Archive for May, 2010

>Top tips for new NEDs

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I was talking over lunch to a bloke who had just scored his first serious non-executive director appointment – a very serious one, in fact, to a top 10 listed company. I made so bold as to offer him my top 3 tips on being a good NED.

  1. Before you say anything in a board meeting, ask yourself why you’re about to say it. I’ve seen too much boardroom discussion which is ego-driven, banging on about old hobby-horses, or just not being of any use to the topic or agenda item under consideration. A slight pause before you throw in your bit can help to ensure that it has relevance, is not being driven by some collateral purpose, and will have the right tone for that moment. This might even include a bit of calculated frustration or stroppiness, which can play a useful part in the board dynamic – as long as it is calculated.
  2. Master the art of the intelligently naive question. Management will often, intentionally or not, start discussions at a place some distance from the most sensible starting point for the board’s purposes – often because they would prefer not to explain or justify some of the basic underlying assumptions. Testing these assumptions is a vital part of the NED role: while you might initially appear to be a bit dumb in bringing the discussion back to a more basic level, it is more likely than not that your seemingly naive question will flush out some crucial piece of information not previously revealed, or something worth debating.
  3. Don’t let an acronym pass you by if you don’t know what it stands for. I guarantee that you won’t be the only person in the room in that position. That may include the person spouting the acronym. I once caught out the director of the technology division (surely the high temple of the cult of the acronym) talking about a vital and expensive piece of equipment called a GGSN. I asked “What does that stand for?”, and he didn’t know. It turned out to be a compound acronym, where one of the letters stood for another acronym. Informed debate needs everyone to understand clearly just what is being debated. Like the GPRS Gateway Service Node, not the General Gauge Sensor Network or the Great Green Sea Nymph.

I’m not sure the new NED was quite ready to display as much ostensible naïveté as I was recommending, so early in his tenure and in front of his heavy-hitting colleagues. I suppose it is ultimately a matter of balance, but you don’t always have to look clever to be clever.

The Board Coach

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>Recruiting not-for-profit directors part 4 – The Recruitment Process

>After you have done the skills analysis, put in place your building blocks, and assembled the recruiting materials (see the previous blogs), the next issue to be decided is “Who will be responsible for the recruitment process?” This can depend on the resources available to the board. The most common route is for the board to establish a committee (historically called the “nominations committee”) to oversee the process, in line with the board’s guidelines and the results of the skills analysis. The ultimate aim of the committee is to come up with recommendations to the board for appointment – either a short list or a preferred candidate.

Your board may not be large enough for the luxury of another committee – if that is the case, then either the whole board can run the process, or a lead director (with sufficient time on their hands to do what is necessary) can be given the job of coming up with the recommendations to the board.

Remember though, the final decision on appointment is of course for the whole board to agree on.

The next issue is “How will we locate and target the right candidates?” If you can afford it, or can secure the services pro bono, you can try the executive search process. Alternatively you can advertise in suitable publications or forums. And you can tap the various networks which the current directors have.

Whichever route you decide to take, make sure you stick to a consistent process. For example, if you take the search option, then it is important that any potential candidates identified through other sources (like tapping the networks, or the inevitable “I know someone who would be perfect for the board”) are fed into the search pool. This helps counter the effect of the Old Mates Act, which has been responsible for plenty of poor board appointments, whether in commercial organisations or NFPs.

Making the final decision

Your skills analysis process should give you a clear guide to make the decision on whom to appoint. Remember, you are recruiting into your gaps. You will have the concrete set of core business and functional skills to take into account, and the filter of the organisation-specific factors to overlay on the pool of identified people. The last filter is “How will any of our candidates fit in with the dynamic of the current board?” That question may vary if your current board dynamic is not as effective as it should be, and might instead be “How will any of these candidates help us improve the dynamic?” This might be, for example, by increasing diversity on the board.

The last step before formal appointment is the delivery of your sales pitch, developed during the building block process, and a frank discussion with the candidates of the expectations the board will have of its new members. Are your candidates up for it? Really? Believe me, it can be far easier to appoint a new director than to remove an existing one.

The formal resolution for appointment

Check the constitution! There will be a section headed “appointment of directors”, or something similar, which will set out how directors are validly appointed. It may be by the board resolving to fill what is known as a “casual vacancy”, because someone has recently resigned; or it may be by filling an empty spot which has either not been filled for some time, or has never been filled. These two kinds of appointments are usually valid until the next annual general meeting, when the appointees will have to re-elected through the normal AGM process.

But the appointment process can vary widely between constitutions, so check your own very carefully and don’t assume it will be like anyone else’s. The safest route is to use the actual words of the constitution to frame the formal board resolution – for example:

Pursuant to clause 43.1 of the company’s constitution, the board resolves to appoint XYZ as a director of the company, to fill a casual vacancy and to hold office until the end of the next annual general meeting of the company.

The constitution will also specify the maximum number of directors who can hold office at any one time – make sure you won’t be exceeding that maximum.

So that’s it. Good luck with finding the right people for your board, who will add value, enhance the board dynamic, and help your organisation achieve its vision.

The Board Coach



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