Landing a Board Seat: A Practical Guide

Many senior executives enjoy serving on corporate boards, and many successfully find a role. But it’s difficult to determine how to best apply your energy to ensure you find a board placement that fits your skills, schedule, and interests.

If you’re interested in serving on a board, the process can be intimidating. However, it is much more manageable to find a board role by breaking the process down into few key steps: finding the board type that fits your experience and needs, preparing the materials you need for your search, and marketing yourself.

Determine your best fit: Public versus private

The first step when considering board membership is to look at the type of board that matches your experience.

Public company boards, while certainly attractive, may not be the best target for newer candidates. As the Wall Street Journal recently reported, there are now only 3,671 public companies in the U.S.—down from 7,332 in 1996 following heavy merger-and-acquisition activity. Public companies have larger boards, with an average seven outside directors, yielding a target universe of 25,000 seats and an average annual turnover of perhaps 3,000 seats.

What does this mean? As a practical yardstick, there are currently more than 19,000 NACD members. Don’t count on 90 percent being uninterested in boards and leaving a seat to you!

By contrast, according to Private Equity Info, there are 16,800 private equity portfolio companies, almost all with a board of directors. These boards are typically smaller, with just two or three independent directors, yielding a universe of about 40,000 board seats—67 percent more than public companies. This raw math should be an eye-opener for many executives looking to land a seat at the board table.

When thinking about public versus private, consider the following example: When PepsiCo (my alma mater, where I gained the best training and experience) needs an outside director, they will likely engage an executive search company. The hunt may then funnel down to sitting CEOs and chairs of other Fortune 50s. By contrast, private equity boards are less concerned with finding a marquee name and simply go out and find two or three terrific people—only 22 percent of private equity portfolio companies’ outside directors are sitting CEOs, meaning many non-CEOs in those seats.

I’m certainly not suggesting you can’t make it onto a public company’s board. Rather, it’s a game of odds, and it’s important to make the best use of your time.

Gather your marketing materials

Getting your marketing materials ready is a must before embarking on any campaign for a board seat. This includes five core materials:

  • Board bio. This is brief, less than a page, and written “at 30,000 feet.” The bio should include a good head shot and “reek of power.”
  • Board resume. In contrast to your usual resume, this relies less on the acquisitions you made, the plant you eliminated, or the 1,000 workers you led. Rather, it carefully threads in your softer qualities—for example, high-potential employees you hired who went on the become captains of industry, people you were asked to mentor or chose to take under your wing, or your genuine interest in coaching.
  • Value proposition. This is your seven-second elevator speech on why a company should want you on its board, and not why you want to be on a board.
  • Potential email introduction letter. If you choose to do an outbound email campaign, keep it short—half a page, max. Readership is inversely proportional to email length.
  • The all-important LinkedIn profile: Your profile has to be “board sticky,” and your outside director ambitions need to be explicit. Listing NACD membership always helps as well.

The hard part: Market yourself

An outbound marketing campaign takes work, and there is no easy way out. Begin with making your board interest known to, say, 50 people you know well. While this might seem excessive, remember that each person might have only a 10 percent chance of hearing about a board need and also be in a position to nominate you.

Before you say you don’t know 50 such people, think about:

  • Everyone you know on a board
  • Every CEO you know
  • All law firms you have engaged (personally or your company)
  • Past and present audit firms and accountants
  • All recruiters, even those not known for board placements (ask them to put you in their firm’s director database)
  • All colleagues, including former subordinates, in high places
  • Industry colleagues
  • Peers in all of your peer groups

Next, network with as many private equity firms as you can. Every new deal means a board needs to be created, and that spells a need for two or three new independent directors. For example, Riverside Company bought 24 companies in 2011 — creating an immediate need for 48-plus outside directors.

Two key takeaways

If there are two messages here, they are that you need to carefully put together your messaging before entering the marketplace and that you should put some serious time into considering the private equity sector. After two tours of duty as a PepsiCo division president, I have found the private equity world to be extremely engaging, stimulating, challenging, and financially rewarding as a portfolio company CEO, an operating partner, and a board member.

Stakeholders’ Desire for Sustainability Presents Opportunities and Challenges for Boards

It is encouraging to live in a time where society is increasingly insisting that corporations generate and measure social impact alongside profit. Not only is this a positive development from a moral perspective, but it’s also good business. In the report, “From the Stockholder to the Stakeholder: How Sustainability Can Drive Financial Outperformance,” for example, Oxford University and Arabesque Asset Management establish that corporations that “incorporate sustainability considerations into decision-making processes . . . show better operational performance and are less risky.”

Mainstream financial and business leaders appear to, in large part, agree. In 2017, Larry Fink, chair of Blackrock, the world’s largest asset manager, sent a letter to CEOs stating that, “to prosper over time, every company must not only deliver financial performance, but also show how it makes a positive contribution to society.” Investors are following suit, with eighty-four percent (84%) applying or considering Environmental, Social and Governance (ESG) criteria.

