A Better Way to Fill Board Seats

Does this sound familiar?

A long-standing, knowledgeable and well-respected director will soon be stepping off your board. This will create a vacant board seat.

Once the board becomes aware of this impending departure, a board committee is tasked with finding a good candidate to fill the seat. The committee scrambles to interview a few candidates and recommend one of them to the board.

The board rubber stamps the committee recommendation and – bingo! – there’s a new board member at the table. You’d better hope they’re a good fit because one director can change the board’s dynamics and culture – sometimes in a negative way that would have been revealed with more time and a better process.

There’s got to be a better way …

Board Succession

Board succession - filling board vacancies when directors step down - can be a complex, time-consuming task. There are a number of factors for the board to keep track of: the gap created by the departing director, the profile of current directors, the organization’s strategic needs, the desired board dynamics, and trends in board governance.

But getting it right yields many benefits. Turnover can be an opportunity to improve board composition. At its best, board succession planning is a vital strategic issue - an ongoing process of planned renewal, assessing board competency and experience needs, and mapping a strategy for addressing them.

The article Board composition: The road to strategic refreshment and succession (Spencer Stuart. March 2021) outlines a number of actions that a board needs to undertake to ensure a robust succession planning process:

• Make succession planning a board priority.
• Assess directors’ skills and attributes and board effectiveness.
• Establish clear expectations about board tenure.
• Take a long-term view of director departures.
• Monitor governance trends.
• Address board leadership changes as well as vacancies.
• Agree on a succession plan that reflects the board’s needs.
• Build a talent pipeline.

From Reactive to Strategic

If your board doesn’t do a good job on all those actions, don’t despair. Most boards are somewhere along a continuum that starts with ‘reactive’ and ends with ‘strategic.’ Over time, boards should strive to move along the continuum toward a more strategic approach.

• Reactive. On a reactive board, there’s not much focus on succession planning. Skills assessment is not structured, and board self-evaluation is seen as a compliance activity. Director tenure is unclear. There’s no formal succession plan – a candidate profile is created only when a board vacancy is imminent.
• Progressing. When boards start to move along the continuum from reactive to strategic, they often start by making succession planning a priority for one of the board committees (often the governance committee), with a limited focus from the full board. Periodic skills matrix and board evaluations help identify skills gaps. The committee reviews the succession plan annually taking into consideration imminent departures. Search efforts aren’t linked to an overall succession plan.
• Strategic. A strategic board makes succession planning a priority. A committee leads the planning process, but it’s regularly discussed with the full board. A skills matrix is updated annually, and board evaluations are seen as a continuous improvement exercise. Director tenure is clear, and the optimal mix of tenure levels is considered. The committee takes a long-term view of anticipated departures, maintains a multi-year succession plan, and develops a talent pipeline for future needs.

Director Skills and Attributes

Good succession planning begins with knowing what the board needs – what combination of director skills and attributes are needed at the board table, not just now but in the future. How will elements such as company strategy, long-term goals, industry disruption, and escalating expectations alter the board’s needs? And how will governance trends – such as next generation directors or Diversity, Equity and Inclusion - affect the way the board views its composition?

Next is determining how well the current members fulfill the board’s identified needs. It helps to visualize the skills and attributes that the collective board possesses. A competency matrix, or skills matrix, is a useful tool to map out the value that each director brings to the board – not just their skills and expertise, but also attributes that contribute to the board’s diversity. The matrix, once carefully completed, reveals the full picture – where the board is strong and, conversely, where gaps need to be addressed through succession planning.

An example of a competency matrix can be found in the Spencer Stuart article Board composition: The road to strategic refreshment and succession listed below under ‘Resources.’

Remember to be realistic – you’re unlikely to find that one stellar candidate who will completely satisfy a laundry list of desirable attributes, skill sets, and expertise. Instead, ranking the most important attributes will make it easier to find appropriate candidates and help to choose among multiple candidates.

In addition, we have to acknowledge that some boards – such as representative boards – do not have the freedom to choose their own directors from a broad pool of director candidates. Directors may simply be named to the board by the member organizations. In these cases, the board may have to find (or make) opportunities to influence its composition by being very clear with the member organizations about the director attributes they are seeking.

And keep in mind that it’s not necessary for every board member to have the entire set of knowledge and skills that the full board needs. As a rule of thumb, having three directors with a required skill or knowledge set gives the board what it needs. In some cases, just one director with a specific skill set is sufficient.

Board Vacancies

A robust succession plan also needs to map out when board vacancies are expected to occur. Term limits and/or age limits provide some certainty about when directors will likely vacate their positions. It’s also good practice to canvass board members each year about their intentions to remain on the board.

