Companies are looking to outside sources to ensure they recruit directors with the right skills
Recent surveys amply demonstrate that today’s boards are conscious of the skills they need in their directors, but experts believe they may be falling short in recruiting individuals who have those attributes. Historically, companies have tried to recruit new directors by following the recommendations of other board members, but – increasingly – boards these days are turning to external candidates.
The aftermath of a public relations scandal or a potentially negative outcome to an ongoing legal dispute may push companies to look to outside sources in order to fill vacant board seats or replace ousted directors. In addition, an impartial perspective may be required if a board becomes dysfunctional and lacks the capability to recruit and train an effective director.
‘When it’s a case of the blind leading the blind, boards need an outside perspective to get out of the weeds and get some clarity,’ says human resources expert Tom Darrow, chair-elect of the Society of Human Resource Management Foundation, who also sits on three boards. ‘If the current board is seen as not getting the job done, it doesn’t want more of the same. It needs to right the ship in a hurry – it needs somebody to take the reins.’
Often the task of finding new directors is delegated to the governance committee, a handful of people from varying professional backgrounds with limited time who are also juggling other responsibilities. Unfortunately, after an exhaustive search, the committee often tends to settle for whatever it can get.
‘It’s all really an issue of bandwidth and capability,’ says Darrow, who is also principal of Atlanta recruitment company Talent Connections. He sees more boards using search firms such as his to determine the skills they need upfront and ask the critical questions that will ensure the candidate not only looks good on paper, but can also become a leader on the board.
Regardless of whether the board recruits from within or from outside itself, the process should be as transparent as possible so the new director is equipped for the task ahead. The tendency may be to present a positive image of the company and its board, but Darrow says he discloses ‘the good, the bad and the ugly’ to candidates. If the candidate remains interested, the selection process continues. Such disclosure prepares the director to handle a crisis situation and other challenges that may arise.
‘You want to find board directors who are ‘turnaround’ people, and who are energized by coming into a difficult situation to help save the day,’ Darrow notes.
As part of the ‘Korn/Ferry market cap 100’ report, an annual study of the boards of the largest US companies by market capitalization, Home Depot’s lead director Bonnie Hill offers the following advice to any board faced with recruiting new candidates:
• Maintain as a touchstone the board’s primary directive: to represent the interests of shareholders. To do that, its membership must have the right mix of skills and experience to properly oversee management.
• Solicit suggestions for candidates from key stakeholders – they often have great networks of resources. What’s more, shareholder engagement of this kind can pay larger dividends for the company later.
• Implement a methodical approach: identify key skills areas of need, pinpoint candidates, make a selection and integrate the candidate onto the board.
• Have a broader vision for the board. Avoid the pitfall of becoming an assemblage of experts instead of a unit.