As the sustainability movement grows, so too do the ambiguities under which boards of directors govern. Boards are bound by fiduciary duties, including the duty of loyalty, which requires that a board acts in good faith and in the best interest of the corporation. Historically, the “best of the corporation” was interpreted to mean maximizing profits solely for the shareholder. Many regulators, academics, politicians, and investors are now challenging this concept, contending that a corporation is best served when it incorporates “more nuanced and tempered approaches to creating shareholder value” and considers the interests of a broader set of stakeholders, such as employees, customers, and communities. Boards can lead the way by partnering with experienced, creative legal counsel to balance a multitude of considerations.

  • Legal Structure. Boards should consider the corporation’s legal structure so, when appropriate, all stakeholder interests are carefully weighed and explicitly memorialized.  Delaware and 34 other jurisdictions have, for example, adopted a new type of corporate form, the Public Benefit Corporation (PBC), a for-profit entity that helps corporations explicitly align shareholder profits and social impact. Other corporate forms, such as Limited Liability Companies (LLCs) or C-Corporations, can also support a mission-driven corporation’s objectives with adjustments to the charter, operating agreement or other governing documents.
  • Policies and Procedures. Boards should, when appropriate, consider various actions to integrate stakeholders into the corporate governance structure, including strategic retreats with management and relevant communities; board observer seats; and transparent board policies regarding diversity, term limits, skills, committees, and selection/evaluation.
  • Measuring Impact. Boards of mission-driven corporations should measure and report impact. Several helpful resources include the UN Global Compact, the United Nations backed Principals for Responsible Investment (UN PRI), the Global Reporting Initiative (GRI), the Carbon Disclosure Project (CDP) and the Sustainability Accounting Standards Board (SASB). In addition, companies like Arabesque Asset Management are now helping corporations—in Arabesque’s case, globally listed corporations—evaluate their sustainability performance using self-learning quantitative models and big data.
  • Planning Ahead. Perhaps most importantly, boards should plan for inflection points—like joint ventures, large investments, initial public offerings (IPOs) and mergers or acquisitions (M&A)—that are likely to create tension between shareholders and other stakeholders. In the IPO context, for example, the SASB is lobbying the Securities and Exchange Commission (SEC) to incorporate sustainability standards into SEC rules for publicly held companies. In the M&A context, PBCs can only merge or consolidate with another entity if either the surviving company’s certificate of incorporation identifies a similar public benefit or two-thirds of the PBC’s outstanding voting shares approve a new public benefit. Attention to these issues is critical, as buyers are integrating ESG considerations into their diligence process and ESG compatible deals are outperforming ESG incompatible deals by an average of twenty-one percent on a five-year cumulative return basis.

The sustainability movement is exciting, but complicated and still developing. For example, on the one hand, BNP Paribas, JPMorgan, and Citibank offered Danone significantly lower borrowing costs on a $2 billion credit facility to the extent that Danone’s business units could demonstrate they were generating positive social impact. On the other hand, the U.S. Department of Labor issued a bulletin that creates roadblocks for ERISA plan fiduciaries that want to consider ESG factors in their investment decisions. But with experienced counsel, boards can navigate this uncertainty and successfully guide corporations to long term profits and impact.

Career Partners International Announces North American Innovation Conference

With its continued growth in serving clients worldwide, Career Partners International (CPI) is pleased to announce the CPI North American Innovation Conference will be hosted in Boston, Massachusetts on October 10th through the 12th.  With over 200 offices in North America, CPI provides world class talent management solutions to thousands of organizations.  Having recently celebrated its 30th Anniversary, the CPI team comes together to define and embrace the strategic future of the industries in which CPI operates.

Focusing on a future-now perspective to enhance the client experience, the North American Innovation conference features several keynote speakers as well as design sessions to meet the fast-changing career transition and executive coaching service offerings.  Talent shortages and employee retention issues demand attention by every kind of organization; CPI’s team is committed to evolving its delivery of the high-touch, high-quality, outcome-based services that clients  expect.  CPI has executive coaches with decades of real world experience, outplacement services with industry best placement rates, career management training programs for all levels, and the ability to deliver these services globally.  The North American Innovation Conference brings the CPI team together to grow and perfect these resilient service offerings.

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In the Wake of #MeToo, How Can Boards Address Workplace Sexual Misconduct?

The statistics are startling. Eighty-one percent (yes, 81 percent) of women have experienced some form of sexual harassment or assault in their lifetime, according to survey results published earlier this year by nonprofit Stop Street Harassment. The survey also found that 43 percent of men reported having experienced sexual harassment or assault.