Strategic boards take a long-term view — focusing three to five years out — to address anticipated departures, creating a chart that identifies all directors, their skill sets, board roles, tenure, and the year they will likely be leaving the board. This broad view gives the board ample time to effectively plan, recruit good candidates, and manage transitions.

The plan needs to also consider the potential for unexpected turnover positions. The key is to be agile so the board can make changes as situations arise. One useful practice is for boards to expand their size to enable them to respond to unexpected vacancies.

Strategic boards look not only for the candidate they need right now, but also maintain relationships with potential candidates to develop a talent pipeline – keeping a running list of interested and qualified director candidates for future reference. When a vacancy occurs – planned or unplanned – the board will be in a much stronger position if it has a pool of candidates to consider.

Board Leadership

We’ve been focusing on filling vacant board seats, but the term board succession also refers to internal movement on the board as directors assume leadership positions such as board chair, vice-chair, or committee chair.

Board leadership roles can’t be filled by just anybody on the board. Effective succession planning should ensure new board leaders have the right skills, time, and commitment to perform the role. Board and committee leaders have to be able to promote effective working relationships, handle conflict, and be strong facilitators. Boards also need to take into account regulatory requirements for certain skills — such as financial expertise on audit committees — that will need to be considered when addressing leadership succession.

Rotating board members through various committee chair roles is a good way to identify which directors might have the skills and the inclination to become the next board chair. Serving as a committee chair also gives directors a chance to determine whether they want to seek out the board chair position - it’s not a role that everybody wants.

Board leadership positions are almost always filled by an existing board member – someone with institutional knowledge, familiarity with key issues, and relationships with other board members and management. A good practice is to arrange for an incoming leader to shadow the current leader.

In rare circumstances, none of a board’s current directors has enough experience, interest, or availability to assume a board leadership position. In this case, an external search will be needed. This is not a desirable situation for a board to be in. If there is a good succession plan in place, there would be sufficient notice of this impending situation to be able to recruit a candidate to join the board and serve as a sitting director for a year or so before they actually assume the leadership role.

Board Succession and The Savvy Director

What does all this mean for the individual board director?

• Think about your own goals on the board. Do you aspire to a leadership position? Maybe even the board chair role? Or maybe you are content to continue to serve in your current role. Be ready with a response if you’re asked.
• Plan out your board trajectory. If you do have leadership ambitions, consider what you should do to prepare yourself and when you’ll be ready. If your board has term limits, you need to consider them with respect to your personal goals. After all, you don’t want to find that you’re almost at your maximum tenure and you no longer have enough runway to take on the role you aspire to.
• Don’t hide your light under a bushel. You can be a board leader without sitting in ‘the big chair.’ Participate fully and fearlessly in board discussions. Help your board find its way by asking thought-provoking, insightful questions. Your leadership potential will shine through.
• Keep your profile updated. As you pursue knowledge and acquire skills, make sure this new expertise is reflected in the board competency matrix.
• Make your ambitions known. Your board chair and governance committee chairs are not mind readers. You may have to clearly articulate for them what positions you are interested in and when.

Your takeaways:

• Strategic board succession planning is an ongoing process of assessing the board’s needs and mapping a strategy for addressing them.
• The board needs to identify its current needs in terms of director skills and attributes, but even more importantly it needs to consider its future needs over the long term.
• Regular board and director evaluations can serve as a continuous improvement tool that reveals skill gaps where the board should focus.
• It’s best practice to maintain a talent pipeline of potential candidates to fill future board vacancies – whether expected or not.
• Planning to fill key board leadership positions should be part of the process.
• Consider your own desired trajectory on the board. If you have leadership ambitions, make sure the board chair or governance committee chair knows about them.

Resources:

• Board composition: The road to strategic refreshment and succession. Spencer Stuart. March 2021.
• Now More Than Ever: Planning for Board Leadership Succession. Anthony Goodman and Alexander Madronal. Russell Reynolds Associates. 2020.
• The Evolving Landscape of Corporate Directorship: What Makes a Valuable Director? Mats-Ola Bydell. Odgers Berndtson
• Chair and Board Succession. Brown Governance. 2008.

Leave a comment below to get in on the conversation.

Thank you.

Scott

Scott Baldwin is a certified corporate director (ICD.D) and co-founder of DirectorPrep.com – an online membership with practical tools for board directors who choose a growth mindset. 

Originally published October 10, 2021

We value your feedback:  Share your suggestions for Savvy Director topics.