Appointing a new NED to a listed entity.
- The diversity challenge - How diverse are our boards? The recent AICD Gender Diversity Report (Oct 23) notes that the top 20 ASX companies have 40 percent of board seats filled by women, however 15 percent of the ASX300 have only one or no women board members. If you are a chair of one of these boards, you are missing out on more than half of the talent pool. Diverse boards produce better outcomes - and you should reach beyond your immediate network to a much broader talent pool. Relying purely on who you know and have enjoyed working with is natural, but comes with the risk of replicating what you already have and creating group think in the boardroom. Having individuals who understand how they operate, their biases and assumptions, and the ability to tune in to their own emotions will undoubtedly lead to better decision making and outcomes. Assessing this is challenging and done well, is a mix of gut feel, formal recruitment tools and feedback from others.
- Planning - A board should be structured to add value and board performance should be assessed regularly with actions taken to address any concerns. Having a current skills matrix will ensure a board is fit for purpose and can also help identify any current or future gaps. Self assessment of skills isn’t recommended and having a robust methodology run independently will ensure rigour in the process over the long term. Renewal amongst board members should be seen as an opportunity to review not just technical skills but also board dynamics and culture as they align to your organisation's strategic intent.
- The long game - Crystal balls aside, how curious are your board conversations about what the future may hold? Are you in a growth phase, has a new player entered the market, what’s the political landscape doing? All these questions will shape the type of NED you will need. Seasoned executives and NEDs can often carry confirmation bias based on what their experience has told them and while that wisdom is a powerful asset, it needs to be balanced with curiosity and sound judgement and a capacity to have thinking challenged. Effective NEDs should also seek to hear the voice of the customer and senior management - not to take over the role of the ELT but to ensure that they are informed and therefore able to help govern and guide effectively. I’d rate relevant experience ahead of qualifications, but completion of the AICD course should be a minimum requirement for all NEDs.
Such an important appointment needs to be well considered and it would be no surprise that I’m an advocate of running a process in a formal way - but not for the obvious reasons! If we are truly focused on having our boards deliver value both socially and economically, we must get beyond the network to look at the breadth and depth of talented individuals who are seeking a portfolio career.