Walters - Know when to go

Stepping down from a board position requires planning, precision and a great deal of self-awareness, writes Kath Walters.

Last year, Henriette Rothschild stepped down from her role as managing director (Pacific) at management consultancy firm, Hay Group. As she did, Rothschild posed a challenge to all leaders in a LinkedIn article called: Is knowing when to go the ultimate leadership challenge? Leaders need to step down “before they themselves are fully ready,” Rothschild wrote.

The same difficult decision applies to directors, and it can be even more complex. A director who steps down from the board of a public listed company attracts questions. Have you lost faith in the company? Is there conflict within the board?

The principles of board renewal are covered in Recommendation 1 of the ASX Corporate Governance Principles and Recommendations. But that is not the point of this column. My question is how you, as a director, will time the difficult personal, financial and ethical decision to resign from your role. The best directors are as clear about their reasons for leaving a board as they are about their reasons for joining one. So, is it time for you to go? Here are some criteria to help you make your decision.

Blocking diversity

To achieve cultural, age and gender diversity, the composition of many boards across all industries and sectors will have to change, and the old guard should consider reflecting on their role. If you are a long-term non-executive director of an organisation, perhaps you should consider whether stepping aside will be of benefit to your board and organisation. You will stand out if you do. The business case for diversity is well established. If your board has an active nominations committee with an up-to-date list of prospective board members who will add diversity to the board, perhaps the most active role you can take to achieve change is standing aside.

Cannot speak technology

Digital disruption is everywhere. Awareness of technology trends and the confidence to question the experts is as important as financial literacy today. It’s not enough to have one board member who understands technology. Every member of the board, from marketing to legal to finance, needs to be abreast of the impact of technology in their sector. If you are not technology literate now, or have not taken steps to update your knowledge, it is time for you to go.

Losing your influence

The role of the board is to challenge and hold your company’s executives to account on behalf of shareholders. It’s not easy to exert influence in the boardroom when everyone else is trying to do the same thing. Are you abreast of the board papers and asking valuable questions during executive presentations? Influence skills have changed, as Yamini Naidu writes in her book, PowerPlay. Are you up-to-date with the soft and hard powers of influence? As Rothschild says in her LinkedIn article: “If you wait until you are ready [to leave] you may already have fallen into your comfort zone and be at risk of complacency.”

Quality successors

The most talented people have options. They’ll wait their turn for promotion, but if you make them wait too long, they will go somewhere else. Your nominations committee keeps a list of hot prospects. As Rothschild points out: “You increase the chance of retaining successors who can then move into your role. If you wait until you are ready to leave, they may already have gone.” You bet they will.

Conflict with the chair

The chair of your board is essential to its effectiveness. They need your trust. Of course, it’s up to your chair to cultivate your support. But if they have not done so within six months or have lost your trust for any reason, it’s time to reconsider your position. You might get on with the chair well, but notice that they undermine the CEO. This is a red flag. If genuine attempts to rebuild relationships with the chair fail, it’s time to move on.

You are indispensable

Rothschild saves her most sage and challenging point to the end. I’ll let her have the final word. “If you truly believe you are the only person who can ‘finish the job’, are you really open to the capabilities of others or are you at risk of arrogance?”