Another report from crisis consulting firm Temin and Company finds that over the past 18 months, 417 high-profile individuals—mostly business leaders and executives—have faced allegations of sexual harassment and/or other misconduct. (We reported on this in our recent NACD Weekend Reader e-newsletter, available to NACD members.) Some of those allegations relate to events that happened years ago, but the broader #MeToo movement has been credited with empowering victims to speak up about their experiences.

And while attention has obviously—and rightly—been on victims and alleged abusers, focus is increasingly being placed on the board’s role in ensuring that companies are conscious of the risk to employees, customers or clients, and other stakeholders. Companies large and small across industries are grappling with how to ensure that corporate culture is healthy and intolerant of sexual misconduct—even (or, rather, especially) when the accused is a senior corporate leader.

Traction From the #MeToo movement

The WomenCorporateDirectors’ Global Institute in May presented a panel discussion called “How the Board Can Address Sexual Harassment and Other Tough Issues—And the Special Role Women Directors Can Play” to discuss the board’s oversight role in the #MeToo era. Davia Temin, a panel participant and president and CEO of Temin and Company, attributed the traction of the #MeToo movement—particularly in corporate America—to greater receptiveness to and legitimization of accusations. This, she suggests, is due to the increased number of women in newsrooms (as editors and reporters) and boardrooms.

Some directors, though, might be concerned about whether allegations made against company employees are valid. They’re not alone. A Pew Research Center poll released earlier this year found that 31 percent of poll respondents say that women making false claims is a major problem related to workplace sexual harassment and assault. Many reports, however, suggest that only 2 to 10 percent of sexual assault accusations when investigated are found to be false.

There are two “eureka” moments when it comes to understanding the dynamics around sexual harassment in the workplace, according to Ceree Eberly, another panel participant who is a board member at Qualfon Corporation and chair of Gartner’s CHRO Global Leadership Board. First, many victims of harassment (including sexual and other forms of harassment) often felt socially excluded from others in their work environment—e.g., not fitting into the so-called boys’ club. Second, sexual harassment is a form of abuse of power. When allegations of sexual misconduct emerge, boards should be alert as to whether an employee used their power or rank as a means to manipulate others.

NACD recently published its Director FAQ: Risk Oversight—Sexual Misconduct, a brief that offers board-level guidance related to oversight on this issue. The brief describes:

  • The current state of board oversight on sexual misconduct-related issues
  • The investigation process—should the board be involved?
  • The board’s role in confronting the problem of sexual misconduct in their organization

The current state of board oversight on sexual misconduct-related issues

One challenge to overseeing risks related to sexual misconduct is that boards seemingly have limited insight into company culture beyond the C-suite, according to the 2017─2018 NACD Public Company Governance Survey. Eighty-seven percent of respondents reported having a good understanding of culture at the C-suite level. When it comes to understanding the so-called “mood in the middle” and the “buzz at the bottom,” however, just 35 percent and 18 percent, respectively, understand culture at those levels.

It is, then, even more important for the board to take an active role in understanding culture at all levels of the organization—to understand what sorts of behaviors or attitudes have been normalized, what is tolerated, and whether company policies around misconduct apply even to high performers or business leaders, as they should.

The investigation process—should the board be involved?

When the board is deciding whether or not it should be involved in investigations into allegations of sexual misconduct, it’s important to consider:

  • The seniority of the accused (if the accused individual holds a position of power, the board will more likely need to be involved in the investigation);
  • The severity of the allegations; and
  • The pervasiveness of such misconduct throughout the company.

If the board is not leading the investigation into misconduct, Eberly said it is important that the board have oversight into the investigation to help ensure that the issue is properly addressed and that the CEO does not unduly override recommended action steps to protect a high-performing employee.

(Fortune 500 board committee chairs offer guidance on board-led internal investigations in the NACD research brief, Effective Practices for Internal Investigations Led by the Board.)

The board’s role in confronting the problem of sexual misconduct in their organization

The board should address sexual misconduct at the company because the issue—and its implications—lie at the intersection of oversight of corporate culture, compliance, ethics, and risk.

The NACD FAQ details several practices to help boards confront the problem of sexual misconduct:

  • Familiarize yourself with the company’s existing policies and procedures around sexual harassment, ensuring that these policies are up to date and reflect a standard of zero tolerance for sexual misconduct.
  • Perform an audit of open harassment cases, as well as an audit of any closed or sealed cases from the past three to five years (or further back, if deemed appropriate).
  • Take a pulse of the company’s work environment and culture.
  • Review and strengthen internal reporting systems.
  • Discuss a crisis response plan with management.
  • Promote an inclusive and diverse culture.

