A 2015 study conducted by Heidrick & Struggles Board Monitor shed light on the fact that 73% of those appointed to sit on the boards of Fortune 500 companies were already members of a board of directors or represented by retired CEOs or financial executives. This tendency has been commonplace for a while, but several there are other practices that are beginning to take on more importance such as diversity, innovation and the regeneration of boardrooms.
Over the last few years, boards of directors are rejuvenating, diversifying and integrating more and more women, especially since quotas were introduced in many countries across the globe. This transformation can be explained by the fact that the world we live in is in a state of constant evolution. The economic environment is also changing at such a rate that board members can’t necessarily balance their current skills with the progress that surrounds them.
The importance of succession planning within the board
At present, succession planning on boards has been identified as one of the key issues to be addressed and must be an important element of an organization’s long-term strategy. Yet, many organizations think of this task as a taboo subject and underestimate its importance. As a result, more and more governance and nominating committees are emerging, in order to be better prepared for the transition. There are several good practices that can implemented:
- Give more importance to the results of the board of directors’ evaluations: evaluating the board of directors has become indispensable for good governance practices, especially when 30% of the board believes that a board member should be replaced.
- Identify the essential and missing skills within the board: pinpointing these skills is essential in order to achieve the objectives set by the organization in accordance with the strategy that is in place.
- Rethink the recruitment criteria for new board members: more often than not, boards limit their search for new members to CEOs or company executives that are already affiliated with other boards. However, excellent candidates can be selected from candidate pools, whether they have experience in digital environments, marketing, e-commerce or international business. This is why it is important for boards of directors to change their recruitment practices.
Proper succession planning makes it possible to identify and bring new skills into the boardroom and bring new opportunities to organizations.
A world that moves faster; higher risks, new skills required
The current economic environment requires boards to manage challenges and opportunities emerging from rapidly evolving issues including cybersecurity, sustainable development, marketing, technology and innovation. Responding to these issues has become something board members must address on a daily basis and a lack of proper skills to handle these issues can be detrimental to the organization.
It is for this reason that the integration of young directors and board members in the boardroom needs to be prioritized. When boards are looking for candidates with these skills, it’s often young directors that stand out and who stem mainly from technological or digital environments. The experience and sense of perspective that these young board members bring to the table proves to be of great value in the current tumultuous economic context – one that demands a digital transformation.
The digital component of the board ensures security and competitiveness
Having a background in technology and digitization can prove to be an asset in a time when cybersecurity is a major issue for organizations. According to a recent study by PwC, being tech savvy is an essential skill that new board members need to have. These findings can be explained by the fact that a large majority of CEOs and business executives throughout the world think of cyber threats as a major concern.
Moreover, according to a survey conducted by ICD Canada based on a sample of more than 500 board members sitting on the board of directors for the biggest Canadian corporations, 70% confess that the digital shift will be the biggest challenge for their board of directors over the next ten years. Integrating board members with an understanding of technology and the digital world would be an undeniable asset in order to make the switch securely and efficiently.
Sources:
Journal Les affaires – « Conseil d’administration: Obtenez le poste convoité » – Mars 2017
Boardroom resources – « Why Board Composition Must reflect a Future of technology & innovation » – Février 2016
Pwc’s study – « A look at board composition : How does your industry stack up? » – 2017
Kerie Kerstetter, Next Gen Board Leaders – « Investors identify Board Composition as a Top Priority and Concern » – 2017
Boardroom resources – « Why board composition wil be the number one issue for 2017 » – Janvier 2017
