Dear reader,

Welcome to the June 2018 edition of The Director’s Dilemma.

Please help me continue to increase the positive impact of this newsletter by forwarding a copy to a board colleague (or aspiring director) with a suggestion that they may wish to subscribe.

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This month our case study protagonist risks being swept into a disaster that is not of her making. I hope you enjoy thinking about the governance and strategic implications of the latest dilemma:

Adam chairs a not for profit board and its nominations committee. His fellow directors are all Anglo-Saxon, tertiary educated men in their seventies, with successful business careers. The company has performed very well and grown to serve the needs of a more diverse group of beneficiaries than he imagined when he founded it over forty years ago. The business enjoys a comfortable surplus and sound reputation.

Recently, however, Adam has started to worry about diversity, or more correctly, a lack of diversity, on his board.

When Adam raised this concern half of the board reacted very negatively saying they had been appointed on merit and that any lowering of standards would harm the business. The other half reacted very positively and, indeed, a few claimed that they also had been concerned and wanted to see some change.

Now Adam is in a bind. His board has reached agreement that they want to retain the criteria of tertiary qualifications and a proven track record of good commercial judgement. They have supported the idea of appointing two 'younger' women if Adam can find some who are willing to serve on an unpaid board and who also meet the criteria. Adam is sure there are plenty of such women but doesn't know how to find them. There are certainly none in his social circle and he is hesitant to approach a professional search firm because his board has never used one in the past. He is not sure if it is okay to advertise and specify gender or age preferences. He also wants a cultural fit strong enough to ensure that the new directors form a team with the existing board including the ones who were against 'change for change's sake'.

What can Adam do?

Ruth's Answer

Adam, as chair of the nominations committee, could undertake a review prior to recruiting new directors.

A best practice process is for the nominations committee to firstly look at the strengths, weakness and needs of the board.

This involves:

  • Detail the skills of existing directors
  • Detail the organisation's current and future challenges
  • From this consider the skills needed for the board as a whole
  • Develop the next steps - a succession plan and recruitment plan

This exercise could well unearth skill needs for this board as a whole of:

  • understanding the governance and funding of not-for- profit organisations
  • qualifications and experience in accounting / finance, business systems and business transformation
  • strategic marketing expertise
  • experience with/ knowledge of digital technology, communications and social media
  • an appreciation of the customer / client base
  • wisdom and judgement in decision making previous experience as a Board Director
  • a balance of age, experience and gender

These then become the selection criteria and should result in the recruitment of more diverse directors.

To find qualified and interested female candidates; the obvious action is post a vacancy at Women on Boards. The posting will be seen by the largely female membership, which obviates the concern with requiring female candidates in any advertisement.

If the board is concerned about its ability to attract female (and other) candidates, it should craft an attractive offer to potential directors. More not for profit boards are paying their directors. This will increase over time.

This board may not wish to remunerate; but the offer of expenses (which will be minimal) is an option. Then consider offering support in the form of director education or similar. Support the offer with a vision of the organisation's impact on its client base. Applicants should appear.

Ruth Medd is a professional Company Director and Executive Chair of Women on Boards. She is based in Sydney, Australia.

Julie’s Answer

Adam has done well to successfully guide the company he founded for over forty years. Now it is time for the company to renew its board and governance so as to thrive in the future. Adam can get professional help from a qualified board consultant who will be able to advise on the skills and experiences that would most benefit the board given the future strategy and current business challenges.

Diversity is more than gender balance. Adam needs new ideas from new board members that can be tested and improved by long-serving directors who know the company and its activities. Diversity of tenure, skills and experiences can be built around the strategic plan to enhance the chances of success.

Adam's local governance and director institutions will be able to give him some help with finding a suitable consultant. Many will also have registers of people who are available for appointment to boards and Adam can advertise his vacancies on these once he has defined the skills and experiences his board needs.

They will also be able to put him in touch with relevant third parties such as the local Women on Boards associations, the board practices of major consulting firms, and the director networks of other institutions such as accounting and legal bodies. There is no shortage of qualified directors available for board service and there are many excellent individuals who will serve unremunerated on boards where they wish to support the aims of the enterprise.

There is no stigma in getting professional help, Roger Feder has a tennis coach and Adam, who has done a good job building such a successful organisation has every right to the best advice he can find to help him design and implement his board succession.

Julie Garland McLellan is a non-executive director and board consultant based in Sydney, Australia.

Richard's Answer

Adam's focus on 'younger' women may be imprudent and will not be helpful when arguing that merit-based selection was used. Candidates should be assessed on their qualifications, skills and (commercial) experiences as well as their capacity to fit in culturally.

Firstly, the board should self-evaluate their own strengths and limitations across requisite skills, knowledge and experience relevant to the strategy. A good visual aid for this is a board matrix. Ideally the board should then engage a board consultant to independently assess the board's self-evaluation. The gaps defined in the board matrix will determine the candidate groups that should be targeted.

Adam may be able to advertise for women only directors, but he will have difficulty if he wishes to include an age preference.  Depending on the location of the not for profit organisation Adam should check if he needs an exemption from an authority such as the Anti-Discrimination Board to permit an advertisement which targets only women and a specific age range. Adam can also approach organisations such as Women for Boards who operate discrete board position listings exclusively for their members.