“Make sure there is a code of conduct in the employee handbook. Say what is considered dating. Is it allowed, and how does it differ from sexual harassment?” said Mei-Mei Tuan, managing partner and founder at Notch Partners, LLC (an advisory firm connecting private equity clients with C-suite executives) and a board member at the Bancorp, at the WomenCorporateDirectors’ Global Institute panel. “Have a confidential hotline. Don’t let folks sweep it under the rug. Pick your battles, but when you do, use your voice to stand firm even if you’re standing alone.”

Oversight of Workplace Dynamics: The Impact of Technology

Talent is every organization’s lifeblood. Coupled with demographic and social trends, the technologies of the digital age are transforming the workplace. My previous blog discussed how shifts in workplace dynamics are forcing companies to transition the traditional labor model into a talent ecosystem in which non-employees complete much (if not most) of the organization’s work. This month’s blog discusses the implications of digital labor, in which automation, robotics, machine learning, and artificial intelligence (AI) capabilities replace human workers (as so-called electronic workers), and the related impact of those implications on board oversight. Specifically, the prior blog emphasizes two of the three dimensions of the evolving labor model—skills and scale—whereas this blog discusses digital labor, which is the third dimension.

As the era of physical locations, workforces, and infrastructure transitions to the digital age, technology-enabled “digital labor” offers powerful, hyper-scalable enhancements to the scalability offered by outside contractors and part-time help. It also adds more capabilities, as well as a higher level of performance that is faster, more reliable, and less costly.

The bottom line is that new and emerging technologies will greatly influence how companies design and manage their labor models. Sometimes that influence will simplify labor models, and at other times it will make them far more complex. Simply stated, technology—if applied intelligently—has a role in supporting and shaping the workforce by offering additional capabilities that will increase quality, compress elapsed time, reduce costs, and enhance scalability.

Constructive board engagement with management is needed in this area because this change could make the traditional human resources model obsolete in the future. As directors focus on the realities of a workplace in transition and the implications of digital labor for that transformation, they should consider the following questions:

  1. What are we doing to stay abreast of the technological trends affecting work and the workplace? The effect of digital labor opportunities on the workplace—particularly within your industry—should be assessed continuously over time. The board should be briefed periodically about the impact of such technologies on the business.
  2. Given evolving technological trends, how are we evaluating their impact on our workforce? Directors should consider questions such as: What’s the goal of automating work—that is, what are we seeking to accomplish and why? What are the benefits and costs to the organization, what are the likely implications of automation on the industry, and what are possible actions by competitors? Which technologies should we embrace now versus later? This evaluation should be conducted about the business as a whole and not be focused only on technology matters.
  3. Are we automating the right processes? There are two categories of tasks that are more susceptible to human error and require a lot of time to execute: the analysis of large amounts of data and processes that are heavily dependent on people to accurately carry out routine, methodical tasks. These data-intensive and manual processes are ideal candidates for automation. Directors should press management to ensure that a compelling purpose and return on investment is driving the automation of processes.
  4. Are we avoiding automation of poorly designed processes? The organization should not automate a broken process. Sometimes, it is necessary to alter a process or change a step—with an eye toward making it more efficient and effective and improving its relevance to the customer—before automation is appropriate. Challenge your management team to think critically and act to make the necessary changes.
  5. Is the organization effective at managing automation? Innovation in automating work must be considered a key success factor on a strategic level so that employees believe the organization is capable of it and is agile in making it happen. As management’s understanding of machine learning and AI concepts progresses—including speech recognition and natural language recognition—more time and greater care is needed in the implementation process. These technologies are advancing faster than people can acquire the skillsets and expertise to manage them.
  6. Is the organization effective at managing change due to automation? Managing shifts in workplace dynamics requires a clear view as to what the organization might look like several years down the road. Getting there requires management to take the steps that it is comfortable pursuing now. As technology automates work activities, management needs to:
    • Integrate the new capabilities in a manner seamless to the customer experience. That includes effective integration with all relevant customer-facing and regulatory compliance touchpoints and systems.
    • Retrain, reskill, and redeploy members of the workforce whose jobs have been eliminated.
    • Manage people’s perceptions of change, particularly when they perceive a threat to their continued employment. Management must be forthright in explaining the reasoning behind the change, its benefits, the strategic imperative of making it happen, and the potential opportunities for employees.
  7. How does the organization maximize its chances of success? Companies must embrace digital capabilities as a core competence that is assessed on a regular basis and improved upon continuously enhance work performance. The entity should be positioned as a learning organization, investing in training, education, and development on the digital front. Digital tools should facilitate social collaboration and work, empowering teams and employees with better interaction and communication, with the objectives of raising staff motivation, increasing efficiency and agility, and generating faster work

Directors should engage with management in understanding the impact of digital technologies on work and its near- and long-term ramifications for the enterprise’s workforce. As executives transition the workforce to the digital age, they need to be aware of and embrace enabling technologies that will help the enterprise better serve its customers and create value. The board has an important role in assessing management’s thinking as the company’s talent and labor model strategy evolves and is impacted by digital technologies.

