When it comes to bringing value to a board, the list of emerging skills that it is important for a private company director to possess is long and varied. This is not said out of a sense of hyperbole and making the job feel more important. It is said because when we asked three directors their thoughts on the subject, we received ten different skills in answer to the question of which skills are vital for private company directors to bring to a board.
Meghan Juday, chairman of the board of IDEAL Industries Inc., director of Kingsbury Inc. and founder of The Lodis Forum, listed risk awareness, collaborative style and a high level of curiosity as her most important skills. Communication, digital literacy and strategic thinking, said Andrea Hayward, director of Rehrig Pacific Company, Ideanomics and Atlanta CASA Inc. Tammy Gianfortune, a director of The Plastek Group, Just Born Inc. and Thermflo/Zonatherm Products Inc., suggested human capital and change management as urgent knowledge points for the boardroom. With all of these skills being necessary for success as a director, it is no surprise that the ability to be a continuous learner was one of the skills that was listed by two of our directors, with Juday calling it out and Gianfortune elaborating.
“That one is important because of the world we live in and how it’s changing at the moment. Unless you are continually out there on webinars and staying on top of things, it’s going to be a problem.”
Also receiving multiple mentions was the ability to understand and harness technology, which Gianfortune called “organizational technology” and Hayward labeled “digital literacy.”
“As a director, you have to be able to understand and leverage technology. You have to have the ability to utilize technology to problem-solve and use data to create value,” says Hayward, who is CEO of Graceway Solutions LLC. “Technology helps directors build models to help their company with its competitive landscape and regulations, and it helps build a book of business.”
Some Skills Are Timeless
While some skills in the director toolset are emerging in importance, there are some that have been, are and probably always will be necessary for a board member to master. Juday describes them as “financial acumen and a fiduciary mindset.” Gianfortune zeroes in even further to the idea of financial acumen, identifying P&L experience as a priority. She also says it helps to have been in a “top spot,” but stresses that having been a CEO – while a plus – is not necessarily a requirement.
“It could be anything from a division leader, a company leader or a CEO, someone who has had all functions reporting into them,” says Gianfortune. “I think that to be in a position that relates to what the CEO is faced with and having been there and walked in their shoes is very helpful.”
To Hayward, one skill that will never lessen in importance for directors is the ability to lead in an ethical fashion.
“You can’t properly govern if the leadership isn’t operating from an ethical place,” says Hayward. “It is absolutely paramount. Ethical board members inspire leadership to govern and lead with purpose.”
The Importance of the Skills Matrix
Juday is a major proponent of using a skills matrix to track the overall expertise of your board.
“The best skills matrix I’ve ever seen was a heat map of skillsets. Directors rated themselves from 1 to 5, with 5 being very experienced, and they could only choose three skills where they had 5s,” says Juday. “The skills heat map would then highlight those areas of strength for the board as well as where there was an overall weakness.”
She describes the need for a skills matrix when having discussions about board composition as “critical,” but states that a gap in the skills matrix does not necessarily mean having to add a new director to a possibly already stretched board.
“Maybe it means that you have to add an advisor to the board or pursue board education to make sure that the board builds its skillsets and doesn’t have any blind spots.”
Juday also believes the skills matrix should be looked at once per year by the board or one of its committees to consider any gaps, a thought that is echoed by Hayward.
“An updated skills matrix should be revisited yearly,” says Hayward. “This provides an opportunity for the board chair to make necessary personnel changes if needed to ensure there is DEI and the proper knowledge level needed for the board to govern effectively.”
Of course, not all board openings are of the planned variety. One of Gianfortune’s boards recently had an unplanned director succession and she says the skills matrix was key to ensuring a smooth search process.
“We formed an ad hoc committee because we had done the work ahead and had our matrix laid out. We were able to quickly analyze within hours what the needed skills were to be able to pull together a position description and we were moving forward. The skills matrix allowed us to react more quickly.”
Generalist vs. Specialist
There are many issues that are challenging the work of private company boards. One of them is artificial intelligence, a topic that many directors are not naturally inclined to be experts on. So the question becomes would it be wise for a private or family company board to target an expert on artificial intelligence to join as a director, or would it make more sense to expect your current board members to grow their expertise in that area as a team? To Juday, speaking in her role as chair, it simply doesn’t make sense to recruit a director who may be incredibly polished in one particular area, but inexperienced in a host of others.
“Personally, I don’t want my directors to ‘power down’ when the board isn’t talking about their area of expertise. Everyone on the board is a fiduciary. If you have a specialist who doesn’t understand financial statements, for example, that puts them, and the full board, at risk,” says Juday. “I far prefer to add an advisory board member to my fiduciary board with that specialist skill set. That way, they can contribute to the conversation freely and the board can be fully staffed up with those directors who can fulfill their fiduciary duties.”
While Gianfortune states that “if you have a larger board with 6 or 7 independents, then potentially you could afford to” bring on a specialist, in the grand scheme, she doesn’t think the approach makes sense for a smaller board.
“You want to look for someone who is broad enough to cover all of the waterfront,” says Gianfortune. “Because, if you think of a board conversation and agenda, you’re probably going to broach certain specialized topics once per year, and it could be a half-hour on the agenda. The person has to be competent as a broader business leader to add expertise in the other areas for them to be a valuable board member on a smaller board.”
While Hayward believes “you have to have a mix of experts and non-experts on the board,” she too stresses the value of the generalist in bringing out the specialist’s point of view.
“Experts don’t always have the answers, but they provide a guide or vision as to why something is happening and the causes and effects. However, it is the generalist on the board that challenges that expert’s reasoning on why things should be done the way they are currently.”
Keeping Directors Up to Date
If the plan is to move forward without bringing on directors who specialize in certain emerging issues, then the challenge for private and family company boards is how to ensure that their directors, whether independent or family, remain up to speed despite often hectic schedules. Juday believes that a major part of that initiative is being ready to have tough conversations with directors who may not be as engaged as they once were.
“A careful plan for board refreshment and a willingness to have the difficult conversation when it’s time to make a change is absolutely critical,” says Juday. “I also think that it’s important for all directors to adapt a mindset of continuous learning. Those in full-time C-suite roles may find that they are doing this everyday; however, those who are out of the workforce may have to be a lot more deliberate to stay up to date.”
As for Hayward, she does not believe staying up to date is an issue for experienced directors.
“It is only a challenge if it’s the director’s first board seat.” She recommends that directors get board-certified when sitting on private and family boards and that they spend time to learn about the dynamic of the business for whom they will be governing.
The Next Big Thing
One thing that is certain as a director: Once you have gotten used to the complexities of an emerging issue such as cybersecurity or the talent landscape, a new issue will come along that will require monitoring, study and mastery. How can Gianfortune tell that an emerging issue deserves her attention?
“When there starts to be multiple different webinars and publications a month on the same subject, it doesn’t take long to figure out that the issue is emerging.”
However, whether it is an issue that is slapping you in the face via a string of learning opportunities or one whose emergence is a bit more subtle, Juday points out that making sure you are scanning the horizon for topics that will challenge both your board and your company is every director’s mandate.
“It is everyone in the boardroom’s job to make sure that we are identifying and then covering all of the gaps in knowledge or experience.”
Bill Hayes is the managing editor of Private Company Director.