Home /

Board succession planning: Why are boards afraid to talk about their future?

In general, boards are more familiar with succession planning for CEOs and key executives than for the board itself. They often acknowledge that they face particular challenges in finding new directors, but seem daunted by the work involved and often prefer to ‘cross that bridge when they come to it’. In today’s increasingly competitive environment, failing to plan for board succession could create significant risk for the organisation.

Some problems that boards encounter in finding appropriately skilled members stems from (often actual, but sometimes perceived) constraints placed upon them, for example:

  • By a constitution which requires all, or a majority of, board members to be drawn from the same membership base, religious or similar faith (for religious organisations) or parents or teaching staff for independent schools;
  • Charitable organisations fearing they will become ‘too corporate’ or lose sight of the mission and purpose of the organisation; 
  • Existing board members who believe the only way to understand an organisation (and the best interests of its members), is to have experience as a member or client of the organisation; 
  • Only considering individuals who are based locally, and not recognising technology permits boards to include members from different cities, states or countries  
  • Individuals who aren’t committed to fulfilling the expectations of the role, but join due to pressure because it’s ‘their turn’. 

While some organisations have the ability to amend their constitution to allow the board to draw from the broadest possible pool of candidates, not all organisations have this flexibility.  It is vital that these boards are focused on their succession planning processes, as finding the right director at the right time can be a considerable problem. This is despite a large pool of appropriately skilled candidates who aspire to be directors, but are overlooked because of boards’ limited view on director succession.

What are the steps to good succession planning?

To be effective, boards should periodically consider the composition of their membership and if any change in size or membership is necessary. By planning and evaluating the next two to three director vacancies, boards can avoid having to meet their specific requirements at short notice.

Good succession planning should consider:

  • The present composition of the board, each member’s skills (both depth and breadth), and their individual strengths and weaknesses;
  • The qualities and skills the organisation needs on its board to deliver the strategic plan, including varied experience of industries and professional disciplines as well as personal qualities;
  • The changing needs of the company, and a recognition by the board that the organisation may have reached a stage of maturity where more skilled directors are required to oversee what is no longer a small business; and 
  • The expected pattern of retirements.

Good succession planning also requires regular performance assessments of individual directors.  Boards need to set an expectation for all directors that their re-appointment is not formality.  To be re-appointed, or supported for re-election, directors need to both possess the skills the organisation needs, and perform their role to a high level. In the interests of the organisation, weak or uncooperative performers should not be tolerated.

Who should co-ordinate it?

The responsibility for succession planning sometimes falls to a specific committee—often called the nomination or governance committee. This committee will be responsible for:

•    Developing a list of eligible candidates;
•    Interviewing potential candidates;
•    Recommending candidates to the full board; and
•    Ensuring each new director receives comprehensive induction and ongoing director development.

However, boards may not know where the emerging talent is or what the future availability of certain potential board members may be. In this case, it may be useful to use an executive or non-executive director recruitment agency to assist either the board or a committee charged with finding new directors.

Chair succession

Selecting the right chair is arguably as important as selecting the right CEO. The chair has a huge impact on whether the board operates effectively, so selecting the right chair is vital.  Accordingly, chair succession should be included in the overall board development plan. Effective chair succession planning involves:

  • Clearly defined roles for the chair and directors;
  • An effective performance evaluation process that enables:
    • Identification of directors who are potential successors to the chair; and
    • Recognition of the gaps between the directors’ current skill-sets and the competencies required to credibly step up to the chair position; 
  • Creation of a development plan for directors to prepare an appropriate succession structure within the board; or
  • Acknowledging that the current cohort of directors do not possess the necessary skills, leadership ability or time to perform the role and taking steps to identify suitable candidates for the role

Developing the board

Good chairs recognise the need to develop themselves and their fellow directors, individually and collectively, in order to forge an effective board:

  • It is the chair’s responsibility to guide new board members through the depths of their learning curve.
  • It is the chair’s responsibility to consider appropriate avenues for their own development, including receiving feedback from the board, calling upon external facilitation and advice, or joining professional organisations.
  • It is also the chair’s responsibility to grow the talent pool of future board directors.

Next steps 

If you need assistance with board succession, skills assessment or board performance evaluation, please contact us.


 

Authors
Melissa Grundy
Senior Advisor
Melissa is a Senior Advisor with Effective Governance, a governance consultant, accountant, former company secretary and market supervisor. Melissa’s focus is on corporate and regulatory governance stemming from her strong background in the...
Jennifer Tunny
Senior Research Advisor
Since joining the firm in 2001, Jennifer has assisted in the preparation of books and academic and practitioner articles and has played a key role in research and in the development and preparation of teaching materials used in AICD courses. She has...

What's new