How can organisations manage the expectations of first-time Board members?
With increased responsibility, what can be done to ensure NEDs are up-to-speed and able to contribute effectively – quickly?
Has the need for more comprehensive inductions affected the need to plan more staggered recruitment of NEDs?
How involved are executives in NED induction processes?
Rupert: With expectation(s) is likely to come plenty of enthusiasm, an eagerness to want to contribute meaningfully (from ‘day one’) and a desire to want to fit in. Many first-time Board Members will - whether they want to admit or not - still be in executive mode and the transition/adjustment to Non-Executive Directorship needs to be carefully and sensitively (in some cases) monitored and managed by all parties concerned. Early engagement and clarity as to the role and contributions the individual will play on the Board, whether that is a focus on a particular area of expertise e.g. Customer ‘Champion’ or as a Member of a Committee, should be encouraged. Time spent engaging with other Board Members (including Executive Directors) will be time seldom wasted and help in managing expectations and setting the right ‘tone’.
Julia: Organisations should make very clear the time expectations of NEDS, and importantly include the time for informal meetings, preparation and more informal contact with the business and other directors. It should also be agreed upfront which board committees that the NED will sit on and the consequent time commitment. It should be stressed that they need to be accessible outside the formal commitment to respond to issues by phone and email. Organisations should ensure that NEDs want to develop their own skills and are open to feedback. There is much more focus now on key skillsets and behaviours to manage the development and assessment of NEDs throughout the year so that they can minimise surprises at the annual review. As a result we find the quality of the debate and discussion is now much more insightful and knowledge led with NEDs more engaged with the business and able to comment constructively.
Rupert: No time to waste – the earlier a (new) Non-Executive Director can immerse themselves in the business the better. We have seen examples where the formal invitation (post verbal acceptance) to join the Board (offer document) has specifically made mention of induction programme details e.g. available times/dates to meet with key shareholders, fellow NEDs, relevant/appropriate executive members and external business advisors e.g. auditors; latest Board Minutes, Annual/Interim Reports; Regulatory Reports (if applicable). It is becoming increasingly common place for (new) Non-Executive Board Members to attend several Board Meetings in an observer capacity prior to official appointment.
Julia: Scheduling time for the new NEDs with key execs (CEO, CFO, CRO etc) allows them to ask questions and understand the key issues facing the business which will help to bring them up-to-speed. The induction should also include time with other key stakeholders: regulators; auditors; major shareholders so they understand the company’s main relationships. Organisations should provide access to the virtual board room which allows the NEDs to see past board and committee papers. A session with the Cosec is usual especially for first time NEDs to ensure they understand the role of a director and the framework within which the board operates. It is now often that new NEDs will also have a session with the existing NEDs to talk about how they operate, this helps to familiarise themselves and so valuable contributions are made as quickly as possible.
Rupert: Not dissimilar to senior executive career management, there is an increasing recognition/acknowledgment of the need to succession plan with Non-Executive Director Board Members. This will ensure a timely handover/takeover of essential knowledge transfer and know-how; particularly relevant in regulated industries such as financial services. It also allows for greater continuity and Board cohesion whilst avoiding any potential for generating nervousness amongst shareholder/stakeholder and executive directors when having to conduct ‘one-off’, multiple recruitment exercises. Staggering Non-Executive Director appointments is therefore considered good practice and should not be influenced by the need for more comprehensive induction.
Julia: We have done a number of multiple appointments recently which have had a positive effect on inductions. New NEDs have appreciated the fact that they are ‘learning together’ and the fact that the executives are inducting a number of NEDs at once has meant they are able to dedicate time and energy to do this in more detail. However, there does always tend to be an annual rotation of NEDs with some coming to the end of term and others rotating off due to changing needs of the business. Many boards now are not automatically renewing NEDs at the end of their three year term for a second or even third, but are considering their performance and the business’s strategic requirements.
Rupert: Firstly, the Executive Directors should be involved; indeed this may also include senior management (non-Board Members) who may hold responsibility for an area/function the Non-Executive Director has been asked to ‘face-off’ into e.g. a marketing/CRM function. How involved? A careful balance should be struck between a desire/need for any new Non-Executive Director to ‘get under the bonnet of the business’, without impacting unduly on the day-to-day running of the business.
Julia: A key part of the induction is to build a link with the business’s key people so it is important that executives are intimately involved in the process. Another requirement is to build an understanding of the nature of the company, its business and the markets in which it operates and some of the people who are most intimately involved in this day-to-day are the executives. Therefore they are important to the NED induction process.
Warren Partners is a specialist executive and non-executive search business, who provide search, Strategic Board Review, leadership coaching and consultancy services to clients based both in the UK and internationally. The organisation was founded in 1999 by Joelle Warren. Warren Partners supports executive and non-executive career and portfolio development across all of the main sectors. It has a firm stance on ethical business and improving effectiveness in the boardroom through achieving the right balance of skills, diversity and experience, making the company an authoritative voice on board dynamics in the UK.