Practical Guidance for Directors Overseeing Corporate Investigations

As the economic, legal and regulatory environments in which companies operate become more complex, boards of directors are devoting greater attention and resources to their corporations’ management of enterprise risk. The role of the board remains to oversee, as opposed to directly manage, the variety of risks confronting the modern business enterprise. However, still consistent with their oversight function, directors are becoming more proactive in assuring themselves that in-house and external counsel are conducting effective corporate investigations into significant potential misconduct or violations of law. Key considerations for directors in overseeing any such investigation follow.

Identify the need for and nature of an investigation. As an initial (though sometimes overlooked) inquiry, the board of directors should confirm that an investigation which reports to the board of directors or committee thereof is indeed required or optimal. The purposes of an investigation include, among others:

  • to determine the nature and extent of any misconduct and the responsible corporate executives and employees;
  • ascertain any shortcomings in the corporation’s compliance program and internal controls;
  • and determine an appropriate response, defense strategy, or remedial steps.

Conducting a thorough, independent investigation may also be a condition to receiving credit under various laws and policies, such as the US Department of Justice’s Foreign Corrupt Practices Act’s Corporate Enforcement Policy, mitigating potential punishment and sanctions against the corporation.

Directors should determine whether any investigation must be independent, as greater independence in conducting the investigation may enhance the defensibility of any findings against scrutiny from third parties, such as governmental authorities, and signal a strong commitment to compliance. If an independent investigation is to be conducted, the board of directors should determine whether the investigation is to be led by attorneys from the corporation’s own legal and compliance functions, or external legal counsel reporting directly to the board of directors or a committee thereof. Although in-house may be more familiar with the company’s business and employees, and would present cost savings, governmental authorities and others may more readily question the objectivity, effectiveness, and independence of in-house counsel, and in cross-border investigations certain non-US jurisdictions may not extend legal privileges to in-house counsel. In addition to deciding who should conduct the investigation, the board of directors should also consider how its composition may impact the investigation’s actual and perceived independence, and thus whether a committee of independent directors should be formed to oversee the investigation.

Clearly establish the structure of and board’s expectations for reporting. Directors should assess at the outset of the investigation how the investigation team’s structure and processes promote timely reporting of all relevant information not only to the directors, but also to other stakeholders, including outside auditors and, if applicable, regulatory bodies. Accurate, objective information will better inform the directors’ decision making, particularly in identifying the root cause of any detected problem. Reporting to the directors should be regular, and a standing agenda should cover key issues to be continuously updated. Directors should be engaged and ask questions of the investigation team. The form of reporting should maintain applicable legal privileges, allow for robust interaction between directors and the investigation team as well as the corporation’s general counsel (GC) and chief compliance officer (CCO), and provide the directors with the opportunity to deliberate on sensitive issues in executive session.

Approach delegation of tasks to a committee with diligence. Although overseeing the corporation’s compliance with laws remains the responsibility of all directors, the board may determine that use of a special committee promotes the independence of and effective reporting in an investigation. In some investigations, such as those reviewing the conduct of members of the board, the use of a committee may be advisable to protect legal privileges. The delegation of the board’s authority to any committee overseeing an investigation should be clearly memorialized in written board resolutions or the committee’s charter. Nevertheless, and especially when multiple committees oversee different substantive areas or investigations, the full board of directors must avoid problems arising from silos and remain mindful of the total magnitude and types of risk faced by the company.

Clearly define the scope of the investigation. Directors should ask the investigation team to identify the scope of any investigation, and then carefully evaluate that scope. Too narrow, and the investigation may not identify instances of similar misconduct or other issues arising from the same root cause, potentially discrediting the investigation’s findings and requiring a costly repeat of the investigation. Too broad, and the investigation team may needlessly “boil the ocean,” resulting in an unduly expensive investigation that lacks focus and therefore fails to identify salient facts and issues. Further, directors should remain flexible to change the investigation’s scope in light of facts learned during its course, and should instruct counsel to promptly and expressly communicate any recommended changes in scope for the directors’ approval.

Request from the investigation team a work plan, and monitor the team’s progress. Directors should insist that the investigation team provide a work plan, identifying in detail the steps that are to be undertaken and progress towards completing the investigation in accordance with its scope. The work plan should allocate responsibility to respective parties for accomplishing each step, and the target date by when to do so. A work plan may also be tied to a budget for phases of the investigation, and directors should insist that tasks be performed efficiently. Material delays and cost overruns should be openly addressed when they arise. Increasingly, for significant investigations, directors and the investigation team may find it useful to engage a dedicated project manager to monitor the execution of the investigation plan. Directors may also ask the team to describe how it will use available technologies to speed and enhance a targeted document review process.

