With the topic of board composition and thus recruitment always on the table for boards, I thought the following Directors&Boards article quite pertinent. I recognize that this article is specifically directed to for-profits but I would offer that the proposed compositions should indeed be considered for nonprofits. I particularly like the consideration over hard vs. soft skills recognizing that many board member's knowledge, while rarely tapped, can bring a wealth of insight about what's going on out in the world beyond the nonprofit. I think it particularly true that nonprofit execs grossly undervalue the outside experience of knowledgeable board members and what their knowledge can contribute to the nonprofit. This article reinforces this consideration.
Diversity, innovation and soft skills should also be priorities for boards of companies looking to keep pace with competition.
As pandemic recovery continues, recession fears loom, climate change wreaks havoc and a new regulatory environment emerges, boards are being tasked with more work and face more uncertainty than ever.
While boards in previous decades generally preferred to recruit CEOs and CFOs, modern boards have been shifting their recruiting efforts to target skills that align better with a dynamic environment. Boards are now looking for a mix of both technical and soft skills so new board members can contribute broadly across an organization’s strategy and deeply in a specific functional role. Sought-after additions to board skill set matrices include human capital, ESG, DEI, tech, dynamic thinking, soft skills and innovation.
Tracy Harris, board member of Bally’s Corporation, CareFirst BlueCross BlueShield, 1847 Holdings and the Council of Institutional Investors, thinks broadly about how her boards reflect their communities. “We are talking about DEI, ESG and making sure that our customers, our employees and our board resemble the communities we serve.” Her boards are also focused on how to ensure success and growth, using a skill set matrix to answer questions such as “What do we need, what should we be thinking about and what are we missing?”
Human Capital
Talent issues have been front and center for boards for years. Issues like the fake accounts at Wells Fargo and Bank of America, transitioning people to remote work during the pandemic, quiet quitting, the Great Resignation, record low unemployment, and technology and AI are changing the way business is done.
A board’s role is to ensure effective strategy and growth. To that end, boards are increasingly recognizing how important deep human capital skills are at the board level. Paul Williams, who currently sits on the boards of Public Storage and Air Transport Services Group Inc. and has held seats on seven public boards over two decades, agrees. According to Williams, “You’re going to need to have a very purposeful focus on human capital.” Williams has seen a greater focus on succession planning and human capital in the last decade than in his previous decade of service, and he suggests this trend will only accelerate. One of his most recent boards focused their recruiting on a CHRO, given the urgency of this skill.
Williams has seen many board members who understand sophisticated financial or technical processes, “but when it comes to people, who are inherently complex and unpredictable, there may be a little bit of discomfort.” He underscores that it is important to “ensure there’s a critical mass of people on the board who are very interested in the psychological elements and interpersonal dynamics.” He suggests at least one third of board members be comfortable talking about human capital issues.
“Some people have very high emotional intelligence, even though they’ve never specifically worked in the human capital arena. They just kind of get it.”
Britt Ide, who sits on several boards across the energy, automotive and technology sectors, including Nxu Inc. and NorthWestern Energy, agrees with Williams. She thinks innovation and workforce development, talent management and talent retention are critical strategic skills. When recruiting board members, she focuses on strategic workforce perspectives.
“We’re all about earnings per share, but so much of that is driven by your people. And that’s only going to get more important with workforce shortages and changes in workforce demands.”
Environment and Governance
The SEC has proposed new rules for public companies that focus heavily on climate-related disclosures and reporting. While some see it as onerous, Ide proactively considers climate risks and climate opportunities when recruiting new board members. She has seen companies get bogged down by viewing climate as a compliance task. For her, it’s more important for boards to ask, “What is our strategy around climate? How is climate going to affect us? Whether it’s the weather at our plants, how our locations are going to be affected or how’s it going to affect our customers, I think that strategic long-term vision has always been important for boards, but it’s even more important for boards now.”
Robert Shapiro, an economist who specializes in working with government, sits on the board of Overstock.com Inc. Shapiro views his knowledge of economics and experience in government as the most pertinent skills he brings to his board. Depending on the size of the company, Shapiro feels that because regulatory issues are constant, public boards should have at least one member with a background in the skills needed to address the specific risks a given company may encounter.