Ask any Chair their feelings on recruiting a new non-executive director (NED), and they will tell you it is stressful. They know that the fallout of getting it wrong can result in distressed directors, strategic splits, resignations, brand damage, factions, shareholder/stakeholder unrest, etc. However, the return on investment (ROI) can be phenomenal if they recruit the right board director.
Having helped hundreds of Chairs search for and appoint new Non-Executive Directors (NEDs), the goal is to reduce the risk and maximise the reward. This information is still helpful if you are a candidate looking for a board appointment. By considering these steps before investing your time to apply for a board, you can evaluate what planning and consideration (or lack thereof) the organisation has taken in recruiting the right board director. You may find that it is not the right board for you. Or, if it is, it can provide you with points for further research or address during an interview with the recruiter or selection panel.
The six planning steps to recruit the right board director
STEP 1: SCOPE – Define what you are looking for
First, you need to define what the right board director will look like. Specifically, what do you expect the newly appointed individual to deliver to the board and the organisation? Questions to address should include:
- What are this appointment’s return on investment (ROI) expectations?
- Are you reliant on this person bringing networks and related business opportunities?
- Will they contribute to brand recognition through their reputation or contacts?
- Will they improve the overall governance – and if so, how?
- Are they required to bring industry experience, and if so, which industry?
- How will you measure their success?
Although this is the starting point, it is the foundation of the process. I encourage you to invest time in this step. You can not recruit the right board director if you are unclear about what right is.
STEP 2: PITCH – What do you have to offer?
Finding the right candidate for your board is only half the battle. Valuable NEDs are in high demand. To attract them, you need to promote what you offer and be prepared to convince them why you are the right organisation for them. You must be able to articulate your value and, if appointed, how they can have a genuine impact. Think through the scenario of what you would say to a great candidate to convince them to take the risk of joining your board. What would your pitch be?
STEP 3: RISK – Is your board seen as a risk?
Experienced non-executive directors know that any appointment they take comes with some risk. The risks to them may be financial, legal or reputational. For most NEDs, reputation is everything, so taking on the wrong appointment can be detrimental to their board & executive careers. You must provide comfort to them that your organisation is not a risk. You are an organisation that is well-managed and supports the board in making informed and robust governance decisions. If there is even the slightest hint that this is not the case, you may see your top candidates baulking at your offer. In the worst-case scenario, you may have spent several months recruiting the right board director, only to find yourself back where you began.
STEP 4: SELECTION CRITERIA – 6 core elements to consider
Regardless of the scope or scale of your organisation, I suggest you focus your selection criteria on five core elements:
Governance Experience – do you require an experienced NED with proven corporate governance experience OR someone with senior management experience who has worked at the board level OR neither. Boards take comfort in appointing someone with prior board experience. However, this may this result in overlooking those who have other valuable skills and experience to contribute. You need to weigh the risks and benefits of governance experience for this role.
Executive Skills – what skills, knowledge and experience are required for the role? Consider performing a Board Skills Matrix to identify gaps in the current board’s skills and knowledge. When compiling the list, separate items into Required (a must) and Highly Regarded (a bonus). It is unlikely that candidates will be able to tick off the entire list. By prioritising the list, you will not discourage quality candidates from applying because they don’t tick all the boxes. Assessing what outcomes and ROI you expect from these skills and experience to deliver will assist with this task.
Diversity – is is more than just gender. Board Diversity has been proven to increase the performance of boards and the organisations they represent. There are 6 strands of diversity to consider – gender, race, religion, age, sexuality & disability.
Networks – beyond their skills and governance experience, what else do you want them to bring to the table? Networks and gravitas within your industry or a related industry are often at the top of the list. A candidate’s reputation and connections can open doors and generate tangible value.
Passion – this is not negotiable. You must appoint a NED who matches your organisation’s passion. Lack of passion may result in a short-term appointment or a board member unwilling to do the extra-professional work often required of a NED.
Fit – professional and cultural fit is equally as important as passion. If the person you appoint does not understand the industry, how your organisation works, or how to operate at board level, the appointment won’t work. They must also be aligned with who you are and what your organisation represents.
STEP 5: RECRUITMENT PROCESS
You must determine which recruitment process you will use to find the right board director. Are you going to formally advertise the role, engage a professional recruiter, wait for the right person, or use your existing connections to recruit your new NED?
- Advertising will cost less than engaging a recruiter. However, you have to be prepared to answer questions from prospective candidates, receive the applications, review & shortlist applicants, communicate and provide feedback to all the unsuccessful candidates, and allocate human resources to manage the process.
- Recruiters incur a financial expense but mitigate the time you are likely to spend on the otherwise. Recruiters have access to talent resources that you would ordinarily not have easy access to.
- Waiting for people to approach you saves money in the short term and works if you are not in a rush, but you won’t be able to control the quality of candidates.
- Using personal connections is still statistically how most organisations recruit new Directors. But is it the best way to find the right board director? Doing so allows you to control the ‘fit’ element and target only people who meet your selection criteria. However, you risk appointing individuals that will promote a ‘group think’ mentality, thereby limiting the board’s effectiveness and representation of the stakeholders.
- The composition of the selection and interview panels need to be established, and guidelines stipulated or revised for this appointment.
STEP 6: TERMS – including remuneration
You must establish the terms of the appointment, which include: remuneration, expenses & reimbursements, and tenure. The organisation may already set these terms. To attract and secure the right board director, you often need to pay them. Australian board directors get paid from $0 to $622,626. Often you do not need to remunerate as much as you think. Simply by offering to pay your NEDs, you will attract more and a greater quality of board candidates.
To recruit the right board director, you need to be prepared for the board appointment process to be an onerous one. Writing job specifications, advertising, responding to countless applicant questions, managing applications, reviewing resumes, informal and formal interviewing, saying no to candidates who may be disappointed, managing the diaries of interviewing board members and candidates, plus contacting and summarising interviews with referees. This list is just the basic task required. As we know, many projects do not go to plan. You may find that you are not attracting sufficient or fitting candidates. You must then invest more time identifying and reaching out to potential candidates to encourage them to apply. You need to also be prepared for any slip-ups or poor process that reflects badly on your organisation, plus the risk to the reputation of a bad or failed appointment.
Board Recruitment Services
For over a decade, Board Direction has been helping organisations recruit the right board director. We have direct access to thousands of Non-Executive Directors and far-reaching director connections. Unlike other firms, we only specialise in Board Recruitment Services and guarantee to find you appointable candidates. We provide packages to suit clients across the Commercial (private, public, listed), Government (Federal, State, Local) & Not for Profit (NfP) sectors.
Finding quality, appointable board candidates is what we are about. Board Direction has one of (if not the largest) Non-Executive Director databases in Australia. By leveraging our database and dedicated external resources, we reach the people you want to appoint. Beyond finding you a new qualified, experienced NED, our ability to promote what you do, your brand and your aspirations to thousands of Non-Executives across Australia should also not be underestimated.
About the Author
David Schwarz is CEO & Founder of Board Direction – Australia’s leading board advertising and non-executive career support firm. He has over a decade of experience of putting people on boards as an international headhunter and a non-executive recruiter and has interviewed over one thousand non-executives and placed hundreds into some of the most significant public, private and NFP roles in the world
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