, but it is not an end in itself. Rather, its value lies in how it brings fresh perspectives to the table that probably would not arise from a more homogeneous group.
Board Refreshment Checklist
Below is a checklist for the board assessment process to help directors ensure that refreshment is addressed on a regular basis.
- Conduct an annual board peer assessment that incorporates a skills matrix as a tool to evaluate each board member’s contributions and to expose skill and diversity gaps on the board as a whole;
- Reinforce that the purpose behind the assessment is to identify areas that need improvement, create dynamic dialogue, and lead to action items for the board as a whole;
- Watch industry trends to get a sense of what skills will be needed in the future;
- Involve the CEO and top managers in the process;
- Determine what is needed in terms of board education.
In 2000, few people could imagine the 2008 financial crisis, the explosion of 3-D printing, or the rise of cyber-security issues that corporations face today. Similarly, today’s board of directors cannot know what its company will face in the future.
By including ongoing board refreshment and a regular review of the board’s skills matrix, however, it can include individuals with up-to-date skills and industry insights who can ensure that the board — and the company — are on the path of continual improvement.