Board recruitment: what are companies looking for?
The pandemic has caused a shift in the landscape of board recruitment, and it now represents a significant opportunity for first-timers.
That’s according to David Schwarz, CEO of the Board Appointments Group, a global agency specialising in board recruitment and selection.
The Corporate Governance Institute recently sat down with David for a deeper dive into this and other trends, both in the UK – where his company has a significant presence – and in Australia, where he’s currently based.
What’s your general outlook on the board recruitment landscape in the UK?
For starters, it’s always active.
I started in this world 20 years ago, and I’ve seen no dip in the board recruitment space at all, whether that be the formal process, advertised roles, or informal appointments.
There seems to be no dramatic change in the level of board appointments being made.
We are advertising more board vacancies in the UK than we ever have, and that’s the very tip of the iceberg.
I went through the global financial crisis (GFC) in the UK as a recruiter, and immediately following that, the desire for the number of board appointments rose.
Do you find that there are any trends in the types of organisations recruiting?
It does ebb and flow a little bit. The tech world (startup world) is recruiting fewer directors, they are often seen as an overhead which can’t be afforded.
Startups are receiving less investment cash recently, so they suffer a little bit. The desire for those roles hasn’t decreased, it’s just fewer opportunities, but as a general rule, there hasn’t been any immediate change.
Are there any trends in the kinds of board members that companies seek?
I’ve read a study on this recently: in the past, finance, audit risk, and legal were the three most requested skill sets at the board level. They are still desirable, and boards should absolutely have them.
But the percentage of those people on boards is decreasing, and replacing them are HR, marketing, IT, change management, and general industrial senior leadership experience.
Whereas those kinds of roles were less common before, they are becoming increasingly desirable, post-COVID.
How much does the desire for IT skill sets have to do with cybersecurity?
It’s almost a flow and effect from everybody having to go online. There was a change element and getting IT people to help with that change, to understand what it is, to ask the right questions, and to call out answers that don’t make sense.
It does mean they all need to know the risks of being online all the time, so cybersecurity is part of that.
Boards are always looking for five things in a new candidate:
- Somebody who’s done the job before
- Somebody who’s got an executive skill set that’s valuable at the board level
- Someone who’s got networking relationships that they can leverage
- Somebody who’s a good cultural fit for the organisation and
- Somebody who is genuinely passionate about what the organisation does
While the skillsets around these five qualities change, the qualities themselves don’t. They have remained the same for the twenty years I’ve been in this industry.
What would you say are the biggest challenges to the recruitment process?
There are a few challenges:
If a company advertises a role and tries to run the recruitment process themselves, it will get overwhelmed with candidates.
It is a highly aspirational space, particularly during periods of turmoil like the one we’re currently in. People often see a board appointment as something they want to do or transition into. They will attract a lot of candidates, more than companies can deal with.
Secondly, companies will often go through their networks to find board candidates. This is good in some ways; if you’re reaching out to people recommended to you, then it’s likely that they will be a good cultural fit. People aren’t going to put their reputations on the line by recommending someone who isn’t.
That’s really comforting, but the flip side is it promotes groupthink. If you’re approaching the same sort of people, the same sort of cultural elements will prevail.
Ultimately, recruiters are expensive to use. For small organisations, they’re a bit of overhead. But these organisations often don’t have any option, because the alternative is they advertise and get overwhelmed.
What’s the balance between first-time board members and veteran board members?
During COVID, there was a strong trend of highly experienced portfolio directors stepping away from boards. For a few reasons:
- They really enjoyed the face-to-face, and they weren’t getting that
- With all the changes that COVID brought, more experienced directors just didn’t have the right skills anymore – I’m talking IT and cybersecurity risk. So, they felt less valuable, or that they could contribute less
- The tumultuous nature of COVID in general
They were replaced with directors with IT, marketing, cybersecurity, and change management skills. It’s certainly been a trend that I have noticed strongly and, ultimately, something that has opened opportunities for first-time directors to go on a board.
And has the “end” of the pandemic reversed that?
It’s like the post-global financial crisis period. People talk about it as an opportunity for change. People enjoy working from home now and don’t want to go back unless forced to.
Directors are feeling the same way. They’re out, and they’re doing other things.
Turning to ESG, how important do you think the topic is in recruitment?
For the large, listed companies: it is core to their board work and strategy. For everyone else, it’s not.
It’s a little bit akin to the IT world before COVID. Back then, companies were banging on about the necessity of IT directors on a board, but nobody could articulate why.
“We’ve already got a CTO. Why do we need somebody else?” they would say.
“And if we really need someone, why not just get a consultant?” There was a real disconnect between value and understanding the value at the board level.
It feels a little bit like that from an ESG perspective.
There is real value in what ESG expertise offers, but I’m not sure boards have caught on to that value yet.
So, using the IT analogy, do you think that the disconnect between value and understanding was ‘solved’ and do you think that will happen with ESG?
For IT, it was solved through COVID, as much as anything can be solved. COVID was a big disruptor in the marketplace, and people suddenly realised they didn’t have all the answers to the questions.
When people are giving us the answers, we don’t know if they’re correct or not.
With ESG, I don’t know what the tipping point will be.
And then lastly, about training. What role do you think training and a formal qualification has for people joining a board?
From a board appointment perspective, I see relatively few businesses state that they [new board members] must have governance training. Among the leading listed companies in Australia, only 40% of directors have any form of governance training.
So, do businesses think it’s 101 or a must-have? Some might.
But is there value in governance training? Absolutely. It will tell you things you don’t know and reconfirm things that you do. It’s another reason to put you onto a board, and it will make you a better director, absolutely.
When it comes to two people applying for one position with relatively equal credentials, having the training may win it in the end.
There is still a bit of work to do in this area. In Australia, more than in the UK, governance training feels like it’s much more of a must-have.