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Getting the right people on board – practical advice on building effective boards

Builing Effective BoardsLike any team, to be effective a board needs the right mix of people.  This is something that is unlikely to happen by chance.  Skills assessment, needs analysis, succession planning and recruitment all require active attention.

In this blog we wanted to share with you some practical advice about getting the right people for your board.

What skills and experience do you need?

There is no one-size-fits all checklist for an effective board.  While every director needs to have a baseline of skills and behaviours to fulfil their legal duties, beyond that the list of what the “right” skills will be depends very much on the particular organisation and its context.

This can include technical skills, like marketing, legal or accounting.  It can also include experience, such as leading cultural change, or managing an organisation through a merger.  What your board needs will depend on the current context your organisation is operating in, and where you want the organisation to be in a few years.

The strategic plan will be an important guide. Looking at your strategic goals, what skills and experience will you need at board level to manage towards those goals?

After creating your ‘wish-list’ of skills and experience, the board should conduct an audit against it to assess what skills and experience the current board members have.  This skills matrix will show you what you have, and where the gaps might be.  Just like individuals, boards as a team can have blind spots, so it can help to have an objective assessment from someone outside the board.

✔  Establish a skills matrix

✔  Audit your current skills and experience

Things change

Once established, a skills matrix should be periodically reviewed.  Things will change, both in turnover of board members and changes in the organisation’s operating context and strategic direction.

The board should come back to the skills matrix on a regular basis and ask what’s changed – what skills do we have now and what do we need at this point in time?  One way to integrate this into a regular cycle is to make it an annual activity, complementary to review of the strategic plan.

✔  Make an update of the skills matrix part of your annual board work program

Mixing things up

In assessing the gap between current composition and what is needed, boards should consider diversity of the group.  It can sometimes be hard to see from within, so this is an area where an external opinion can be valuable.

There is currently a good deal of focus, and rightly so, on enhancing gender diversity on Australian boards.  The ASX Corporate Governance Principles and Recommendations call for a diversity policy with measurable objectives on gender diversity that are reported against in the annual report.   Listed companies need to comply with this requirement, or explain publicly why they have not done so.

There is a growing body of research indicating increasing gender diversity can enhance performance.  Global consulting firm McKinsey & Co, in their Women Matter series demonstrated a positive correlation between a company’s performance and the proportion of women on its governing body (McKinsey & Co 2007), and identified reasons for this linked to differences in leadership styles (McKinsey & Co 2008).  In Australia, the Reibey Institute (a non-profit research centre) analysed return on equity of ASX500 companies and identified higher returns for companies with female board directors than companies with no women on their boards (Reibey Institute 2011).

However, gender is just one dimension of diversity.  Other factors such as age, racial mix, socio-economic background, linguistic diversity should be considered, to question whether there is a need for greater diversity in these areas.

Diversifying board membership may need to be managed carefully, as different backgrounds can also mean different cultural biases, assumptions and norms.  Cultural fit is an important part of board recruitment, but “cultural fit” should not be an excuse for continuing to recruit “people like us”.

✔  Critically assess the diversity of the board

✔  Consider asking an objective outsider to assess your board’s skills and diversity

Finding good candidates

Recruitment processes will vary depending on the nature of the organisation and board member selection process.  For example, in some Not-For-Profit organisations, the board (who are also the members) select board members directly.  In other contexts, members (shareholders) vote for directors in a ballot process.  Some boards have formal nominations committees focused on identifying potential board members.

Quite often, board appointments are opened up through networks, and “who you know”.  This can be a reliable, resource effective way to find talent.  However, it does create the risk that new board members will be from much the same background as the old ones.  There can be a natural human tendency to look for “people just like us”.  “In-group bias” (the tendency to give preferential treatment to others we perceive to be members of our own groups) can affect recruitment and selection processes.  There’s also the practical constrain that if you are looking to increase diversity on your board, relying on networks alone may provide too shallow a talent pool.

Options for broadening the search include engaging specialised recruiters, public advertisement and sector-based forums (for example, Pro Bono Australia in the Not-For-Profit sector).  Boards should consider the practicality each of these options – for example, if you advertise publicly, do you have the time and experience available to you to be able to review and shortlist applications?

✔  Look for a deep talent pool, outside your existing networks

Clarify expectations

Like any recruitment, it is important to be clear about what you would expect of someone coming into the role.  The board should have clearly articulated position descriptions for board directors.  It should also be clear about the expectations for anyone taking on a board role – for example expectations about meeting frequency and attendance, minimum time commitment for board activities.

✔   Be clear what the role requires

A two-way street

Board should approach recruitment as a two-way process, and expect that high calibre candidates will want to find out about the organisation and how the board operates.  As a candidate, it is reasonable to expect access to board papers, financial statements, contact with a number of board directors, attending meetings as an observer.    A board that is not willing to open itself up to this kind of due diligence may send the wrong message (potential candidates may be wary about what you’re hiding!) and close the door on talented and diligent potential directors.

✔  Expect candidates to interview you

An ongoing process

Board succession planning should be an ongoing process.  Boards should be regularly assessing their existing composition and what they need.

Nominations and recruitment shouldn’t be left until there are gaps in board composition.  Boards should consider developing a ‘pipeline’ of talent who could fill upcoming vacancies.

✔ Don’t rest on your laurels


McKinsey & Company (2007) Women Matter: Gender diversity, a corporate performance driver

McKinsey & Company (200) Women Matter 2: Female leadership, a competitive edge for the future

Reibey Institute (2011) ASX 500 – Women Leaders: Research Note

About the author

TMS Consulting