Do you use the best process for appointing board members?

User-01Selecting the right mix of directors is a fine art. You need a balance of personalities; the best combination of skills and experience.

How do you make sure your appointment processes for executive and non-executive directors delivers what you need?

With diversity coming particularly under the spotlight in recent years, you need an appointment process that will deliver the best board to move your business forward.

How should directors be appointed?

Firms in the FTSE 350 are required by the UK Corporate Governance Code to either publically advertise for board roles or use search firms. This needs to be disclosed in their annual reports, in the interests of transparency.

A recent report by Grant Thornton, The Board – Creating and Protecting Value, showed that organisations’ views on their own non-exec director recruitment vary dramatically.

Only a fifth of those in private companies agreed with the statement that ‘The recruitment process of non-executive directors is rigorous, well documented and transparent’. Conversely, 100% of NHS commissioner respondents believed it to be the case, and over 90% of housing companies.

Rigorous and transparent processes around director recruitment are essential, helping to ensure, as the report says, ‘members from a wider pool are recruited, and [to] avoid boards recruiting the ‘usual suspects’.

The need for a range of views

The benefits of a diverse range of directors are well documented.

As a whole, the board needs to reflect a wide range of experience, skills and views, as we explored in our blog on how to achieve the ideal mix of perspectives in your boardroom.

Without this diversity, boards can be subject to groupthink and other ‘herding’ tendencies, which can negatively impact their ability to make good decisions. And with a recent report asking if the female brain is the secret weapon of the best boards, the potential benefits of this variety are clear.

Going out into the market to recruit your non-execs can help to combat the problems of the ‘usual suspects’ as the report terms them – the propensity for existing directors to create a board ‘in their own image’ and perpetuate current behaviours and views.

How to build the best board

First, identify the qualities you’re looking for in your new member. Look at the current membership and identify any gaps you want to fill in terms of previous experience, skills or views.

Do you want directors who focus on regulatory issues or on opportunities, for instance? If your existing membership is very risk-averse, you may want to balance this out with any new appointment.

Similarly, if your current membership is light on governance expertise, you might want to appoint a compliance expert. This will help to address concerns that boards should be more proactive on governance and are failing on compliance. Read more about why you might need a compliance expert on your board.

Maximising board efficiency

Transparent recruitment processes are one of the vital ingredients for a successful board. 

Creating a board that is as effective as it can be demands the best mix of members, as well as processes and meetings that enable efficient decision-making.  Technology can help here, giving members the information they need in the most effective format.

Having the necessary data and background information can have a huge impact on the ability of your directors to make decisions. You need to ensure that these expensive resources spend their time in the most efficient way.

If you want to find out more about how the right technology can benefit your board, you can read out Board Portal FAQs. They look at how an online approach to board packs can help to support a more efficient board, and are free to download here.

Nothing in this document should be treated as an authoritative statement of the law. Action should not be taken as a result of this document alone. We make no warranty and accept no responsibility for consequences arising from relying on this document.

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