As soon as a new board director gets appointed, that’s the best time to start planning for their replacement. Recruiting, nominating and appointing board directors takes time. If boards wait until they have a vacancy, it could leave them with an unbalanced, or an inefficient, board. Effective succession planning must be a continual process.
Effective nominating committees are a hub of activity. They take stock of the board’s current skills, abilities and talents. They consider the board’s current and future needs. They search far and wide, looking for just the right candidate to fill a vacancy. Sorting through dozens, if not hundreds, of profiles, looking for just the right person to fit the bill, nominating committees usually make an internal and external search, with or without the help of a third party. In addition to all the other needs, board candidates must be able to tackle the board’s challenges; be able to see potential opportunities; be capable of managing risks; and be aligned with the board’s strategic plan.
Technology can be a substantial help in taking stock of the board’s future needs. A board management system is a secure platform where nominating committees can collaborate to find the best candidates to help them with their work.
Update Board Matrix and Board Succession Plan
As board terms end or as directors leave the board for other reasons, existing board directors are often the best candidates to step into officer positions. Laws and regulations require boards to have effective leadership. In addition to reviewing the board’s existing talent base, nomination committees need to be concerned with planning for a leadership pipeline within the board. This task entails reviewing the board’s leadership roles and evaluating board directors to see who has those skills or who could be groomed to fill officer roles.
Among the board’s official duties is to hire, monitor and evaluate the executive director and any other senior leaders. Nominating committees must have candid discussions about any current or upcoming changes in management. Whom the board chooses to fill the senior leadership positions may determine if other changes need to be considered as the board seeks to fill board director vacancies.
The environment surrounding today’s businesses and organizations calls for looking at board director and officer recruitment through a new lens. Boards need to be refreshed more often than they’ve been in the past. The demands of board service are such that there is a greater need to have diversity on the board and to get the right balance.
There’s a need for modern governance today. Modern governance is the practice of empowering leaders with the technology, insights and processes required to fuel good governance. Modern governance practices ensure that boards are being equipped to meet the current and future needs of their organizations and be prepared to manage risks and take advantage of opportunities.
How the Board Recruiting Process Has Evolved
Nominating committees used to recruit based on their competencies for the areas of audit, finance, human resources, legal or risk management. Committee members also looked for senior executive experience, natural strategic insight ability and other specific areas of expertise. All those areas are still relevant today, but we can add areas of expertise like cybersecurity, artificial intelligence, machine learning, social media, and environmental, social and governance issues, as well as other contemporary issues.
Board composition is experiencing an evolution. Organizations are feeling the pressure to review their board composition and work toward adding women and other demographics that will bring diverse perspectives into the boardroom.
There are currently no requirements for nonpublic boards pertaining to their demographics. We can take some clues from the public companies as to the future direction of all other organizations when it comes to board composition.
Many other countries already have legal requirements for women on boards. There is currently no federal legislation that requires companies in the United States to have women or minorities on their boards. California was the first state to step out of the mold with its “Women on Boards” legislation, whereby all public companies based in California must have at least one woman on their boards by 2020. Larger companies may be required to have two women on their boards. While the legislation is active, a Washington, D.C.-based activist group challenged the legislation with a lawsuit alleging that the new law is illegal under California law. Despite the controversy, many companies are already complying with the law. The last all-male board of the S&P 500 added a woman recently. Although the law may not yet specify that organizations must have women on their board, within the last several years, it’s become part of best practices for board composition.
Board recruitment is a big undertaking. Many boards lack the connections to conduct a broad search. Boards that want to cast a broader net for recruitment may need to budget for hiring a third-party talent agent.
Boardroom Technology Is the Modern Governance Approach to Effective Succession Planning
Many boardroom processes and protocols are becoming outdated and are being replaced by digital tools. Board management software programs provide a secure platform where boards can communicate and collaborate in total confidence without worrying about data leaks.
BoardEffect’s board management system includes a survey feature that works perfectly for composing a quality board of directors. Nominating committees can use surveys to evaluate the current board’s performance as well as the performance of individual board directors. The results will provide the necessary information for committees to build a skills matrix that will show any gaps in board skills. The survey tool streamlines the process for board and executive recruitment so that the nomination committee can focus on identifying the perfect candidates. It also frees up the board so it can work on their oversight and strategic planning duties.
Boardroom technology for succession planning is the modern approach to getting the right talent on your board. Modern governance processes equip boards with the right information at the right time, which gives them a strategic advantage in these times of enhanced risk and disruption. Succession planning is a continual process that can only be enhanced with BoardEffect technology.