Friday, October 2, 2015

What’re the Next Practices of Board Succession Plan

In a world of well-defined problems, directors are required to exercise influence over volatility, manage uncertainty, simplify complexity and resolve ambiguity in a 21st-century digital environment.

Generally speaking, Boards have a couple of main functions such as strategy oversight, governance practices, providing advice to executives, and resource provision, etc. The spirit comes from the top, the board also plays a significant role in setting culture tones and encouraging innovation. At today's business dynamic with digitalization and globalization trend, what’s the elephant in the Board Room, and how to bring the new blood to digitize the Board? What're the logical steps, the next and best practices of Board succession plan?

The company’s strategic plan is the base document to start with: What is the strategic plan of the company? It is only when this plan is defined or updated that one may clearly see what type of Directors should eventually be searched. Director appointments must reflect the collective mind, capability, experience, and knowledge required around the board table to guide and direct the executives in fulfilling and achieving the strategic plan objectives. Using the strategic plan, and develop a detailed checklist associated with the skills and experience required around the board table in order to support the successful implementation of the strategies outlined, plus ensure the continuing financial stability of the company. These identified attributes are then matched against the current board members' skills, experience, and the gaps in cognition, knowledge, capabilities which are readily identified. It's difficult if not impossible for the directors to argue against the process and conclusions as the requirements are matched against the company’s strategic plan objectives with a bit of diversity thrown in for good measure. It’s important that this task is carried out in a professional manner without any ideologically focused personal inputs as the resulting recommendations need to reflect the attributes and skills required to ensure strategic implementation success.

The next step is to get the board to draft and adopt its director succession plan: The plan covers the processes involved in new director appointments and this is where transparency, wider search functions, and detailed interview guidelines are established, thus ensuring the best possible candidates who will add value are sourced and appointed. This process, the plan, and the underpinning logic need to be endorsed by the shareholders. It is especially important that a director knows what they bring to a board. For example, "fundraising boards" depend on directors with specific networks and abilities to raise money -- if the circumstances change then the director needs to move on. Unfortunately, the Boardroom is often still a club that includes a small and insular group of people. The recruitment process is somehow outdated and not so transparent, and even deeply flawed - At today's digital and global business dynamic, Boards must move towards a process that is rigorous, and merit/competence based, and until this fundamental problem is solved; change will be stymied. Boards should have to demonstrate that they are following a 'truly' merit-based protocol, be more open minded to compose a team of heterogeneous BoDs with complementary cognition, skill, capability, knowledge, and experience.

The other important step is to keep update about the Board’s governance charter/docs: One of the key elements that arise as a result of this overall process is to ensure that the Board’s current governance charter/document is updated in order to capture the underpinning drivers which have been identified, and the board will need to address to ensure business success. Too often this important document is forgotten and, as a result, doesn't drive board behavior to reflect the high-level inputs, directional focus and knowledge application identified as being required in the original strategic plan assessment and thus board composition.

There are numerous occasions with managing board restructuring exercises and each situation is different with varied and multiple drivers, and each with its own unique problems that require addressing. There is no “cookie cutter” model in a textbook that can be simply laid out as a process to be followed. However, there are certain factors and principles that underpin the process. There is a lot that can and should be expanded upon regarding board selection and strategy. In a world of well-defined problems, directors are required to exercise influence over volatility, manage uncertainty, simplify complexity and resolve ambiguity in a 21st-century digital environment.


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