Board Leadership: The Next Generation
Welcome to the Spring 2008 edition of Inside/Outside, a quarterly publication providing insights into human capital challenges experienced at the highest organizational levels, as well as news about our growing firm.
In this issue, we present a Q&A with Chairman and CEO David Nosal about the challenges companies face in finding the right executive talent to serve on boards in the new millennium.
David Nosal has built out the boards and executive leadership teams of some of the world’s leading brands. He shares below observations and insights into why it’s more difficult to find qualified board members today and the importance of identifying and preparing the next generation of board members.
Q: Are companies facing new challenges when recruiting directors?
DN: Companies are finding it increasingly difficult to recruit high-quality, independent directors. Heightened scrutiny and personal liability in a post-Sarbanes-Oxley world, coupled with the increasing time demands of board service, have contributed to a situation where CEOs—traditionally at the top of the wish list—are limiting (or are being limited on) the number of boards on which they sit. They are saying no instead of saying yes due to time commitments and other concerns about risk and liabilities. And some boards have age limits for members.
This means the pool of CEOs as potential board members is diminishing, forcing boards to look elsewhere for new members. It was widely reported that in 2007, an increasing number of board seats went to “freshmen.”
Boards also recognize that they have a need for directors with certain expertise. Thus they are
devoting a rigorous, thoughtful approach to board selection and they are seeking help in finding members with specific experience in functional areas such as finance or marketing.
Q: You say that Nosal Partners has a unique, value-added approach to board search. What do you mean by that?
DN: We are dedicated to assisting our clients in strengthening their boards’ effectiveness through strategic and thoughtful evaluation of their needs and the recruitment of the highest caliber of directors.
The opportunity we see is to apply our Executive Leadership Solutions ™ model to board search. In concert with our alliance partner MDA Leadership Consulting, we offer services beyond traditional search, such as new director integration and coaching.
We also utilize proprietary tools, such as the Ideal Board Director Profile and Board Profile Matrix, when assessing potential fit between the hiring board and prospective candidates
Q: What do the Ideal Board Director Profile and Board Profile Matrix consist of?
DN: The Ideal Board Director Profile, which was developed in collaboration with MDA, can be used to evaluate both the hiring board’s needs, as well as the prospective candidate’s capabilities, functional expertise, skill sets, experience, interests and potential cultural fit.
The Board Profile Matrix enables an analysis of the current board’s strengths, as well as its skill gaps and experience voids to help the search team develop the best strategy for director recruitment. These tools are, of course, customized for each board, taking into account market conditions, company strategy, and capabilities of existing members.
Q: So this is designed to determine which individuals will add the most value to a given board. Where do you find these candidates?
DN: We have a two-pronged approach: (1) We mine our database and networks for appropriate candidates and (2) we identify and reach out to what we call the “next generation” of potential board directors.
This second facet to our board recruitment model is a focal point of our strategy. We work proactively in the market to identify people who have the skills and experience necessary for a director but who have not yet served on a board.
These may be senior-level managers with operating experience, or chief financial officers, or functional heads from a broad range of disciplines such as legal, marketing, technology, real estate, supply chain or human resources.
Q: What advantages are there to considering someone without prior board experience? What characteristics would you typically look for in a freshman board member?
DN: Boards are gradually focusing their recruitment on breadth of experience rather than title. When
considering a senior-level manager as a freshman board member, you are likely talking about someone with 20 to 30 years of valuable experience, potentially with functional expertise that complements the skill sets of that particular board.
Many companies are turning to executives at the next level down from the CEO, such as a CEO of a subsidiary, or heads of marketing, supply chain or executives with other operational expertise. Some companies are encouraging their high-potential executives to sit on outside boards as training for their own future corporate leadership posts.
We also are committed to increasing representation of the human resources function in the boardroom. The broad skills and exposure of seasoned, high-quality human resources professionals are needed around the table as boards tackle issues such as executive compensation, succession
planning, performance management, global sourcing and talent management—all necessary elements of a company strategy.