The four criteria boards look at when recruiting a new director
In this edited extract from the AICD's essential guide to achieving your board ambitions, Developing Your Director Career, author Elizabeth Jameson FAICD runs through how board recruitment works so you can be ready when opportunity knocks.
In spite of the fact that frequently shareholders or members ultimately elect the board, in most organisations today the board itself will usually take a leading role in the process of director recruitment. This might comprise the board undertaking an extensive search and selection process for new directors, even if it has to put their recommendations to the members or the shareholders for an election.
Over the course of the past two decades, the process for seeking out and appointing new directors has developed considerably.
Today’s boards are becoming increasingly sophisticated in the way that they identify gaps in their capability and seek to fill those gaps. The starting point for many boards is an explicit board succession policy and/or plan.
Components of a balanced board
In the simplest terms, what boards look for in any new director is someone who can make a worthwhile contribution to the work of the board.
The importance to the board of ‘getting the right fit’ with each appointment should not be underestimated. Boards have a social fabric that depends on much more than purely a skills fit. It depends on goodwill amongst directors and the ability to ‘disagree without being disagreeable’, working in a constructively challenging way without destroying relationships. Group dynamics can make or break the effectiveness of a board.
Achieving a balanced board therefore usually comes down to four main components:
- Skills (boards asking ‘what hard skills and qualifications do we need amongst our directors?’)
- Experience (boards asking ‘what practical experience do we need amongst our directors in terms of a track record in relevant fields?’)
- Demographics (boards asking ‘what sort of balance of age, geography, gender, ethnicity, culture, faith, and other demographic attributes do we want in order to bring a sufficient diversity of views and styles of thinking?’)
- Personal or behavioural attributes (boards asking themselves ‘what type of behaviours—commitment, dedication, strategic thinking, integrity, and team player ability—do we want amongst our directors?’) These four components should be reflected in the board’s approved ‘skills matrix’ or ‘board composition matrix’, reflecting the fact that what boards seek is much more than hard skills and qualifications.
The types of things generally included under the four components below:
Sample balanced board composition matrix
- At least some formal qualifications or skills in some professional areas of general relevance to most boardrooms today such as:
- finance/accounting skills;
- information systems/data analysis;
- business management; and
- legal skills.
- Formal qualifications in specific industries or professional areas of relevance to the particular boardroom in question such as:
- engineering (e.g. for an industrial business);
- pharmacy/medical science (e.g. for a pharmaceutical company);
- education (e.g. for a school); and
- marketing (e.g. for an online retail business).
- Some directors with a minimum level of experience (e.g. ‘10+ years’) in some areas of general relevance in the boardroom, such as:
- corporate executive experience;
- development and oversight of information systems;
- change management and organisational transformation; and
- financial governance.
- Some directors with a minimum level of experience (e.g. ‘10+ years’) in domains of specific relevance to the particular boardroom such as:
- advocacy and political (e.g. for a NFP with a strong advocacy focus);
- health sector professional (e.g. for an organisation running hospitals); and
- insurance/financial services (e.g. for an insurance company board).
- Seeking a balance of different backgrounds to bring greater rigour through diversity to decision-making, the board may have identified, for instance, that it needs to secure:
- a lower average age of directors (i.e. younger directors);
- a lower average tenure of directors (i.e. greater turnover of directors);
- a balance of, say, at least 40% of each gender on the board (i.e. more men or women);
- identified number of persons from Aboriginal or Torres Strait Islander background;
- a balance of other cultural backgrounds; and
- a majority of followers of a relevant faith (e.g. in the case of a church-based organisation).
4. Personal or behavioural attributes
- Most difficult—and sometimes impossible—to recruit for but still an important component of the complete board composition matrix (and the reference checks during a recruitment process) the board will generally be looking for people with a range of desirable attributes such as (in no particular order of priority):
- strategic thinking;
- business/commercial acumen;
- curiosity—interest in probing further;
- courage—preparedness to take on the hard issues in a respectful manner;
- focus under pressure;
- team player—accepting that governing is a ‘team sport’ not for lone wolves;
- active listening—people who ‘listen to hear’ others and consider their viewpoints;
- ability to ask insightful questions (rather than proffer all the answers);
- skill in the art of constructive (rather than disagreeable) disagreement;
- dedication to the task—people who take their board role seriously;
- integrity (assessed by the regard that they are held in by others);
- intelligence—able to read and analyse a great deal of complex and sometimes technical information outside their own areas of experience;
- availability—ability to put in the requisite amount of time; and
- emotional intelligence—high level interpersonal skills based on an ability to understand and respect the variety of views around the table and to appreciate the influence of their own biases.
As a starting point, if you do not have a working understanding of the fundamental reasons for the importance of the above factors, or the fundamental difference between ‘governing’ and ‘managing’, you are too early in your quest. If so, your focus at this point needs to be to make sure you acquire the knowledge you need, preferably through conversations with your boardroom champion.
The AICD regularly runs courses and events for directors, aspiring directors and executives, covering governance and business best practice. Click here to see our upcoming courses in Western Australia.