Critically, directors should also monitor whether the investigation team is effectively and appropriately collaborating with other departments and resources within the corporation, particularly if the investigation team is led by outside counsel. The GC and CCO are uniquely situated to act as intermediaries among company management, external legal counsel, and the board of directors. The investigation team should, to the extent appropriate (especially if independence and privilege are to be maintained), draw upon the knowledge and expertise of the GC and CCO and their teams, as well as resources from internal audit and human resources.

There are many important considerations for directors during an investigation beyond those noted above, including nuanced questions about self-disclosing to and cooperating with government authorities, waiving legal privileges, and interacting with other third parties such as external auditors, key business partners and customers. Moreover, both before and after an investigation, directors should undertake actions that ultimately increase the corporation’s compliance with laws, such as establishing an effective compliance program and strong tone at the top, informing themselves of critical legal risks of the corporation and its business and industry, and monitoring the implementation of remedial enhancements. Every investigation is different, with highly contextual challenges. But by addressing the points set forth above, directors will be positioned to more effectively oversee investigations in any number of diverse circumstances.

The Rebellious Future of HR Comes to London, Ontario

Career Partners International (CPI) is pleased to announce DisruptHR 2.0 London, hosted by CPI Vice-Chair and Carswell Partners President, Terry Gillis, will be coming to London, Ontario on September 19th.  Returning for the second year, after an enlightening inaugural event, DisruptHR 2.0 London will be hosted in conjunction with Fanshawe College at their Product Validation facility.  With over 30 years of international talent management experience, CPI is excited to bring together the region’s HR Disruptors for an evening sure to challenge the status quo.

Hosted among the backdrop of the Fanshawe College’s sophisticated industrial product testing facility, DisruptHR 2.0 London is focused on the creative, new, and exciting side of human resources development and practice; The Rebellious Future of HR.  Alex Benson, Western University Professor, will be presenting “The Rise & Fall of Narcissistic Leaders”.  Other presentations will include “Don’t Talk to Me (I’m Busy Leading)”, “Lessons from the GWL Agile Journey”, “The Importance of Glitter in the Workplace”, and many more from the region’s top Human Resources and Leadership professionals.

DisruptHR 2.0 London will be hosted on September 19th, from 6:00pm to 9:00pm at the Canadian Center for Product Validation.  Attendees are sure to gain a unique perspective the changing world of HR and are invited for a drink at the world’s quietest bar.  To purchase tickets or find an event near you, visit Disrupthr.co.

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Connecting the Dots: Governing through Disruption

In my governance portfolio, I very much enjoy leading across a variety of industries. My board roles at companies like Dunkin Brands Group, Brighthouse Financial, and Tailored Brands allow me to both contribute my expertise and deepen my knowledge of different operating models. I find that I am constantly honing my ability to encourage management to consider ideas from disparate business models, and that can make a critical difference during times of disruption.

In order to succeed, corporate directors must connect the dots about what modern businesses need and strive for growth and positive change through every stage of the business’s operations: while the sailing is smooth, during times of disruption, and when preparing for long-term sustainability. While I’m always learning, the following ideas have helped me fulfill my duty to govern and create value through times of disruption.

Identify, Understand, and Mitigate Turnaround Issues

Corporate directors must be courageous, independent voices in the boardroom. Navigating disruption can bring out the best—and the worst—in everyone. It is imperative during crises that directors check their emotions at the door and prepare to provide creative guidance and advice to management. This also is a time rife with possibility. While it can be difficult to navigate sensitive issues around business change, it is easier to create change when the platform is burning and the need for change is apparent.

Name and identify the issue at hand. Is your business in crisis because of a recession or at risk if the bull market goes bust? Is your business facing disruption from changing consumer preferences or decreased buying power? Once you understand the complexities facing your company, it is easier to work on a holistic oversight strategy. Many leaders will not want to dig in and uncover additional issues during a time of turnaround or crisis, but it is in the best interest of the company for directors to buckle down and urge management to reconsider its strategy.

When navigating industry change, it’s the board’s role to point out the hazards while management fights the fire. Because the board is not involved in the day-to-day operations of the business, its members will not be as focused on specific aspects of the company’s operations that may be blinding management to an opportunity or risk. Directors would do well to read often about the broad changes impacting not only our businesses, but the world at large. The board’s oversight might be just the key to saving the burning business—or seeing it collapse because a hazard was missed.

Stretch yourselves by having difficult conversations in the boardroom. Collaborative thinking in the boardroom is overwhelmingly considered positive, as consensus is important to guiding management toward strategic change. During difficult times, however, this type of environment can stifle conversations, hamper free thinking, and restrict exploring different management strategies and approaches that could strengthen the business. Of course, a board should be a unified voice in public, but in the safe space of a boardroom it is important to push boundaries and force hard conversations to the top of the agenda. In times of crisis this paradox of conflict and exploration inside the boardroom and unification outside it is the board’s duty.

