A Recruiter’s Guide to an Effective Board

Expectations for boards are higher than ever, but finding the right kind of directors is tough. Janice Ellig of executive search firm Ellig Group offers her perspectives on how to make boards run at maximum efficiency.

March 2, 2023 – According to executive recruiters, heightened expectations now placed on boards have elevated both the professional standards and personal commitment required of all directors. At the same time, many boards find that the supply of independent-minded “board experienced” directors – especially those who can add vital forms of specialized skills and expertise – is limited. Such candidates are widely sought but can be hesitant to take on the intensive responsibilities now required of board service. Most in demand are women, senior leaders with global experience, ethnically diverse professionals, and millennials.

“From my extensive experience as a search advisor, the hallmarks of effective boards are five components: composition, competencies, courage, communications, and character,” said Janice Ellig, CEO at Ellig Group. “The composition of all board seats should be greater than the sum of its parts, with the diversity of thought, experiences, ethnicity, gender, and origin to provide independent fiduciary oversight.”

“Competencies around the boardroom table should encompass the relevant skills and experiences needed to know what questions to ask, ensuring the organization is financially, reputationally, and culturally sound,” Ms. Ellig said. “Relevant being the operative word — for, as organizations and the world they operate in evolve, so too must the expertise of directors.

Courage to challenge the strategy should be on display not just in good times, but also in bad ones like the pandemic, enabling organizations to pivot and make the tough calls when market realities shift, according to Ms. Ellig. As one director said to her: “Boards need to challenge management teams during the good times to ensure they have the right CEO at the helm and then support them through choppy waters.”

“Communications should be boldly collaborative,” Ms. Ellig said. “Effective board members listen and align their differing perspectives towards a constructive potential solution, so leaving egos at the door isn’t a nice-to-have: It’s an operational imperative.”

And finally, she explains that directors should foster the kind of character that does what is right even when no one is looking. “The board’s first responsibility, entrusted by the shareholders and from which all else follows, is to ensure the right CEO is driving the right strategy with the right team,” Ms. Ellig said. “If the CEO is not fulfilling these responsibilities, then the board must have the courage of its convictions and do what is right for employees, customers, communities, and investors.”

Board Advisory Services

Ellig Group’s board advisory services focus on practical improvements to enhance the efficiency and effectiveness of governance processes in organizations. The firm’s work engages boards and CEOs around the most strategic elements of governance, including value-driven director and CEO succession planning and ongoing board skill development and education.

As the head of the Ellig Group, Ms. Ellig is dedicated to increasing the placement of women and diverse candidates on corporate boards and in C-suites by 2025. She joined the firm in 2000 and became co-CEO in its transition to Chadick Ellig in 2007; Ms. Ellig assumed sole ownership of the company as the Ellig Group in 2017 with a new focus on Reimagining Search. Prior to her career in executive search, she spent 20 years in corporate America at Pfizer, Citi, and Ambac Financial Group, an IPO from Citibank, where she was responsible for marketing, human resources, and administration.

Ms. Ellig recently discussed how effective boards operate and what is changing on boards looking ahead in 2023.


Janice Ellig
   Janice Ellig

Janice, what are some of the best practices for conducting board meetings?

Leadership of the board — and of committees, which are where the work gets done — is fundamental to high performance. Good board meetings, therefore, start with good chairs, who ensure critical issues are discussed, questions raised, and, critically, that relevant information is brought to the attention of the board — a key part of good corporate governance. They also act as gatekeepers, enabling all board members to contribute in robust discussions where different perspectives are put on the table, not tabled or shut down, where peers can disagree without being disagreeable, and where diversity of thought and experiences is valued. Chairs are only one part of the equation, so effective board meetings get the best of their independent directors, too. A good way to do so is to hold regular executive sessions where directors can have open and candid discussions about the quality of materials, information, and transparency. This is also an ideal time to discuss getting more access to management and having appropriate one-on-one meetings to delve into specific areas, leadership, functions, and/or culture.

