In times gone by, making the board meant you had made the grade, so what was the point of development at this lofty level? Professor Colin Coulson-Thomas explains how times have changed.
The credit crunch has exposed the limitations of many boards. The public intervention required to prevent meltdown reflects a failure of boards to question and read the road ahead. CEOs and their executive teams have not been challenged or held to account. Directors have stood by while people have been paid huge bonuses and commissions for bringing time bombs into their organisations.
Yet the current situation is not unexpected. When many of today's non-executive directors started their directorial careers, preparation for the boardroom was almost non-existent. More than nine out of 10 directors did not receive any preparation for the board, or were prepared by such informal means as 'experience'.
Often the board itself is to blame for inadequate preparation, as many directors are reluctant to acknowledge their developmental needs. Many directors also doubt the value of offerings from those claiming to have director development expertise.
"Often the board itself is to blame for inadequate preparation, as many directors are reluctant to acknowledge their developmental needs."A board position can be a source of satisfaction and pride. Some directors resent suggestions that they are not entirely competent. Addressing their development needs requires sensitivity and tact. Many chairmen also believe directors are 'born, not made'.
In the past many board chairmen bypassed traditional sources of management education when seeking director development advice. More recently 'networking', forums, specific counsel, mentoring and 'using the internet' have become more popular. Directors should ensure sources of advice focus upon their distinct development needs.
Owner-directors often use trusted external advisers and personal contacts rather than internal employees as sounding boards when sensitive matters relating to directors and boards are discussed. Experienced chairmen select suppliers according to development need, and look at the personal qualities, integrity and experience of individuals who will be working with the boardroom team.
Building a relationship with a particular board and understanding its dynamics can take time. Yet boards can benefit from exposure to different viewpoints, including those that challenge their assumptions. Addressing a particular knowledge gap or networking with other directors often represents a first step.
A board should assume responsibility for its own development. Each board comprises a combination of people that should match the situation and circumstances of the company. The competence of an individual director needs to be assessed in relation to a particular board. The qualities that individual directors need to develop and display should relate to, and complement, the qualities of colleagues.
Development requirements should reflect a board's composition and circumstances. The chairman should ensure all new directors are properly prepared for the boardroom and their directorial skills remain both current and relevant.
Even an experienced director will need to be inducted into the practices, procedures, ways and ethos of a particular board upon appointment. The chairman should acquaint a new director with the routine of the board, opportunities for informal contacts between meetings, practice regarding the acquisition and presentation of information, how the boardroom agenda is drawn up and managed, and the role of the company secretary. Questioning should be encouraged - existing directors may take the familiar for granted.
Priorities should reflect the nature, situation, circumstances and ambitions of the particular company. The board should have the capacity to 'grow' to match the capability of the company and the challenges and opportunities it faces. Certain directors may need coaching, counselling or mentoring. Sometimes board composition may have to change.
There is much that directors, both individually and collectively, can do to learn from their experience. Non-executive roles with other organisations, activities within representative bodies, service on committees, participation in conferences and other external activities can all represent learning experiences for self-aware directors eager to remain current, raise their profile and increase their impact.
The boardroom represents a prime learning environment. The chairman should ensure the culture and dynamics of a board are conducive of learning. A board should regularly review what it has learned and consider the factors that 'help' or 'hinder' learning inside and outside the boardroom.
Other learning opportunities include major corporate developments, visits, participation in negotiations, giving presentations, travel, events, meetings with customers, suppliers and business partners, public appointments and professional, voluntary and educational activities. Each director should be encouraged to build upon natural strengths.
The reading of newspapers and listening to the broadcast media should be 'questioning': e.g., how will this affect the company? Joining relevant institutions, societies and associations, and attending seminars and conferences can lead to fresh insights.
Confident directors build networks of people with shared interests and complementary skills. A director could network with fellow directors; peers in customer, supplier or business partner organisations; consultants; internal and external experts; and various social contacts and learn from them. Points of view can be floated and arguments tested.
Ultimately the acid test of how well directors have been prepared for their onerous duties and responsibilities is how well they cope with crises and severe challenges. Recent events have exposed inadequacies at the top of many financial institutions. People have been hoping for the best rather than preparing for the worst.
To avoid censure directors of UK companies experiencing substantial write offs and bail outs may need to demonstrate that they have been acting in accordance with the Companies Act, by exercising reasonable care, skill and diligence and having regard to the likely consequences of any decision in the long term. Claiming ignorance of their company’s exposure to US mortgage loan defaults or that they did not understand the nature of a derivative or the implications of slicing and dicing debt will cut little ice.
Long experience of looking the other way and following the herd should no longer be a requirement for further board appointments. Loyalty to the CEO has been sought, when the emphasis should have been upon curiosity and courage – the curiosity to question and the courage to challenge. A new generation of directors are required, selected from people with integrity, who have their feet on the ground, stay current and think for themselves.
'Developing Directors' is published by Policy Publications and can be obtained from www.policypublications.com This article was first published in October.
Colin Coulson-Thomas is the professor of direction and leadership at the University of Lincoln, the author of 'Developing Directors' and 'Winning Companies; Winning People' and is an experienced director. He can be contacted via www.colincoulson-thomas.com
