A FUNDAMENTAL principle of change management is that an organisation’s internal rate of change must surpass the external rate of change for it to thrive. This concept applies to the board as well.
Boards must continuously evolve to address industry challenges, shifting regulations and rising stakeholder expectations by adapting, innovating and enhancing their skills to align with the organisation’s long-term strategy.
Board renewal is critical for organisations to meet today’s challenges. Here are three considerations that can help boards stay relevant in a changing world.
Professional skillsets
In these complex times, boards are increasingly selective, seeking directors with specific expertise that align with emerging needs. In addition to traditional areas such as legal and finance, desired skills now include cyber security, artificial intelligence, intellectual property, sustainability and experience in business transformations. As industries converge and global supply chains connect, boards require knowledge of emerging technologies and trends.
This shift in criteria is causing companies to face a limited talent pool of board-ready candidates with the necessary modern skillsets. As a result, boards are becoming more nuanced in evaluating and specifying director competencies to ensure alignment with strategic objectives.
Collective expertise
An effective board harnesses the diverse expertise of its members, working collaboratively to meet organisational goals. While individual expertise is valuable, it is crucial that the board functions as a cohesive unit, with directors contributing complementary skills that build collective strength. For instance, cyber security or transformation knowledge should be distributed across the board to reach a critical decision-making mass.
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The board also plays a role in overseeing management, ensuring that talent and expertise within the organisation are continuously developed. Directors should focus on strategic oversight, not substituting for executive-level development, to avoid interference with management and overloading the board.
With the ever-broadening plethora of issues boards are expected to oversee, filling a board with the whole range of skillsets and perspectives is just not feasible. The underlying need is to raise the quotient of the entire board – whether in cyber security, transformation, sustainability or human capital. Board size, often managed by nominating committees, should balance the organisation’s complexity with decision-making efficiency.
To keep pace, boards should regularly introduce fresh perspectives and knowledge. Structured learning, site visits, expert exchanges and ongoing professional development help boards build the necessary domain expertise.
Board culture
The 2023 Blue Ribbon Committee Report from the National Association of Corporate Directors in the US underscores the importance of assessing board culture and identifying areas for improvement. Board renewal requires intentional, holistic efforts beyond recruitment.
Boards must cultivate a learning culture that encourages directors to stay informed, which extends beyond traditional education and structured classroom learning. Curiosity and engagement with management help boards stay aligned with business changes, making them more effective in guiding strategy.
Director selection should consider not only skills but also interpersonal dynamics. Board effectiveness hinges on team cohesion and the ability to navigate complex, “wicked problems”. This process requires a supportive, inclusive board culture under strong leadership.
Best practices in board succession and planning
To manage board succession effectively, boards should take a forward-looking approach, envisioning the organisation’s needs over the next three to five years. This includes anticipating the required expertise, regional knowledge and industry experience to align with the company’s trajectory.
The board should also scan the horizon and consider “skating to where the puck is going, not where it has been”.
Creating a skills matrix helps map current directors’ competencies and identifies potential gaps, guiding recruitment, as well as learning, with a focus on diversity and skill alignment. This matrix should be updated regularly to reflect evolving strategic priorities.
To balance continuity with fresh perspectives, boards need a mix of new, mid-term and long-term directors. Leadership roles, particularly for committee and board chairs, benefit from overlapping tenures for a smooth transition and knowledge transfer. Clear guidelines on director tenure and retirement plans ensure that board renewal aligns with strategic goals.
While the planning process makes rational sense, the implementation could be fraught with emotion and vested interests. Board leadership should set the right expectations while being willing to adjust when circumstances change.
Implementing succession plans requires careful navigation of personal interests and board dynamics. Leadership must gain the commitment of each director to prioritise the board’s long-term success over individual needs. Proactive recruitment and talent warehousing are essential in competitive markets, where it may take years to secure the right director.
Embedding learning into board renewal
Boards need to adopt an ongoing approach to learning to adapt to emerging threats and opportunities. Integrating learning into the renewal process ensures that the board collectively enhances its capability over time, addresses issues from various angles and adapts to industry shifts.
A single expert director is merely the starting point. As challenges evolve, the board’s collective knowledge base must deepen, supported by a structured director lifecycle that includes performance evaluation and on/offboarding processes.
Board renewal is essential to addressing today’s fast-paced challenges. A strategic approach that integrates new skills, promotes continuous learning and emphasises a collaborative board culture can prepare organisations to adapt and thrive in a dynamic business landscape.
The writer is a member of the Advocacy and Reports Committee of the Singapore Institute of Directors.
