AESC’s Leaders on Leaders podcast explores top trends impacting global leadership. Karen Greenbaum, AESC President and CEO, speaks with leaders from the world’s top executive search and leadership advisory firms.
In our latest episode, Karen speaks with Kate Bullis and Rob Iommazzo, co-founders of SEBA International, to discuss board transformation and the unique challenges boards face as they diversify.
Below is a brief excerpt.
KAREN: The subject today is board transformation. Let’s just begin with a broad question and Rob, I’m going to give this one to you. How do you see boards transforming?
ROB: Well, I should say from my perspective or the client base that I serve for our firm [which] is predominantly more in the financial services space, what we have seen is a need for certain specific skill sets evolving such as risk management. As you know, boards have transformed and have been transforming the last several years both by gender and race. Now we’re seeing a bit more of that diversification and transformation in and around the skill set piece. And that’s really where we’re looking to help some of our clients given the focus that we have in the market. And, if you’re looking at larger financial institutions, some of the regulation that has passed over the years through Dodd-Frank in the Enhanced Prudential Standards Act require board risk committees and people who serve on it to have necessary experience in risk management and/or audit experience. So, I think a lot of that is beginning to trickle down beyond just the large financial institutions to smaller financial institutions as well.
KATE: I would just add that it’s been fascinating for us to see this shift. The diversification of boards has been a subject for quite some time now but now the diversification is happening in this realm of specific skill sets. If we know that traditionally CEOs and CFOs are the typical makeup of a board, what we’re seeing today is a real shift in companies seeking out specific skills, [such as] digital marketing and risk management, and this is across financial institution certainly. We’re seeing it in technology companies. We’re seeing it in companies of every kind and so we really do predict that this is going to continue. As the executive leadership team is diverse and brings various skill sets to bear, so too will the board.
KAREN: Kate, what are the unique challenges that boards face in making this transition both in terms of identifying the right talent but also in terms of ensuring the board is ready for diverse views?
KATE: On the identification of the right talent side, clearly there’s a strong history of board build out that is recycling. […] That has to change and that is changing. We’re absolutely seeing more and more companies take on first time ever board members. And we suspect, because we’ve personally experienced it, that a lot of that is based on this need to diversify in skill set and also in companies’ willingness to look in new places for this talent. You can’t keep going to the same places [and] to the same well to get something different. I think companies are relying on not just going to different search partners in order to find these specific skill sets but also boards have to start thinking very creatively about how they deploy things like advisory boards. We’re seeing an interesting trend on advisory board creation where a board might have a more traditional makeup but they appoint an advisory board on a specific area to help a company in that area. They then tap into those advisory boards for assistance in developing new board members. Firms like ours can be helpful but there are other ways as well.
As far as the question about ensuring that the board is ready for diverse views, I would say the ones that we see that are really ready tend to have the beginnings of a transformation going on internally. [And] those companies just demand it. The business just demands it. It becomes increasingly impossible for the board to ignore that these skill sets really are necessary to help usher in the changes, expertise and support needed by the executives inside these companies who are responsible for marketing, digital, and risk management.
KAREN: Thank you Kate. Rob, building on what Kate just said, are you finding that boards are more open to first time board members as they seek to diversify?
ROB: Yes, simply because the diversification and skill set. Again, it’s been our experience that when one serves on a board, it certainly opens the door to continue to serve on other boards and that continues to be the case. It certainly puts a board out of their comfort zone, so to speak, to look at first time board members. That said, as they look to transform their organization, again, it points back to the need to diversify the skill set and have specific skills.
KATE: I’d love to add to that there was an interesting study done by the IRRC in early January. It said that of the SMP 1500, it showed that nearly one in every ten directors in 2016 had never previously served on a board. I really believe this representation is a huge shift from the long-standing practice of directors having substantial public board experience before.