We’ve seen investors become increasingly active and multiple topics move up the board agenda. What do you think will be some of the major agenda items for the year ahead?

In speaking with directors, we hear of nine recurring themes:

  1. Talent & culture. Given the shift towards a variety of hybrid working models, boards will be asking management about the pipeline of talent, employee sentiment about the organization’s culture, and what its flight risks and retention strategies are. “Is our workforce diverse, inclusive, and does equity prevail at all levels?” will be on dashboards or heat maps and regularly assessed.
  2. Succession issues for both board and management. Building bench strength and succession plans for the CEO will be critical given the turnover of that role during the pandemic. Is there a diverse pool of qualified executives being appropriately developed to fill key roles, including for the CEO position? How is the development monitored and what is the timeframe to succeed to the next level? The pool should be diverse and sufficient to provide the board with more than one option.
  3. Customer experience & loyalty. This is what keeps companies viable. While companies may have sophisticated analytics at a divisional level, customer sentiment is often siloed or misinterpreted. Boards will want to know the customer journey — that is, the true customer experience for the organization in its entirety — and ask, “Is technology an effective enabler or is the voice and human contact with the customer getting lost?”
  4. ESG. All three letters in ESG will matter and it starts in the communities, locally and globally, in which companies operate. Is the organization viewed as a top-tier organization by all constituents — employees, customers, communities, investors? And when and how to take a stand on societal issues that are on the minds of constituents? Some companies have a framework for what warrants comments based on their business not on the personal views of any one person, including the CEO.
  5. Activist’s perspective. Proactive boards will look at themselves through the lens of a potential activist, to assess their strategy’s risks and opportunities. It was recently reported that Marc Benioff, CEO of Salesforce has taken an interesting stance with activist investors, telling them “I’d like to see the stock price go up too” and inviting their advice. To me, that is an example of a CEO’s humility that he and his team may not have all the answers.
  6. Organizational strategy. Boards want more discussions about the strategic direction of the company. From the pandemic, to an economic downturn, to the supply chain, to inflation, to the talent pipeline, to societal issues, boards are focusing on leadership’s ability to have the agility, expertise and willingness to pivot and make the tough calls.
  7. Crisis management. Effective boards regularly go through scenario planning/simulations to prepare for those what if scenarios that may be grey rhinos — i.e. predictable and likely situations.
  8. Technology. Is the organization positioned for where the puck is going? Is the business using technology as an enabler? Is cybersecurity embedded in its operations?
  9. Global regulation. Boards will need to keep abreast of the ever-changing regulatory environment across all the geographies in which they operate, while monitoring trends around the globe and adjacent industries to help companies navigate complexity, reputation, and cost implications on its business.

Does governance have a role in pushing U.S. boardrooms forward?

The changing environment and external constituents will have implications on governance practices and drive discussions in U.S. boardrooms. As an example, we are seeing shareholder proposals on workers’ rights at companies such as Walmart, CVS Pharmacy, and Netflix. Companies will look at whether they have the right policies and practices in place that enable the board to have frank discussions with relevant information from management. Additionally, board roles, responsibilities, and assessment practices may be under review. As employees, including the CEO and leadership, are evaluated regularly, so too the proactive boards will look at best assessment practices for boards, individually and collectively.

What is your Golden Rule?

You can hire skills, but you cannot hire integrity. Great leaders have good character at their core: as Peter Drucker said, “Management is about doing things right; leadership is about doing the right things.” With board service comes power and tremendous responsibility. Boards are a composite of individuals who come together to provide strategic stewardship. We applaud the outstanding directors who embrace this responsibility and provide intellectual insights to drive robust discussions, ensuring the strength of our public companies and society.

Related: Hiring Top Talent in Unprecedented Times

Contributed by Scott A. Scanlon, Editor-in-Chief; Dale M. Zupsansky, Managing Editor; and Stephen Sawicki, Managing Editor – Hunt Scanlon Media

 

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