In today’s fast-paced business world, companies face wave after wave of risks and opportunities, from cybersecurity and emerging technologies to a multigenerational workforce and activist investors. To remain relevant and innovative, boards need to get comfortable with the idea of rapidly refreshing their board in response to emerging needs.
Board finance expert Carol Coughlin shared best practices for refreshing your board and conducting director evaluations in a recent Athena Salon. Below, we share some of her tips for overhauling your board and evaluating your directors to achieve long-term success.
2023 has brought another sea of disruption to companies – hacking threats, security breaches, hardware failures, loss of power, and even deliberate employee sabotage. What are the skills needed on your board to address these types of crises? Are your current board directors capable of navigating these complex challenges?
Carol is an experienced public and PEG company board leader and audit committee chair. She’s highly skilled in corporate governance, including board refreshment, strategic alternatives, and M&A for growth and highly regulated companies. Following an IPO and her nomination to board chair of a public community bank, Carol led the board through acquisitions that doubled the size of the company followed by a merger with a larger company.
She said it’s imperative to have the board step back and look at the company’s goals on the horizon and ask if the current board is the right one to get you there. Realize that the health and future of the company depend on getting the right people on the board. This involves the right mix of personalities, skills, and experience; this combination contributes to what should be a desirable company and board culture.
Surprisingly, many directors believe how long they will serve on a board is their choice. To create effective boards, the director’s mindset needs to change from “I’ll be on the board as long as I choose to be” to “I’ll be on the board as long as I have the right skills to contribute to it”.
A helpful board mantra could be “think like an investor”; the company must have the right strategy and the right people in place to enact that strategy. They want to know that progress is being made, and that there are new faces with new skills and backgrounds around the boardroom table to facilitate creativity, manage risk, and remain relevant.
Integrating board evaluations (and the potential board refresh that follows) allows your board to take more risks and make critical decisions that will move the company forward. The risk and/or governance committees should be looking at whether the strategic plan is suited for growth or whether the company is en route to obsolescence.
Remember that new perspectives bring more robust conversations. Look at each director individually (as each brings different experience and skills to the board), but keep in mind the average age of public company board directors is 60 years old. These people can be retired or close to retirement and not as embedded in what’s happening on the ground in businesses as they’re changing and embracing new business models and ways of engaging with their stakeholders.
Look at board refresh broadly, though, as there are many directors in their 60s who are still actively employed, engaged at the ground level, and bring new ideas and perspectives to the table. It is a good business practice to rotate people doing committee work so they don’t grow stagnant.
In Carol’s board experience, here is what she found…
This resulted in the governance committee creating an action plan based on the results (namely, that they needed more strategic planning and improved onboarding for directors).
Third-party tools are necessary to facilitate this process anonymously, including a board matrix to see what skills are needed (i.e. finance, cybersecurity, IT, public experience, etc.) The board evaluation process may lead to certain people resigning or rolling off the board to make room for new directors with the skills and experience necessary to take the company to the next level.
This process ensures people are made to feel that everyone’s opinion matters, which smoothes sticky issues and conversations.
Athena Alliance can help you get the right people with the right skills at the right time to take your company where it needs to go. Our board support team is ready to talk about all the possibilities.
(Athena members can always watch the full Salon recording on-demand here.)
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