Leadership

A Bottom-Line Argument for Better Board Talent

By / Jun 27, 2016 (iStock/Thinkstock)

A new study shows—yet again—that boards are sluggish at succession planning. Can a stronger focus on its financial benefits move the needle?

It’s no surprise that boards struggle to find talent. But what do we mean when we say “talent”? And just how important is it?

A new study by the KPMG Board Leadership Center sheds some light on just how deep the succession planning problem is, and has a few suggestions for ways to address that talent issue. Its “Building a Great Board” report [PDF] is based on a survey of 2,300 corporate board members and executives from 46 countries. Overall, the findings show a serious concern about a gap between strategy and the board’s ability to execute on it. A few of the findings:

  • *Asked to identify the biggest concerns facing the board, 75 percent said, “alignment of board talent with the company’s three- to five-year strategy; 61 percent said, “need for greater diversity of viewpoints/backgrounds.”
  • *Little more than a third of respondents (36 percent) say they are satisfied the board has the right makeup “to probe management’s strategic assumptions.”
  • *Asked what the biggest barriers for a high-performing board are, 69 percent said it was finding people with general business experience and specific expertise; 55 percent say it’s identifying future talent; and 43 percent say it’s “resistance to change due to ‘status quo’ thinking.”
If people aren’t comfortable having an open dialogue and taking different points of view…you probably don’t have a diversity of thought.

This isn’t my first boards-in-crisis-survey rodeo, so it doesn’t surprise me to see that while leaders are pretty good at identifying the problems, their follow-through is as weak in the corporate world as it is in the association world. Only 17 percent of respondents said they’re actively addressing succession planning via “robust board discussion.” (Even there, I suspect a few respondents are saying what they think they ought to; after all, few are eager to say there’s “little/no discussion,” so it’s all the more remarkable that 33 percent did.)

The reasons for the resistance to succession planning is familiar too: It’s easier to stick with the known pool of people who are already clambering up the leadership ladder, nobody wants to be the person who rocked the boat on their watch, and so on. But let’s assume that boards do want to make a good-faith effort to bring smart, strategic, diverse voices to the organization. How does that get done?

In a companion report [PDF] to the survey, KPMG interviewed a handful of corporate leaders about how they address talent and strategy alignment. Part of the solution demands that the current board actively work on identifying the issues facing the organization in the coming years, and pinpoint the particular skills the board will need to address them. “The conversation can start with an understanding of where the company is now and its strategy and plan for profitable growth into the future,” says Siemens executive Louise Koopman Goeser. “Then, based on those answers, what are the skills of the current board members and what skills might be needed to achieve that future vision?” A lot of associations have talent matrices, but perhaps those matrices need to adapt from year to year.

Cultivating diversity matters too, both in terms of background and in kinds of thinking. As Alison Winter, a board member at Nordstrom, put it, “I think gender can also bring a different approach to risk-taking. It’s good to have generational perspectives and ethnic diversity, especially if you’re a global company. However, if people aren’t comfortable having an open dialogue and taking different points of view, regardless of the diversity in the room, you probably don’t have a diversity of thought on those decisions.”

This is unquestionably an uphill battle. But perhaps it’s one that’s easier to lead your team into if you can point to the bottom-line success it can generate. Last week Harvard Business Review published an article by Tom Monahan, CEO of corporate consultancy CEB, titled “Your Company Needs a More-Radical Board of Directors.” The article isn’t as provocative as its title or accompanying image of flamethrowing bass guitar might suggest—after all, at most organizations, a “more radical” board might be slightly frisky. But Monahan makes the valid point that a culture of risk avoidance has created boards that are more concerned with best practices—what everybody else is doing—rather than what they ought to be doing for the best interests of the organization.

“The best companies do things differently by using data and benchmarks not to aspire to the median, but to ensure radical deviations that are consistent with core strategies,” he writes. That means cultivating board talent that understands the value of breaking free of convention if it fits with the association’s goals, instead of “diverting resources to overcorrect near-term headaches at the expense of the time and energy needed to plan for the long term.” Monahan points to CEB’s own research, which found that companies are three times more likely to perform in the top 20 percent of their industry if they have long-term planning processes in place.

Succession planning will still be an uphill battle, battle. But a smart organization can argue that a little free thinking is worth the trouble.

What do you do at your association to cultivate future thinking about strategic goals and board members who can creatively execute on them? Share your experiences in the comments.

Mark Athitakis

Mark Athitakis, a contributing editor for Associations Now, has written on nonprofits, the arts, and leadership for a variety of publications. He is a coauthor of The Dumbest Moments in Business History and hopes you never qualify for the sequel. More »

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