The Importance of Refreshing your Board

One of the key roles of the board is to establish the ‘tone from the top’ in terms of culture and values. ?Having a board with a balance of differing backgrounds, skills, and experience, not only role models diversity for the rest of the organisation, but it will result in deeper and richer discussions and bring appropriate expertise to many of the challenges that it faces.?

Different perspectives also enable a board to identify all opportunities and risks facing the organisation and it reduces the risks associated with ‘group-think’.?To be able to do this successfully though, the board’s composition must be right. This is why, board refreshment has an important role when looking at excellence in board governance today.

A stale board i.e., one that has long tenured board members and not added new members for many years, has a very high-risk rate of becoming complacent, where a lack of independence, new perspectives, and diversity could pose significant risks in relation to long-term performance and effective oversight of management (The UK Corporate Governance Code indicates that Non-executive Directors (NEDs) lose their independence after nine years of service on a board).

Yet, while most boards are aware of the need to diversify and refresh their members, doing so can be difficult. NED vacancies do not occur frequently, leaving either expansion of the board or waiting for someone to retire or step down before adding someone new. In addition, attracting new NEDs can be hard, particularly where there is little or no compensation.

Understanding how, when, and why, to refresh your board

Many organisations are adopting tools to help them refresh their boards. The most popular two methods are mandatory age limits and term limits, although neither are the silver bullet needed to ensure boards are bringing in the new talent they need to face the exponential change organisations have faced and will continue to face going forward. Both are a means to avoid difficult conversations and mandatory age limits also assume that those over a set age can no longer provide a valuable service to the board, which seems rather ageist.

One method that boards should consider as part of their refreshment plan (if one isn’t already in place), is a skills audit, conducted, reviewed, and refreshed regularly. This helps you to understand what you’ve got and what you’re going to need of your board members.

Completing a skills audit should involve:

1.?An in-depth assessment and review of board members skills in the context of the long-term strategy and ever-changing marketing conditions. Ensuring focus is on the changing needs of the organisation and the skills the board will require to solve future challenges is key e.g., DE&I, ESG, digital and cybersecurity.

2.?Conducting annual individual board member evaluations. An external party can help bring an objective perspective here. Hanover regularly conducts Board Profiling Assessments as part of our Board Review work, where we explore both individual and board level performance.

The outcome of a robust skills audit is a clear matrix of what skills and behaviours you currently have and what you’ll need in the future. It will allow you to quickly see the strengths and gaps you have and how, when, and why, you may need to refresh your board.

With this in place, it is then critical to establish a clear board refreshment programme with medium- and long-term goals.?This will allow you to plan and target your board’s refreshment and tenure balance to ensure your specific objectives are met, while offering greater flexibility compared to term limits or mandatory retirement age policies.

Attracting new NEDs

As mentioned above, one problem board’s can face, is attracting new NEDs, in particular when compensation is limited or non-existent. It’s therefore important to ensure that any attraction strategy provides:

• A clear understanding of what a NED role is
• The commitment involved
• How an individual would benefit from it
• What value and individual would add to the board.

New NED’s will also require a robust onboarding programme, and if this is their first NED role, key to attracting and motivating individuals to put themselves forward, is to make sure they are aware of the full range of support and training that will be available for them when they become a NED on your board.

Here at Hanover, we regularly conduct board reviews, helping Chair’s better understand board composition in terms of skills and behaviours, dynamics, and diversity. We also work closely with boards and individual members to enhance effectiveness. For more information on how we can help you refresh your board and ensure you continue to maximise effectiveness, contact me on [email protected]