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Rethinking talent in the boardroom

Organisations are facing major challenges. Many boardrooms have not yet caught up with the avalanche of recent and current profound changes, and both boards and members of nomination committees need to think carefully about talent and the C-Suit. It is easy to talk at a high level about moving from a shareholder economy to a stakeholder economy but what does this really mean for the selection and development of the C-Suite?

In this podcast, Dr Sabine Dembkowski, Founder and Managing Partner of Better Boards, discusses the implications of major changes on the selection and development of top talent with Professor Joe Fuller. Joe is a Professor at Harvard Business School and co-founder of the Monitor Group, now known as Monitor Deloitte.

Some of the key takeaways of the conversation include:

“We’ve moved away from just looking for executives with deep industry experience”

Joe outlines how his recent research highlights that it is no longer safe to assume that leaders with traditional managerial pedigrees will succeed in the C-Suite. While executives with deep industry experience and high-order process management skills are always good candidates, new criteria around social skills have been added to the desired mix. The nature of the skills sought in C-suite candidates (and especially CEOs) has changed. In particular, supervisory boards, boards of directors and incumbent executives are all seeking a far higher level of social skills from candidates. Social skills are more than being a good communicator. Leaders with social skills can interact and communicate effectively with different people and constituencies. Joe describes this as a capacity for ‘theory of the mind,’ being able to put themselves in the other person’s shoes.

“Boards of directors tend to hire and evaluate in the way they learned over the course of their careers”

Joe believes this issue represents a real challenge for boards. Historical criteria looked at the track record, career progress, responsibilities, and business units or companies. However, those measures were flawed. Traditional ways of evaluating people are subject to error – and now evaluating the new skills required is both different and difficult. Because evaluating soft skills has previously been rare, companies and boards have never refined their ability to do this. Only fairly recently have executive search firms and companies developed tools, such as simulation exercises, to allow more data gathering and hence a better impression of individuals’ social skills.

Joe explains that many companies are still locked into very traditional approaches to evaluating candidates. Joe observed that decision-makers are hiring and evaluating in the way they learned throughout their careers. The need for change opens new challenges for boards, and this shift is expected of modern-day C-suite executives – and particularly CEOs.

“To assist management in hiring a new senior executive… broaden the aperture on what they evaluate”

Joe explains that, in his opinion, the first thing a board or committee member hiring a new senior executive needs to do is broaden the aperture of evaluation and widen the kind of experiences they want to see represented in a track record.

In Joe’s opinion, boards should look for executives with experience dealing with diverse constituencies. Not necessarily racially or gender diverse constituencies, but executives whose careers have exposed them to regulators, trade unions, not-for-profit organisations, social entrepreneurs or customer advocacy groups. Executives with multiple successes dealing with different constituencies and also multiple communications media will probably have good social skills.

“The stakes have never been higher, and the punishment never greater for getting it wrong”

Joe points out that senior executives must refine their management and/or communication styles for today’s social media. Essentially, anything said at any point during their working day may end up on a platform with global reach and almost no barriers to being observed. The stakes have never been higher. The vast majority of people with rich experience have not arisen from that social media environment, nor did they admire and learn from supervisors who could help them master that. Joe explains, this interaction of the growth of constituencies that are relevant for large businesses, compounded by the proliferation of communication channels by which controlled and uncontrolled communications can instantly reach shareholders, politicians, social advocates, employees and customers, really calls for a different skill set that may not traditionally have been evaluated.

“We have to set aside some of our rather, frankly, lazy approaches to evaluating people”

Joe believes that boards need to make clear to executive search firms that they seek people with experience managing different constituencies and handling volatile problems successfully, not proof of someone’s performance in more traditional measures. He reiterates that most boards fall into the very traditional pattern of one on one meetings in similar environments. Yet all the data suggests that if you take people from a similar background, and they all see the same candidate in a similar setting, they come to similar conclusions.

Joe advocates having some interviews or meetings in groups, changing the setting, and assigning roles to different directors to ‘dig deep’ on specific characteristics. He also suggests asking the exact same question from different people at different times with slightly different wording to see whether the candidate gives the same answer. He suggests simulation exercises, possibly as simple as having a group of directors confronting the candidate with a challenge the company is currently facing. The scope of discussions must be widened, and the usual approaches to evaluating people be infused with more structured, specifically designed and purposeful evaluative events.

“This is a new era that requires new solutions, and old dogs with old tricks is not going to be a sufficient response”

Joe also speaks about internal candidates and highlights how succession planning can be tweaked to grow candidates with the skills required. Career planning and career paths for high potential young executives are essential. He points out that in global companies there have often been programmes for candidates for the executive committee to do a couple of tours in a foreign market, or be rotated between several key functions. Or they may be sent to Business School for example, for executive education.

Joe believes that traditionally, helping a high potential young manager grow has involved two main routes – coaching and exposure. High potential people may be very bright, aggressively minded drivers, which can mean they are hard on their subordinates, so they are typically given coaching to be an effective supervisor. Alternatively, someone who lacks exposure may be sent to Harvard or INSEAD for executive business training, for example, or rotated into another job. Joe believes this is simply not enough anymore, and a third route needs to be added – purposefully cultivating and exposing people to situations and training opportunities where they can hone their social skills.

“Executives don’t benefit from boards trying to run the company through seven meetings a year”

Joe explains that research data indicates that boards basically only concentrate on two things related to human assets. The first is executive succession planning, and the second is budget accuracy. But boards need to think about these questions through several lenses. What are the most critical jobs for future competitiveness? What percentage of offers are being accepted? What is the turnover rate in those jobs? Are people leaving the company voluntarily? Is it growing or shrinking? What are the key skills competitors are seeking? All this data is already available, so the board should be playing an appropriate role in challenging management on this front – not trying to run the company but asking hard business questions about how the company is managing itself to build the workforce it will need in the future.

Joe advocates boards challenging management as to which jobs are critical to competitive success, even at much lower levels in the hierarchy. If a company hired and retained a key job such as elite performance e-commerce marketers, and they hire three times that of competitors, this will quickly show results. Hiring the best young candidates at a lower level will show marketplace results.

Joe believes that two variables distinguish the future of work. The first is higher academic attainment, and the second is more refined social skills.

Looking at those two variables simultaneously, you come up with an answer which has been often overlooked – women. He explains that women comprise most of all college enrollees, graduates, and post-graduate programmes. Also, women score dramatically well on social skills relative to men. Important progress in gender diversity in large companies has been made. However, Joe does not believe that it has reached career paths and job descriptions that more women can take advantage of, whilst balancing personal and professional considerations. Job descriptions are still rooted in a 1960s paradigm of traditional households where one adult was responsible for work inside the home and one adult was responsible work outside the home, and those days are over. He believes the whole paradigm has to be re-thought.

 

The three top takeaways from our conversation are:

  • The whole field of human assets is undergoing a radical transformation and the old rules will not suffice.
  • The paradigms used for advancing executives and candidates for advancement and the types of experiences and competencies they must demonstrate to move forward need to be changed.
  • Companies that are better at cultivating social skills will prosper relative to those that are not.

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