Board Seat Skills Buckets: What Are Your Strong Suits?
In our last article in this space we talked about board service and I offered an assessment that I hope will be helpful to you as you do your due diligence and decide whether or not board service is for you.
Today, we’ll cover researching what corporate boards are looking for and determining how where you might be the best fit. I’ve identified two of what I call distinctive “skills buckets.” One of these buckets will likely be a better fit for you over the other.
“Always in Demand” Board Skills: These are the big- picture executive leadership skills that are universally in demand by most boards when they are seeking new directors.
“Subject Matter” Board Skills: These are the skills from subject matter experts that boards pursue when such skills are mission critical to the company.
Let’s take a look at each of these skills buckets in more detail.
Always In Demand Board Skills
In a nutshell, corporate boards routinely seek very senior executives who have big-picture experience, possess keen operational and financial skills, and know firsthand how business works and the functions and processes that make it work.
“Always in Demand” titles include:
· CEO of a public company
· President of a large division of a public company
· CFO of a public company
· Board of directors experience with a large private company
Note: Because there is a scarcity of CEO’s, division presidents, and CFO’s available for board service, corporate boards of directors are recruiting other C-suite titles. These titles are particularly attractive to boards when the candidate reports directly to the CEO or CFO. Examples include Chief Operations Officer, Chief Technology Officer, Chief Marketing Officer, and Chief Talent Officer.
“Always in Demand” corresponding experiences include:
· The ability to chair an audit committee
· The ability to sit on an audit committee
· The depth of knowledge to advise corporate boards on corporate governance (This is often the case for small-cap firms with limited legal resources internally.)
· The experience of setting executive compensation
· The ability of a CEO to help plan his/her own succession
· The mastery of profit and loss (P&L) financial statements (To be truly relevant, the person must thoroughly understand revenue or sales targets, not just a cost center P&L. The candidate’s revenue oversight is ideally three to five times the revenue of the company a candidate is hoping to serve as a board member.)
Subject Matter Board Skills
If you are a professional with a deep subject matter specialty, your prospects for a corporate directorship may be rising rapidly! More than ever, today’s boards are filling seats with highly specific “mission critical” skill sets. This is particularly true for small-cap firms where corporate resources are often more limited. Subject matter experts being seated at today’s corporate board tables include those with command of:
· Digital technology Cyber fraud
· Social media
· International market entry Employee engagement and retention Corporate governance
· Customer loyalty and retention
· Scientific knowledge for science-based companies Political navigation for heavily regulated companies
Want some really good news? The above list is just the tip of the iceberg. Given the rapid change in today’s business world, new subject matter skills are constantly emerging.
Four Decisions To Set Your Board Seat Strategy
Making the following four decisions is crucial to setting your search strategy. As you weigh each decision, ask for what an adviser in a random article I read several years ago called ‘AIR’: Advice, Insight, and Recommendations.
Ask your friends and colleagues for AIR. Your awareness of your skills will likely be keener because of their help and input.
Decision 1: Choose the skills bucket that suits you best.
Pick one: Always in Demand or Subject Matter. State your reasons why you chose one over the other.
If you believe you have equally strong credentials in both buckets, by all means list them! The duality can give you a real advantage.
Decision 2: Declare the skills that make you most competitive.
Within your chosen bucket, what particular skill set(s) do you consider most board worthy? Declare them! Be as specific as you can as you note what you have to offer to the board. This will help clarify your own mind and help if you involve a recruiter later on in finding the right board seat.
Decision 3: Pinpoint those industries you can best serve.
Within what industries do you believe corporate boards would find you most board worthy? To help you answer this question, consider these two different factors:
Career experience- Think about industries in which you have direct experience. That’s likely where your board candidacy will be most appealing. But be careful here. If you are about to retire, for example, your employment agreement may include a non-compete clause. That provision could restrict you from serving on the board of a firm in direct competition with your current employer.
Adjacent industries- What adjacent industries serve the companies in which you have worked or have business challenges that are compatible with your own experience? Often, your best board seat opportunities reside in these adjacent industries.
Decision 4: Decide what size company will most prize you.
Each public company has a “capitalization size”: that is, the market value of the company’s outstanding shares of stock. The four cap sizes are large-cap (customarily greater than $10B); mid-cap ($2B to $10B); small-cap ($300M to $2B); and micro-cap (less than $300M).
Let’s dig a little deeper into what the boards of public companies in these four categories look for in director candidates.
Large-cap boards seek seasoned directors with years of large company governance experience, “very big picture” business know-how, political acumen . . . or some combination of those exposures. Exceptions, of course, are candidates with extremely high professional profiles and/or have exceptionally close relationships with people in high places.
In Claiming Your Place at the Boardroom Table: The Essential Handbook for Excellence in Governance and Effective Directorship (McGraw-Hill Education, 2014), authors Thomas Bakewell and James J. Darazsdi share the story of Mellody Hobson’s first board director appointment to an iconic large-cap company. Here’s how it happened.
“I helped Bill Bradley when he ran for president in 2000,” says Mellody. “I worked as hard on his campaign as I worked on my job every single day. Obviously, we were unsuccessful. But then one day, Bill calls and says, ‘I’m on the board of Starbucks, and I’m taking you with me.’ I never imagined that was possible. I’m like pipsqueak in Chicago.”
As the authors point out, Hobson was deeply modest in her self-assessment. A Princeton graduate, she began as an intern with and rose to be president of Ariel, a firm managing $3 billion in assets. She made a name for herself within the Bradley campaign and her outstanding work planted a seed in Bill Bradley’s mind.
While Mellody’s story is encouraging and interesting, it’s an exception to the rule. Most in-the-know board recruiters and sitting board directors would advise you to explore directorships on boards that are mid-cap and/or small-cap.
Someone who is looking to be a board member for the first time would do well to look at mid-cap companies. With the right skill sets, a first-time director would be a key candidate for a mid-cap company board seat.
The sheer number of small-cap and micro-cap companies weighs in the favor of anyone seeking a seat at the corporate board table. A 2014 Barrington Research study found nearly 50% of exchange-listed companies have market capitalizations of less than $300 million. Almost 35% are smaller than $100 million in market capitalization.
All of those statistics mean two things, one slightly disadvantageous and the other definitely advantageous:
Given the thin capitalizations and pervasive risks that can face many small-cap and micro-cap public companies, their boards are often more “hands-on,” providing constant oversight. As a result, directors can be called upon on very short notice.
Because these small-cap and micro-cap corporations have limited resources, however, their boards are increasingly seeking directors with specific subject matter expertise.
Bottom line: Board doors are opening for many aspirants who would never have been considered before. Stay encouraged.