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Posted by Andrew & Nada on 17th December 2018
Audit skills to design the ideal board

In his book 'The Excellence Dividend,' author Tom Peters argues that effective boards should be diverse in terms of their directors' age, education and function. Similarly Anthony Fitzsimmons of Reputability LLP recommends that the ideal board includes those who are analytical and can demonstrate a deep understanding of markets and people.

It's difficult to disagree with these traits and our latest research into the potential of leading FTSE boards confirms that diversity is key to top team effectiveness. However, while the above lists suggest a 'one-size-fits-all' approach, our findings recommend that each board should be put together based on its own unique criteria.

Most significantly, we've uncovered that the difference between giving the appearance of possessing board diversity, as opposed to having actual substantive board policies and practise in place can be vast. We recommend a three-step process to achieve success:

1. Audit your board's skills

An audit will take into account the primary roles expected of individual board members. These may be engaging with stakeholders, providing resources, or guiding and helping formulate strategy for a future expansion of operations.

This audit can be initiated or conducted by the Chair using periodical evaluation. This will identify board strengths and weaknesses, whether they involve dynamics, deliberations or are crafted by design. The results will highlight not only any potential skills deficits, but also other stumbling blocks to effectiveness, such as conflicts of ego, groupism or groupthink, and grievances harboured by directors who feel they are not being heard.

2. Allocate director roles to match needs

Once this is achieved the Chair should ensure that board members' diverse skills match organisational requirements. Our research suggests that directors with specific experiences are most effective in meeting the different role-requirement of boards. In addition, the need to communicate positive signals to current and future employees, government agencies and customers can be met by appointing a gender-balanced board.

3. Take an approach that ensures diversity

Having conducted a sound skills audit acknowledging the diverse characteristics required across boards, the Chair can facilitate an objective and professionally-run board appointment process.

This should be free from the undue influence of any single individual, such as the CEO, whose overwhelming influence can often be difficult to resist. A professional board search agency will explore widely before recommending eligible candidates, and will also avoid any conflicts of interest.

This is where the diversity of candidates comes to the fore. For example, boards who need to guide the executive on strategy-formulation or expansion into new territories can benefit from a directors' experience of working and living in different countries. If there is a struggle to instil discipline and a need to hone people management skills then appointing directors with a background in the armed forces can reap dividends.

Our study further illustrates how ensuring the inclusion of directors from diverse national and professional backgrounds can send a positive message to investors and reassure them that merit is respected and their investments are in capable hands.

The value of different perspectives

The ideal board as conceived by our research may look and sound similar to the versions proposed by Tom Peter and Anthony Fitzsimmons. Both approaches call for a composition of between 30-40% women. Both welcome directors from backgrounds in areas as diverse as IT, venture capital and the creative industries. Both call for boards with significant differences in ethnicity, age, education and social circumstances.

However, the regimented fit as proposed by Tom Peters has clear limitations, and the overdependence on analytical skills as recommended by Reputability LLP can only achieve so much.

Our review takes matters a step further and calls for board directors, essentially the top echelons of businesses, to exercise discretion on the basis and summation of their invaluable experience. A room full of diverse know-how means different perspectives have been brought together for a reason. This broad range of views and opinions helps eliminate groupthink and delivers a balanced risk of approach and appetite. In other words diversity demands that boards perform their role more effectively.

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