Keep Consumers Top of Mind

The demographics of our nation are changing. Our nation is becoming more and more diverse, as well as globally oriented. Many businesses are at a crossroads, and if they do not react to their changing consumer base, they may face an existential threat. Understanding consumer needs and preferences is the first step in successfully navigating industry change. It is never a misstep to put yourself in the shoes of your customers in order to meet their needs.

Be aware of current events. Analyze customer data and community engagement where your customers live. Board leaders who think with a customer-first mindset are an asset to organizations and leadership. In this changing economy boards must concern themselves with how disruption by certain technologies and business models impact their current and potential customers. Choose to engage management in conversation about how adopting those disruptive concepts can be used to improve customers’ experiences.

Your board should set clear expectations for innovating through disruption. The board can partner with management to include goals for innovation into the company’s strategic map, and also can incentivize managers to meet certain metrics by including expectations as part of their remuneration plan. Disruption can actually spur innovation. For instance, when the fresh bread category at Dunkin was hit with the low carb eating trend, it not only sparked thinking on ingredients in bread’s current format, but also helped us to step back and think about what the consumer’s base needs were. In the end, bread is a “carrier” for many foods, so our innovation funnel began to populate with many more breakthrough ideas on carriers instead bread as a static format.

On the Horizon

There is a tremendous upside for companies willing to incorporate aspects of corporate social responsibility (CSR) into their operations and products. Consumers are becoming more aware of environmental and social responsibility and they want to support companies whose CSR values are in line with theirs. Investors are also keeping an eye on a company’s ability to monitor and report on their footprint on the environment.

The world grows more connected every day. The board can play an important role in helping the company’s culture to become one that places digital innovation first. Putting an emphasis on addressing the needs of a digital world must be addressed sooner rather than later. Be a futurist for your organization. The bulk of corporate leaders cut their teeth in a world where complex technology was science fiction, and while directors are digitally savvy at an increasing rate, they ascended to their role in a business world that looks very different from the one that their management team is operating in. But all directors can be students of technology. Boards may want to consider directors who have both a digital and an operational background to help their companies innovate and be on the forefront of emerging technologies.

NACD gives their members the tools so board members can find their voice, encourage innovation amid disruption, help businesses thrive, and much more. The discussion on these topics and more will continue at the 2018 Global Board Leaders’ Summit, happening September 29 through October 2 in Washington, DC. I look forward to seeing you there. 

Looming Risks Are Driving the Need for Resilience

Editor’s Note: This is the second in a series exploring the board’s role in corporate resilience. Click here to read the first installment.

The structure of risk is changing. Across the world, accelerating rates of technological and social change are putting growing pressures on businesses, governments, and international structures to respond at a previously unseen speed. Interconnected stresses and shocks are challenging assumptions and best practices. Stand-alone risk mitigation and incident management approaches will not be enough, and have not been enough for some time. Adaptive approaches are needed.

Before your company considers what it needs to do to become more resilient (as discussed in part one of this series), it should also take time to consider how and why the risk landscape is changing at such a dramatic speed. Why is resilience becoming more important now?

Public trust in business is declining—and is being sped by data insecurity. Diverse, recurring incidents across many industries challenge confidence in corporate leaders and practices. These include data losses, repeated cyber penetrations (for instance, Sony has been breached several times in the past decade), leader-sanctioned data falsification, and deceptive practices. Europe’s General Data Protection Regulation (GDPR) raises the bar for protecting privacy and imposes severe penalties both for data loss and reporting delays which will challenge nearly every data-based company doing business on the continent. In any case, since companies cannot expect to avoid incidents in these environments, it behooves them to prepare in ways that build resilience and leave all concerned better off afterwards. The changing structure of risk is making this particular task harder all the time.

Geopolitical risk is rising after a period of relatively stability. Klaus Schwab, founder and chair of the World Economic Forum (WEF) Geneva, postulated that the world is entering a Fourth Industrial Revolution that will be characterized by “a fusion of technologies that is blurring lines between the physical, digital, and biological spheres.”  The velocity, scope, and systems-wide impacts of these changes will be massively disruptive, transforming how companies are managed, as well as means of production and distribution. This paradigm shift can provide very important collective benefits, raising productivity and improving qualities of life for many. But labor markets in many countries are likely to become more unequal and disrupted, with losses of jobs and a further bifurcation into “low-skill/low-pay” and “high-skill/high pay” groups.  A result may be societal inequalities and social tensions, which could generate significantly more refugees from “youth bulge” areas in the Middle East, Africa, and Asia. There also could be unrest in megacities and under-served parts of the developed world. The resulting geopolitical risks include domestic turbulence, scapegoat-finding, radical nationalism, and protectionism.

