As companies large and small grapple with the business impacts of the Covid-19 pandemic, CEOs and their executive teams need all the help they can get. The Board of Directors or Board of Advisors should be one of the primary resources for organizational leaders. But what if that board is not up to the task of providing strategic insight and offering the kind of valuable perspective needed to help the company navigate the new world order?
From our vantage point as strategic human capital advisors, we have had the opportunity to see hundreds of boards up close and personal. Some are incredibly impressive and impactful. Some other boards, unfortunately, are full of well-meaning people with homogenous thinking, dated skills, or business acumen that does not lend itself to great governance and strategic input. Among the most critical roles of a board of directors is to: 1) decide who leads the organization and; 2) provide valuable oversight of business strategy and risk. Directors whose own experiences do not align well with these vital responsibilities should perhaps be reevaluated for continued board service.
Now more than ever, organizations need board members who are not just great business leaders, but who also represent a diverse range of perspectives along with strong skills in key areas. For example, as companies revamp their business models, directors with strong financial competency may be especially helpful. Many firms have had to ramp up their work-from-home or online technological capabilities, and thus a strong digital director would be very useful at this time. Executive compensation plans are under scrutiny as business forecasts evolve, and board members with relevant skills in this area might be particularly valuable.
Both the skills and life experiences of your board members really do make a difference. It has been well documented that the more diverse the perspectives sitting around the board table, the more likely better decisions will be made. A group of board members who think alike, look alike and see issues from a similar viewpoint are missing the opportunity to cast decision-making in the broadest possible light. Considering this, how can a more diverse board not be beneficial?
According to Carol Johnson, a Director who sits on four corporate boards, “The CEO role has never been more challenging. Board support and input, in partnership with the CEO and leadership team, should help the organization to think through strategic solutions, fresh opportunities, and how life will be different. This is more important today than ever.”
The saga of the Board of Directors of Theranos, a now defunct blood testing startup founded by one-time Stanford student Elizabeth Holmes, is quite telling. Holmes recruited luminaries including Henry Kissinger, George Schultz, William Perry, Sam Nunn, Bill Frist, Dick Kovacevich and Jim Mattis to her board with the promise of revolutionizing blood tests. While this was a board of intelligent and accomplished leaders, they likely viewed the world similarly, and simply did not govern appropriately, ask the right questions, or properly assess the company’s risks. And equally important, most of these big name directors did not have relevant experience with the company’s core business of blood testing. As a result, the company is out of business and Holmes is awaiting trial. Names alone do not make a great board. It is the collective skills, nuanced insight, diverse backgrounds and perspectives, the courage to tackle tough issues, and the ability to present opposing views in a constructive manner that are the hallmarks of the most effective boards.
Needless to say, directors are expected to do their homework and prepare for board meetings beforehand. Shockingly, we see too many directors who do not review materials ahead of time, often belaboring discussions and sidetracking conversations, which wastes valuable board time. The average public director now spends roughly 20 hours per month on their board duties, and advance preparation to optimize board time together remains critical to being a high performing board.
Companies with lesser skilled directors, or a board lacking in diversity, need to take a hard look at who is truly contributing and adding real value. Perhaps it is time to have a difficult conversation or two regarding the need for current skills, along with the expectations of board performance. As Bill McNabb, the former CEO of Vanguard has stated “Having the right directors on the board is the single most important factor in good governance”. Well said.
Alan J. Kaplan is Founder and CEO of Kaplan Partners, a retained executive search and board advisory firm headquartered in suburban Philadelphia. He can be reached at 610-642-5644 or alan@KaplanPartners.com.