I have pleaded many times over for renewal in the boardroom. In a previous article I wrote about the dangers and pitfalls of a lack of diversity in the boardroom. I pointed out how having a limited pool of directors sitting on multiple boards can stand in the way of progress.
According to a recent article in the Australian Financial Review, others share this view. In the article Jim McKerlie, chairman of Drillsearch Energy, stated that there’s a massive need for renewal in Australian boardrooms. According to him, the universe of candidates for new directors has been narrowly focused for far too long.
Boards tend to favour candidates that have a successful executive career and are familiar with governance practices. They want experience in the industry in which the board operates and candidates who are financially savvy. According to McKerlie independently wealthy individuals also tend to be favoured, as the fees paid by boards will usually not compensate the loss of income from other employment. This makes the pool from which directors are drawn even smaller.
Diversity in the boardroom is the answer to future growth
I have said it before and I will say it again; diversity in every aspect – and especially in the boardroom – is the answer to future growth for companies. Boards look for potential board members that will be a cultural fit. Nonetheless, it’s also important to ‘renew’ the board with members that will bring a greater diversity. In this way new attitudes and a new way of thinking will be established. As McKerlie puts it:
“The principal skills I would look for is a diversity from the balance of the board. Someone who is not from the industry can ask the questions that are taken for granted. A younger person who is at least understanding of the millennium worker is essential, someone who can make the board look differently at situations.”
The changes needed for board renewal
There isn’t an algorithm in existence according to which boards should appoint new directors. Boards are faced with new challenges. If they don’t renew and keep up with a changing world, companies will be left in the lurch. Business acumen and the ability to understand financial structures are still important. However, every week as I look through the new vacancies posted on the website, I notice that knowledge in or at least an understanding of technology and digital is required.
As the landscape around technology and digital changes, directors need to be able to manage the changes needed for the board as well as within the company. Being able to not only cope with but actively manage change, is a skill set much needed in our fast changing world. More than ever boards run the risk of being left behind during times of transformation. This places the companies involved at risk. The solution to this is a broad mix of talent. Board members must be equipped with the necessary capabilities to thrive in a digital and technologically advanced world.
The new look around the boardroom table
Gone are the days when boards consisted of stuffy, retired men sitting around a table, using their long years of experience to guide companies through tough times. Directors are younger and have a completely different skill set. It doesn’t mean that there is no longer a need for the stalwarts who know how to manage the finances and have years of governance experience. Rather, the two are complementing each other, using the wisdom of experience, combined with the growth brought on by innovators bursting with fresh new ideas.
To remain competitive, boards need to take a hard look at the composition of the people in their boardroom. They must realize that direct access to board members with the knowledge to keep up with the digital and technologically advanced world, can keep their board ahead of the pack.