Why rigour and independent assessment beat the ‘old mates act’
10 years ago, over 95% of the NED, SID and Chair roles we handled were straight forward replacements for those completing their term (and even some who had passed their term!). These days, our Board practice is seeing a very different picture:
These figures show that demands for NEDs on the contemporary Board have changed somewhat. However, whilst the reason for the role may have changed, many of the practices have not. As an AIM listed company, Norman Broadbent has itself been endeavouring to create a diverse Board (currently 50/50 Male/Female and diversifying!), and we have first-hand experience of the pitfalls on the road to diversity. However, it has become part of our DNA, and we will keep going until we get it right.
Norman Broadbent’s Board Practice has been working with Boards for over 40 years to create effective leadership teams, and we are proud to say that we have been at the forefront of the changing face of Boards during that time. We have long advocated for greater cognitive diversity on Boards, having seen the benefits it brings to both Boards and businesses. We are the only UK partner to the UN Women initiative, and one of only a handful of firms recognised by the Hampton-Alexander Review for Diversity. We were also an early member of the 30% club and have seen with pleasure the increased emphasis on diversity in boards – the advances made by the FTSE 350 in recent years, with the AIM market not far behind. As members of the Quoted Companies Alliance, we work alongside them to encourage these businesses to adopt the best practice, encouraging diversity but also transparency which is so critical for shareholders and investors.
Our proven search process aims to de-risk board appointments by identifying weak spots in boards’ existing skill-sets or experience, then seeking out candidates with the relevant skills and experience to fill those weak spots and create balanced, effective boards. Candidates are assessed against pre-agreed criteria to create an objective process, avoiding the perils of groupthink that ‘gut feeling’ assessments fall prey to.
This approach has been shown to be clearly effective, allowing Boards to move away from their traditional image as ‘old boys clubs’ that are largely ineffectual and allow their members to ‘help out’ their peers, by offering them a largely ceremonial appointment. Today’s NEDs are strategic partners, truly additive to the leadership of their organisation, bringing critical experience and skills which enable their businesses to thrive in an increasingly competitive marketplace.
All of this goes some way to explaining why we were shocked to receive – in a reputable Board Newsletter– an article titled “How Personal Connections CAN get you a Board Appointment”, claiming that 65% of appointments are made based on the age old ‘who you know, not what you know.’ Without access to the specific studies, it is impossible to debunk the statistics themselves, but it is telling that the original article makes reference to a forty year old publication (Getting a job; Mark Granovetter) who found that 56% of his sample (300 US based Executives) found their current employment through personal connections. While that may have been believable in the 1980s, we firmly believe we have evolved a little since then!
Firstly, these statistics simply do not chime with our everyday, working experience. We are always willing to involve ‘recommended’ candidates into our search processes, should an existing Board member have a colleague, friend or peer they feel would be suitable. That candidate is then put through the same rigorous process as the candidates we have identified. This ensures that the ‘known’ candidate, can be assessed objectively against others, avoiding bias in the appointment. However, the practice is becoming much less common, with only perhaps one or two searches a year including a candidate who has been recommended to the process.
Secondly, they fly in the face of contemporary dialogues around Boards and Leadership. Across the board at Norman Broadbent we are seeing the rise in significance of the Talent Agenda as our clients understand the value of their people and seek to objectify their assessment, development and recruitment processes. Our Leadership Consulting and Research & Insight teams are kept busy from dawn to dusk providing objective hard data for Leaders at all levels. This insistence on maintaining the narrative that ‘personal connections’ lead to appointments is damaging for the industry but also for the reputations of Boards, who have worked hard over the last decade to improve their standing in the face of stricter governance and regulation, following the financial crash of 2008.
Thirdly and finally, any Boards which do recruit in this subjective fashion need to take a long hard look at themselves. They are unlikely to be effective or offer much in the way of good governance. Effective Boards need members with a variety of skills and backgrounds to challenge one another, to approach problems from novel perspectives and to challenge each other’s assumptions. One-dimensional Boards, in contrast, tend to fall prey to ‘groupthink’ and are unlikely to take a novel approach to challenges and are simply less likely to survive in a today’s challenging marketplace.
With any luck, articles like this will not be seen again as the push for diversity continues. Yet it seems incredible that in this day and age we are still refuting this kind of nonsense. It is both damaging for the organisation, and not that complimentary for the individual appointed. Today, the emphasis is – and should be – on appointing the individual with the skills and experience needed to support the Board – and the organisation – into tomorrow. That might mean looking at experienced Board Professionals but also looking at how to engage with the first time NED, many of whom have skillsets which are simply not-available in portfolio NEDs, which is why Norman Broadbent will always include these candidates in a shortlist.
Oh.. and if there are any boards out there still recruiting from personal networks, you may want to reconsider your approach, before you get left behind or found wanting …
If you would like to discuss this article further, learn more about The Norman Broadbent Group, or discuss specific people, Board, or organisational challenges, please do not hesitate to contact Angela Hickmore, NED Norman Broadbent via firstname.lastname@example.org for an initial confidential discussion.