November 10, 2015 – Sixteen percent of new corporate board directors are 49 or younger according to the annual Korn Ferry Market Cap100 (KFMC100), a study of board practices at the largest U.S. companies by market capitalization. On boards as a whole, while just four percent are 49 or younger, youth nevertheless seems to be trumping long time experience.
“The analysis points to efforts by the largest companies in America to add next-generation directors who bring the fresh ideas and insights that are crucial in a rapidly changing business environment,” said Dennis Carey, vice chairman of Korn Ferry. “Of particular interest, nearly one in six new directors is 49 or younger.”
These findings suggest that boardrooms may soon follow the shifting demographics in the workplace. Currently, more than one-in-three American workers are Millennials (adults ages 18 to 34 in 2015) and this year they surpassed Generation X to become the largest share of the American workforce, according to Pew Research Center analysis of U.S. Census Bureau data. The Millennial labor force just last year surpassed that of the Baby Boom, which has declined as Boomers retire.
Recent figures released by on-demand talent provider Findly concluded that Millennials are poised to make up 75 percent of the global workforce by 2020. “Given the size of this generation, there is a growing focus on recruiting and nurturing Millennial talent,” said Scott A. Scanlon, founding chairman of Hunt Scanlon Media based in Greenwich, Conn.
Jason Hanold, CEO of Chicago-based Hanold Associates, said that Millennials have a preference for startup cultures and are attracted to small, high growth companies over established brands. “What’s compelling about these high growth opportunities is that they allow Millennials to contribute early and often and forge an ownership mentality,” he said. “Millennials enjoy problem-solving and critical thinking.”
Millennials are looking for companies that place premiums on career development, whether it’s a focus on mentorship or providing continued training or education opportunities. Companies that provide these options for career growth may be more likely to attract and keep Millennials for the long haul.
But finding next generation leaders is becoming an increasingly challenging and complex proposition. According to a number of studies conducted by Hunt Scanlon, transformational leaders – change agents who can realign, reorient and overhaul a company’s mission and culture – are now the most in-demand wedge of any professional group.
“Clearly, the generational shift is underway — and a noticeable transfer of power in the senior leadership ranks of companies is in progress,” said Mr. Scanlon. According to Hunt Scanlon research, a number of companies are now turning to members of Gen X, those born between 1965 and 1980, and younger boomers, now in their mid-50s, to move into the C-suite and onto boards. Among those that have recently named CEOs aged 50 or younger are McDonald’s, Harley-Davidson, Microsoft, and 21st Century Fox.
“Millennials are not too far behind this demographic group,” said Mr. Scanlon. “The time to work with them and to onboard them is here. Millennials are giving companies a fresh human capital advantage and they should be embraced for their inspiring values, competitive spirit, inherent skill sets, and personal drive.”
The KFMC100 report found that the most sought-after new directors have a finance/audit background (50 percent), followed by same industry experience (47 percent), COO/operations (32 percent), and marketing/sales (31 percent). Thirty-five percent of new directors have international work experience while 21 percent were born and/or educated abroad.
These factors have led to director recruiting becoming more challenging in recent years. According to Egon Zehnder, the 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, as such candidates are both widely sought after and sometimes hesitant to take on the intensive responsibilities of board service.
In terms of diversity, the KFMC100 study showed 20 percent of new directors were women, nine percent were African American, three percent were Asian American and zero percent were Hispanic Americans.
Recent research released by Heidrick & Struggles indicated that progress for women in boardrooms within the Fortune 500 was accelerating. Of the 339 new directors appointed in Fortune 500 boardrooms last year, 99 were women, representing 29.2 percent of the total. That compares with 25.9 percent in 2013 and 22.8 percent in 2012. The Heidrick & Struggles Board Monitor projects that women will account for 50 percent of new board directors in the Fortune 500 in the U.S. for the first time in 2024 — nine years from now.
Korn Ferry has also reported evidence that women are making strong gains in the most sought-after top-slotted roles in global companies. According to another one of the search firm’s surveys, more women in the U.K. have joined the boards of FTSE 350 companies as new non-executive directors. Thirty-nine percent of first-time FTSE 350 non-executive appointees were women last year, up from 28 percent in 2013 and 11 percent in 2007. Overall there were 434 appointments to the FTSE 350 in 2014, of which 233 were first-time appointments (54 percent). The proportion of appointments given to first-timers has increased steadily from 48 percent in 2012 and 53 percent in 2013.
The National Association of Corporate Directors (NACD), the advocate for the profession of directorship and advancing board leadership, anticipates that a likely outcome of increased board turnover will be an increase in diversity in the boardroom. NACD released new findings from its forthcoming 2015–2016 Public Company Governance Survey which showed that board turnover continues to increase. Two thirds (72 percent) of respondents indicated that their board added or replaced at least one director in the past year, compared to 64 percent of respondents to the previous year’s survey.
Multiple executive search firms have been boosting their board services practices in response to the growing need for directors. Caldwell Partners recently added Jay Millen as a leader of the firm’s CEO & board practice. He joins the firm from DHR International, where he served as a vice chairman and head of the firm’s board and CEO practice group.
Allegis Partners recently launched a new board recruitment practice. Based in Chicago, Sara Hays co-leads the group as a managing director along with Paul Williams, who has been a partner with the firm’s sister company Major, Lindsey & Africa (MLA) for the past 10 years. The firm’s board search practice partners with boards to recruit director candidates that align with the company’s culture and strategic direction.
RSR Partners named E. Thames Fulton as a managing director in its board of directors practice. With more than 14 years of experience in board recruiting and governance consulting, he serves as a senior advisor to boards, chairmen, and chief executives of Fortune 500, small-cap, and family-owned enterprises. He formerly led Cook Associates’ board advisory services practice
Russell Reynolds Associates added Emily K. Rafferty as senior director in the firm’s non-profit and board effectiveness practices. The firm said the appointment was in response to board performance becoming a critical area of focus for non-profit organizations. At the beginning of the year, Russell Reynolds hired Justus O’Brien to co-lead its integrated CEO and board advisory services group alongside industry veteran Charles A. Tribbett III. The team comprises former and sitting directors of public company boards, leadership and management consultants, as well as legal, governance, regulatory and communications experts. With over 17 years of search and succession planning experience, Mr. O’Brien was most recently the co-head of the CEO succession practice at Egon Zehnder where his efforts focused on board and succession work at Fortune 100 clients.
But Reynolds also lost one of its top CEO and board director consultants, Ron Lumbra, last month to rival Heidrick & Struggles. Everyone, it seems, wants in on the game.
Contributed by Scott A. Scanlon, Editor-in-Chief, Hunt Scanlon Media