Trends in transition

Organisations are looking to recruit from the executive ranks to bring digital skills to their boards, writes Dr Ann-Maree Moodie FAICD.

At a private lunch organised for non-executive public company directors, an attendee offered this observation: the first step in the due diligence process for considering a board seat invitation should be to check whether the chair is on LinkedIn. As business transformation continues apace, today’s non-executive director needs to be comfortable engaging with the digital environment to understand the impact of digitisation on the companies they govern. This luncheon guest believed a profile on the most benign of social media platforms was an indication of whether the chair was prepared to engage with the digital landscape and, by extension, whether other directors on the board were similarly comfortable.

It’s highly unlikely such a comment would have been made even a decade ago, when the art of governing companies was more predictable.

But the exponential speed of change brought about by digitisation means that business and governing models also need to change: to be adaptable and constantly evolving.

Boards want to understand deeply how digitalisation can offer an opportunity or present a threat to the business and whether it — and the industry — is prepared. Directors are asking: Who are the competitors we didn’t see coming or who might be on the horizon? How do we adapt our business to ensure we’re connecting with our consumers? Do we need to change our own well established systems and processes?

Traditional board-recruitment strategies aren’t addressing the demands of digital transformation

Exacerbating the challenges is the realisation that traditional board-recruitment strategies aren’t addressing the demands of digital transformation quickly enough. Boards believe they can’t wait for sought-after technical expertise because business operations now demand real-time expertise.

The recommendation for listed companies to publish a skills matrix in the annual report has highlighted the urgency to fill perceived gaps in the board’s collective expertise. But with some skill sets — such as “digital” — relatively new to business practices, chairs are learning that it’s rare to find them in an experienced director.

This has led to a trend to seek senior executives with the right digital skill set, but not necessarily the commercial experience of being on a board. More likely, they have engaged with public boards as members of the senior executive or in an advisory capacity. This new practice has given rise to a new term in boardroom parlance. “Director in transition” describes a director, recently retired from an executive career to join a prominent listed board as a first step to building a portfolio of directorships. Unlike former listed company CEOs, who have extensive experience interacting with boards in their dual role as a managing director, a director in transition is usually someone recruited from a senior professional or commercial role, but not necessarily with the seniority of a CEO or managing partner.

This is a distinct departure from traditional board recruitment practices, where candidates needed to be “blooded” by a decade’s service on NFP and government boards before being considered for a well-paid public board seat.

Today’s directors in transition haven’t followed this path. Instead, their first appointment is to an ASX100 board, because chairs are more willing to appoint inexperienced directors if a specific skill need is met. This new trend has broadened the field of board candidates and made competition for limited board seats even tighter.

The desirability of directors in transition lies in their technical expertise. Digital skills encompassing big data, cybersecurity, innovation, entrepreneurship, artificial and augmented intelligence are especially valued. In this era of disruption, these directors have a natural affinity with business transformation, adaptability, agility and change management, which is also attractive. Combine this with the seasoned board experience of their colleagues and the board creates a compositional mix of wisdom, experience and contemporary views.

Chairs are willing to forego board experience, believing directors in transition can learn on the job while being supported with mentoring.

As the board will be composed of experienced directors, chairs feel the director in transition can be afforded a longer period to settle in and learn about the operations of the business and the board’s group dynamics. On balance, chairs think being patient about this lack of board experience is more than rewarded by the expertise they bring.

Many directors in transition are a generation younger than their colleagues, and their career path hasn’t been linear. They understand the need for flexibility and adaptability in workplaces, they are comfortable seeking diversity of views, and they are accustomed to the characteristics of the modern workplace such as generational and cultural differences. They bring a fresh perspective, contemporary management experience and current networks. Meanwhile, their seasoned fellow directors are recognising they need to participate in the digital economy to learn how it works and how it impacts on business.

A basic LinkedIn profile doesn’t mean a director is digital-savvy, but it’s a start. An increasing number of directors also use Twitter to engage with a broader audience and understand the online environment.

Management expectations are also driving directors to learn about and participate in the digital world. ANZ Bank CEO Shayne Elliott MAICD, recently named a “Facebook influencer”, says he joined the world’s most popular social media platform “to experience it”. He told the Australian Financial Review: “If you’re a senior executive at ANZ and have an ambition to do well with the bank and you’re not interested in technology, I don’t see how that’s going to work”.

Social media scholar and author Danah Boyd says becoming literate in a networked age requires hard work, regardless of age. Gaining fluency with technology takes effort — as well as opportunity, networks and training — to become an active participant and contributor.

This advice is being lived by a growing number of directors who self-fund their learning by enrolling in coding courses and participating in study tours to other hotbeds of technology development. Their knowledge is shared with their fellow directors, especially those apprehensive about engaging in the digital landscape. These less-knowledgeable directors are being encouraged to read LinkedIn articles, follow influencers in the digital space and watch tutorials on Lynda. “Google is your friend,” said the luncheon director, “even if you’re only looking up what SEO means. You need the right language to participate in the conversation.”