After 25 years of advising traditional boards of multinational companies, serving on various smaller advisory boards in Europe and Asia and serving as chairman of a public company in the Nordics, two emerging trends strike me as having a potential to improve the board composition of today.
The first trend is that long tenures for generalist board members may become a thing of the past, and the second trend is how the modern-day CEO could benefit even more from governance based on deep insights into burning issues from a dynamically assembled board of experts of the moment.
Mr. “Right Now” is the future board member.
Historically, many board members have been picked after careful selection processes, which identified them as Mr. Right. An assessment often based on broader experience and relationship criteria. Searches hardly ever focused on identifying Mr. Right Now – an executive with deep expertise needed imminently – and hence probably with a somewhat limited tenure prospects on the board.
However, perhaps the myriad of rapid new developments having emerged in the late 10’s is driving a change towards picking Mr. Right Now. The frequency and the complexity of new executive challenges both suggest that the seasoned generalist board executive may have a harder time acquiring and possessing the required knowledge to provide up-to-speed governance and advice to the CEO.
Digitalisation in all aspects, disruptive anything, cyber-crime prevention, airtight compliance and many more recently arisen executive top priorities are moving into the board agendas and are forcing the boards to rethink their line-ups.
Specialist types à la today’s digital natives and white-collar crime investigators would not historically have been “must haves” in the board room but may just be what the doctor ordered, even for larger caps, in today’s agile world with digital footprints across all parts of the value chain.
While the benefits of including targeted fresh talent may be obvious, any board pursuing this path may come to see a lift in complexity in terms of maintaining an efficient way of working. Diversity and leading-edge insight come at a price.
governance NEEDS for CEOs OF TODAY are becoming dynamic and issue specific.
Some observers will claim that the notion of a need for specialists is hardly a new notion. Certainly, nothing that will make headlines in a 2018 business journal. Recruiters are likely to point out how searches aim for varying profiles. They may further claim that real specialists should not make it to the board but should be adding their bit to decisions taken at organisational level well below the board.
Perhaps so. However, a claim could also be made that even large-cap CEOs of today are less the classic corner office allrounders and more the Excel master black belts acting as über portfolio managers, presiding over a complex set of rather different strategic pursuits. What this type of CEO needs from his board is not necessarily only sparring on general leadership challenges but also targeted air coverage on novel issues representing the game changers of today and tomorrow.
A parallel to the purpose-built board with short board member tenure by design is issue-driven networking, as organised by companies like Expeerience. Rather than creating a traditional wine-and-dine network with a doubtful return on precious executive time, these non-network companies match likeminded CEOs in a workshop only when they have identical challenges to discuss. As the CEOs may never see each other again, this pure form of issue driven structure is hardly a natural fit for a board constellation, but the idea of creating a strong board through selective use of executive experts as members does seem to have merit.
In a quest for ensuring the strongest group performance through careful selection of its members, inspiration can also be found in academia. When putting a class of new MBA students together, Harvard Business School says that they are not looking for reasons to reject a candidate but for one reason to accept the candidate. This means that the school is seeking to build a general management curriculum by selecting a portfolio of candidates with at least one world-class, stand-out feature relevant to that year’s class.
the board of tomorrow may still count the generalist
Does all of this then mean that traditional board functions and experienced board members are a thing of the past? The answer is likely: “Not so fast”.
Going forward, diversity is a prerequisite for a fit and successful board, not least in terms of deep expertise and experience. As stated earlier, diversity and leading-edge insight come at a price, though. The transition towards purpose-built dynamic boards will take a while but could well be expedited through guidance from seasoned board members.
Rather than resigning from the board or starting to fight the uphill battle of mastering every latest development, the conventional board members may hence serve the board well by honing the skills of managing and extracting value from the transient, non-traditional expert board members, while ensuring the still vital overarching visionary aims for the company.
(Originally, the article was published in the magazine Board Perspective, 4/2018)