Advertising for board positions is a hit or miss proposition which may not deliver any suitable candidates and prove to be labour intensive for Adam.

An alternative to adverting is to use an Executive Search firm. By contacting the Association of Executive Search and Leadership Consulting (AESC) Adam can obtain a list of reputable firms suitably qualified to undertake a search for women board candidates.

The executive search firm will help Adam to clearly define the qualifications, skills and experiences best suited to the board positions as well as identify the board's cultural attributes. At the end of the day Adam will be able to demonstrate that a merit based approach was applied even though it was confined to a pool of women candidates and thereby placate (as much as reasonably possible) the board members who make the merit argument.

Given that Adam's not for profit organisation is offering unremunerated board positions he will need to negotiate the fees with the executive search firm upfront.

Richard Sterling is a Director of AltoPartners, an executive and board recruitment firm. He is based in Sydney, Australia.

Book review - Dilemmas Dilemmas

Governance is the key driver of performance and accountability for both corporate and not-for-profit Australian companies. Julie Garland McLellan's dilemmas - now gathered together in this publication - challenge us to think seriously about how we think and act as directors.

She presents her material in an engaging way, with a degree of clarity that exposes ways of thinking which will assist both experienced and new directors to fulfil their roles.  For the not-for-profit sector, increasing interest in transparency and accountability means that directors must shoulder similar responsibilities to their corporate counterparts.

Julie's writing on critical situations that arise around the board table provides a pedagogical framework in a most enlightening and entertaining way. This book is a timely resource and is a welcome addition to director education.
Sue-Anne Wallace, Chair, Australian Council for International Development, and Code of Conduct Chair, Customer Owned Banking Code Compliance Committee

Available in soft or paperback format through Amazon.com

 

What's New - In May

I spent the first half of May enjoying a much-needed holiday and the latter half wishing that I had kept up with my work whilst I was away!

However, I still found time for some exciting work on my own boards and some very rewarding (in terms of seeing how great an impact the boards could have - not in terms of being highly paid) consulting work with some of my favourite not for profit boards. My own boards were exciting as Bounty Mining has advanced its plans towards IPO on the ASX which is always a time consuming and exhausting process. I look forward to reporting on our transformation to a listed company in the near future, there was much to learn from our group of professional supporters and also from each other as the process caused us to review and reassess every aspect of our business.

I also enjoyed an excellent and thought-provoking session with Ferrier Hodgson on Innovation Through Collaboration which proved the catalyst for finishing and publishing a collection of ideas about how boards can improve their organisations' ability to innovate. The article is on LinkedIn if you wish to read it.

Notwithstanding my whinge about having to work hard to make up for having some time off, I am always keen to work more and will be delighted to hear from you if you would like to arrange a board strategy workshop, education session, or board performance review!

Inspirational quote for June - This month my favourite quote is one gleaned from an interview that I gave to Company Director Journal about board composition. I came across it again whilst researching my answer to Adam's dilemma:

 

A note on names - A few readers have asked me where I find the names for the protagonists in each case study; I 'borrow' them from people I meet or things that I read. Adam is a very old name, possibly derived from the Hebrew meaning 'to be red' (like the clay from which, according to the book of Genesis, the first man was made) or from the Akkadian meaning 'to be made'. Our protagonist 'Adam' will have to make and shape his board to safeguard the future of his company.

This newsletter - If you have any ideas for improving the newsletter please let me know. If you are reading a forwarded copy please visit my website and sign up for your own subscription.

Suggestions for dilemmas - Thank you to all the readers who have suggested dilemmas. I will answer them all eventually. I could not write this newsletter without your help and without the generous help of all the experts who respond each month to the case studies.

Be a contributor - if you would like to attempt a response to the dilemmas for publication you will be most welcome. Simply reply to this email and let me know.

Let's connect - I use LinkedIn to share information about boards and directorship with my friends and acquaintances. If you use LinkedIn and we are not yet connected I will welcome a connection from you. You can find me at linkedin.com/in/juliegarlandmclellan.

Let me help you - If you would like me to speak to or train your board, staff, audience and/or group please contact me at julie@mclellan.com.au.

Farewell until the next issue (due 1 July 2018). I look forward to greeting you again then. In the interim I hope you will enjoy health, happiness and hard work.

Enjoy governing your corporations; we are privileged to do what we do!

Best regards,

Julie

 

Photo Credits:
Personal images in this newsletter are provided courtesy of the contributors, course attendees and conference participants.

Disclaimer:
The opinions expressed above are general in nature and are designed to help you to develop your judgement as a director. They are not a definitive legal ruling and do not constitute legal advice. Names and some circumstances in the case study have been changed to ensure anonymity. Contributors to this newsletter comment in the context of their own jurisdiction; readers should check their local laws and regulations as they may be very different.

Privacy:
I am privileged to have your contact details and keep them as safely as possible. I will alert you if they are ever accessed by any unauthorised person (the technical staff at ayuda help with publishing and issuing the Director's Dilemma and have access so they can send the newsletters to you). I do not sell your details to anyone; they are kept only for the intended purpose - sending you this newsletter and helping to build the judgement of company directors by providing a safe way to consider potential responses to real life events.