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Why Director Inductions Matter

Directors are expected to contribute to the governance of their organisation to the best of their ability. Starting a directorship with little or no induction into the business operations significantly increases the risk that new directors will stumble. This impacts the ability of new directors to make informed decisions and to participate effectively in meetings. Ultimately this has an impact on organisational performance, whether it’s ineffective board meetings or uniformed decisions increasing organisational risk. A purposeful induction will also provide a clear articulation of board behavioural expectations regarding director conduct and organisational culture.  

Effective Governance has worked with many boards conducting board review or supporting boards with governance challenges. Often the root cause of issues such as missed conflicts, misunderstandings about director and executive delegations and responsibilities, or breaches of the Code of Conduct; is a poor or absent induction process. 

Setting mindsets

A fundamental mistake is viewing director inductions as a one-off compliance check type activity consisting of viewing some past minutes and the board charter. To be effective, director induction programs should be tailored to the organisation and conducted over an extended period (varying according to business complexity). Ideally, an organisation will have adopted an Induction Policy to support both directors and management work through the induction process. A thorough induction will also underscore the importance of director duties and possibly even make those who view directorships as a ‘part-time’ or ‘CV builder’ undertaking, think twice about signing up. 

We’ve outlined below the key steps for an effective Induction Program below. 

Achieving an effective Induction Policy 

There are two key steps to consider when developing an Induction Policy.

  1. Induction Program

A purpose written policy directed at facilitating director inductions has the immediate benefit of focussing new directors, management and indeed the entire board on the value of inductions to the organisation. 

An Induction Program should include scheduling the following matters: 

Planned meetings 

Discussions at the director interview are insufficient to cover off the ‘get to know you’ with fellow directors and executives. Your policy should outline individual meetings with the chair and then fellow board members, preferably informally outside the board room. These meetings would act as an information exchange and an opportunity to display behavioural standards within the board. These should be followed up with meetings with key executives for the organisation such as the CEO, Managing Director or School Principal; the CFO or Business Manager; and the Company Secretary.  

Site visits

Time should be planned for the new directors to visits the office and operational sites. This might involve site visits to retail stores, schools or manufacturing sites. The visits will assist the new director when back in the board room to appreciate the environment within which decisions are being made. 

Governance courses

Many directors come to board roles with formal governance training, but equal numbers do not. Boards should provide support for introductory governance training with a focus on the particular industry the organisation operates within. Ongoing professional development throughout the director’s term can then transition them from the induction phase to the maintenance phase. 

Find a mentor director

In addition to scheduled meetings, informal catch ups and check ins with mentor directors provide invaluable touch points for new directors to gain insights into issues and context. Acting as a mentor should be considered a core responsibility of directors as they progress through their tenure. 

  1. Induction Process 

The induction program will establish the framework for the induction of new directors. It also helps establish the mindset that learning about the operations of the organisation is a continual process. As mentioned above, one of the best ways to do this is to involve existing directors in the induction process. In addition to the formal framework, a process for information flow is required. Ideally the Induction Policy will list the documents to be provided to new directors such board documents, past minutes, budgets, policies, processes and board reviews. Time should be allocated to provide these well ahead of the first board meeting and to coordinate with scheduled meetings with the boards and executives.

If your board would like assistance drafting a simple yet effective Induction Policy to enhance your effectiveness and performance, please contact Dr Rachel Baird.

Authors
Dr. Rachel Baird
Specialist Advisor
Rachel is a governance professional with 30 years of legal practice advising corporate clients on compliance and risk. She has served on multiple boards across sport, education, NFP and the environment, helping organisations move to positions of strength....

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