Hundreds of directors have joined boards for the first time this year. How to go from newbie to great. Since last year, 19% of firms in the Russell 3000 index have appointed at least one first-time director—that’s nearly 600 new director recruits. But experts say this figure vastly undercounts the number of new directors serving on boards now. Private equity firms have been on a director hiring spree, either to diversify their boards, add new skill sets, or prepare their companies for public trading, and many of those new recruits are first-timers too. But there’s a difference between just sitting in the boardroom and being an excellent director. Board directors have the potential to make a huge difference in the performance of their organizations. While it isn’t rocket science, experts say becoming an effective director involves having the right mindset, commitment, and curiosity. Great directors are similar to great musicians, says Jane Stevenson, vice chair of Korn Ferry’s Board and CEO Services practice and the firm’s global leader of CEO succession: “It’s not about playing the notes—it’s only when you know the notes and are free to breathe what you are playing that the music is extraordinary.” There’s certainly plenty of room for directors to improve; directors themselves admit as much. In one 2020 survey, 49% of directors at publicly held companies said at least one fellow board member needed to be replaced. Here are five ways that board directors, first-timers or otherwise, can become great directors.
Be prepared. Companies prepare a package of materials for directors before each meeting. Collectively called a board book, the information typically includes financial statements, notes on company strategy, personnel decisions, and other important issues to the organization. The least directors could do is read the board book, but many just don’t and it shows. More than one-quarter of executives and 18% of board chairs say that directors are unprepared for board meetings, according to a 2017 survey by the National Index of Nonprofit Board Practices. Experts say there would be similar results from a survey of for-profit organizations. Reading the board book is only a start, however. Top-performing directors will seek out guidance from other experts to fill them in on important aspects of an industry or area of operations. For instance, a director with a background in human resources might hire a consultant to help them learn the nuances of financial statements. Before each meeting, first-time directors should expect to spend 50% more time getting up to speed on the company’s situation than a veteran director, Stevenson says. “You want to ensure that you come into the room well-grounded and not have to be educated at the expense of other people’s time,” she says.
Don’t try to run the company. One of the biggest impediments to directors doing a good job is forgetting their role. “You’re a director. You aren’t management,” says Tierney Remick, vice chair and coleader of Korn Ferry’s Board and CEO Services practice. Indeed, one current CEO has sat on the board of another firm for years and admits he still has to remind himself that he isn’t one of the company’s executives. A board director’s job is to advise the CEO. Sure, a director has a fiduciary responsibility to represent and protect investors’ interest in the company. But that, experts say, involves asking good questions, not dictating strategy. That also means not doing things such as interceding on behalf of customers or going behind the CEO’s back by talking with subordinates about major decisions.
Ask smart questions intelligently. Speaking of advice and guidance, directors should ask questions that ensure the company is not only following through on its strategy but also living up to the firm’s stated purpose and values. In 2020, for instance, good directors were asking executives how they were implementing their crisis-response plans and how the company was following through on commitments to diversifying the organization’s leadership ranks. But experts say the tone of the question is as important as the question itself. Often directors will ask questions to make themselves look good (or an executive look bad). Stevenson recommends that directors ask open-ended questions, giving executives and directors a chance to exchange ideas. “Great directors know when their speaking will be a contribution, when it will be a distraction, and when it will be an opportunity for learning,” she says.
Cultivate other board directors. When a new director comes on board, the lead director will often walk them through the basics of how things work and fill them in on the various intricacies of the business, Remick says. Often the lead director will assign an existing board director to act as a mentor, with whom the new director can consult for advice. But great directors will go well beyond those early steps to get to know individual board directors. Indeed, directors networking with one another, and with directors at other firms, can increase everyone’s knowledge and skill sets. Traditionally, a lot of networking among an organization’s directors is done when they gather in one place the night before the board meeting. COVID-era travel restrictions curtailed that. Face-to-face meetings should become easier again as the pandemic eases, but directors shouldn’t rely on night-before events, anyway. Reach out to directors at any time to ask for advice and listen to their experiences.
Join a board committee. “First-time directors need to understand the business of the business,” Remick says. One way to get a better understanding of the intricacies involved is to join one of the board’s committees, such as its audit or succession committees. (A first-time director typically won’t get onto the board’s compensation committee unless they are an expert in finance.) Experts say being on a committee increases the accountability of individual directors by assigning them a specific task and responsibility. Committees can make the board as a whole more accountable to stakeholders by separating the outside directors from management for certain decisions.
Source: read://https_www.kornferry.com/?url=https%3A%2F%2Fwww.kornferry.com%2Finsights%2Fthis-week-in-leadership%2F5-ways-to-become-a-great-board-member
Comments