Game-Changing Strategies for Corporate Boards

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Corporations spend tremendous resources finding the right board members. They hire professional recruitment firms tasked with scouring the earth for candidates, while board members spend their time and energies determining the “fit” of potential contenders.

So much goes into this recruitment process that it is often mistaken for an actual onboarding process (but more on that later). Much is at stake in terms of legal and fiduciary responsibilities — yet, once the right candidate is selected, relatively little attention is paid to creating the conditions within the board to extract the distinctive knowledge of its new members.

Understanding how boards operate is a difficult issue to tackle: The factors that influence how internal discussions and decision-making unfold remain mostly hidden. But from my consulting engagements, research collaborations, and executive teaching, I have identified three areas where corporate boards could institute game-changing strategies. Each is based on a different but complementary approach to engaging and leveraging the unique perspectives and expertise of each board member.

Embrace Gender Quotas

First, let’s address the elephant in the room: gender quotas. The push from business and government leaders to establish and enforce formal quotas for women members of corporate boards now extends far beyond Scandinavian regions to Latin American countries like Brazil and, most recently, American states such as California.

There is a preponderance of evidence that suggests that when corporate boards have fewer than three women members, women directors are tokenized; that is, they are more likely to encounter significant bias and less likely to exert influence. At or above three, women directors are generally seen and treated as valued board contributors, where the differences they bring to their boards positively affect the fundamental nature and effectiveness of the board’s work.

Thus, corporate executives might consider reframing the issue of gender quotas: Rather than viewing the number of women on a corporate board as a problem to solve, it can be an opportunity to seek out board members with the ability to identify wide-ranging arguments and encourage novel solutions. After all, if a goal of board discussions is to unearth potential problems the company might face, open and generative dialogue is more likely to occur when there are significant differences in experience and expertise to draw from in the first place. Having women on the board might offer an opportunity for more comprehensive debate and analysis. Without enough women on the board, such discussions are unlikely to materialize in productive ways.

The strategic recommendation: Embrace gender quotas as a starting point to discovering the substantive differences in perspectives and expertise that will increase the effectiveness of the board. Gender quotas are an imperfect but powerful tool to begin solving an institutionalized problem.

Broaden the Role of Board Chair

Second, it’s essential not to underestimate the role of the board chair. The chair can directly influence the amount and quality of information shared by members. This is especially important given that a core responsibility of board governance is to explore alternative routes a company can or should take. Compared with the top management team, which operates with a narrower focus on the business day to day, the board operates in a fundamentally different state of long-term value creation.

Board chairs who purposefully structure board processes to promote constructive debate can develop the board’s shared ability to navigate uncertainty — a critical task toward making informed recommendations. In so doing, a board chair can improve the nature of the group’s work, from the politicking that occurs through private conversations outside the boardroom to the open dialogue that emerges inside, during real-time boardroom conversations. This is an opportunity for the chair to put his or her own opinions in the background and move to the foreground the process of collectively surfacing ideas and concerns.

The strategic recommendation: Elect a board chair who displays a concern with exposing variables that have yet to be considered — thereby expanding uncertainty to broaden the option set — rather than simply making decisions.

Remember That Recruitment Does Not Equal Onboarding

Third, new board members need to be initiated to their boards with more deliberation. One of the biggest mistakes corporate executives make in board member selection is the overreliance on the recruitment process as the way to bring a new member into the organization. This is understandable: Board candidates will often go through multiple interviews with each board member, and a smart candidate will also research the company on his or her own, reaching out to past board members, current and past employees, and others who might serve as important sources of information and counsel. By the time the member is on board, both sides are very familiar with each other.

But that’s not enough. Typically, once a board member is selected, little more is done by all parties to orient the new member. Few companies have formal onboarding processes that instruct new board members on the group’s routines, norms, and dynamics. Rather than explicitly outlining how and why the board functions a particular way, most boards leave new members to pick up this information implicitly, on their own, over time — and often in silence.

Although remaining quiet to carefully listen and observe might be the intuitive recommendation of a seasoned board member to a new director, it is important to understand the trade-offs. Before being assimilated into the existing way of thinking and doing things, new members can bring a fresh perspective to current processes and routines. They can offer outside benchmarks and exemplars, as well as raise red flags that would otherwise be overlooked. Without the shackles of history, new members can push the board to question their assumptions and reframe existing factors to delve substantively into important issues.

The strategic recommendation: Establish formal onboarding procedures in which current board members communicate and explain existing routines and norms — and new board members are enlisted to improve ongoing processes. Do not settle for silence from new board members. Instead, solicit their perspectives and be open to change.

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Our expert columnists offer opinion and analysis on important issues facing modern businesses and managers.
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Comments (2)
Raghuram Yaramakala
A good post. 
India is the first developing country to have enforced a quota for mandating listed companies to have at least one woman director on the board. The revised Companies Act approved in August 2013 made it mandatory for all listed companies and other large public limited firms to appoint at least one woman director to their boards. 

Onboarding of Directors is in place in large companies in India. For example, in NTPC, the power generating public sector behemoth, at the time of induction, new Directors undergo a familiarization programme, which highlights organisation structure, subsidiaries/ joint ventures, business model of the company, risk profile of the business etc.
johan mery
This is a good post. This post gives truly quality information. I’m definitely going to look into it. Really very useful tips are provided here. Thank you so much. Keep up the good work.