Technological change is accelerating. Most businesses consider technological change in their own competitive areas, but few have internalized its accelerating, interconnected parts. If a capability—say computing power per unit cost—doubles every eighteen months, in ten years it will grow by 10,000 percent, and in 15 years nearly 100,000 percent. Even if the doubling period is two years, in 15 years the increase is nearly 20,000 percent. The rate of growth may slow, or there may be dramatic increases in some capabilities, such as quantum cryptography. There may be new materials or advances that we have yet to foresee. The net result is that linear projections based on present conditions cannot work, however comfortable they may be, and useful they may seem for driving conversations and decisions.

Understanding the impacts of new technologies is complicated by the fact that many changes are occurring simultaneously, and across diverse areas. Some areas of biotechnology are changing even faster than computations per dollar. Robotics and autonomous vehicles are proliferating quickly. Additive manufacturing such as 3-D printing grows more sophisticated daily. Nanotechnology is entering widespread use, from batteries to medicine to new materials. The energy that underpins everything is undergoing several different types of transformation.  Changes across all these domains, plus areas like additive manufacturing and artificial intelligence, need to be at least considered in corporate planning, along with their interactions.

Even if a company is not directly implementing a particular technology, leadership needs to understand how the overall environment is changing and ask how it will affect the firm’s interests. These changes provide new opportunities but also add new risks—many of them interdependent, and without borders.

Technical and social risks are becoming more interconnected. Consider four examples of interconnected risks: Mobile devices, the Internet of Things (IoT), physical vulnerabilities of infrastructures, and insider threats. These might seem to be mainly related to information technology (IT), but they can have impacts across the company and the environment in which it operates.

Mobile devices are becoming more essential to daily life—and presenting more risks. They introduce threats that must be understood and addressed aggressively. The board should ask if devices issued by the company are password or PIN protected. Is the data on them encrypted? Can they be tracked or neutered remotely, at home and abroad, if lost or stolen? Does the company even have an inventory of them?

IoT risks are exploding. Almost no one understands the extent of cyber risk posed by the rapid deployment of the inherently insecure IoT. Even those who recognize IoT’s potential upsides and downsides find it hard to turn this into realistic risk assessments for their companies, much less for the outside organizations they interact with and on whose networks they may depend. This is not a hypothetical issue. Security cameras and corporate refrigerators already have been turned into attack vectors. How many companies have an accurate picture of their IoT connections, or plans for managing them over the life cycle of the components?

Physical infrastructure is becoming more vulnerable. Cyberattacks increasingly can do physical damage to infrastructure. Generators can be destroyed, industrial control systems hacked, and sensors corrupted to degrade output quality without showing up on monitoring reports. Medical devices are exceptionally vulnerable to hacking, leading to everything from misdiagnosis to death.

Social engineering and insider threats are rising. Beyond technology, the pervasiveness and danger of insider threats is growing. Some big data analytic applications are working to develop baselines of activities across a company from which anomalies can be detected in near-real time. It remains to be seen how effective these will be in the long run, but it is clear that traditional security approaches against insider threats and social engineering, e.g. phishing e-mail attacks, are failing too often.

Cyber Resilience

As noted in part one of this series, security approaches aimed only at locking down and keeping cyber threats out cannot work. There are too many penetration vectors, and the attack surface is too large, and growing. In 2016 Daniel Dobrygowski of the WEF was explicit: “Cybersecurity is no longer enough: we need a strategy of defence, prevention and response…. [L]eaders should be considering cyber resilience as a strategic goal.”

To be cyber resilient a company first needs to be resilient overall. Much of the focus of cyber resilience is on technology and network measures, referred to as operational or business resilience in part 1. But the cultural component of cyber resilience is equally critical. All members of the organization need to know their roles and execute them. People are both the first line of defense and the greatest weakness.

Role of the Board

These are complex problems that demand adaptive approaches. Few people in the company, including the board members and the most senior leaders, will have the expertise and the perspective themselves to address the technical issues, tie the disparate threads together, and understand the interdependencies. Yet it is essential that they ensure that the organization overall considers these challenges in decision-making.

In a March 2016 Director Dialogue, Judy Warner, editor-in-chief of NACD Directorship, summarized advice from a 2016 series of NACD roundtables on organizational resiliency: “Be skeptical. Trust, but verify. Resist complacency.” Because of the special nature of cyber resilience, the board might benefit from outside advice.

Future parts of the series will address how resilience differs from enterprise risk management, how companies can build a capacity for resilience, and what the board’s role should be in resilience.

Defying Conventional Wisdom, New Directors Expected to Speak Up

Of the 358 directors who joined Fortune 500 boards last year, 128 had no previous board experience. That’s according to Board Monitor 2018, our firm’s latest installment in our annual tracking of trends in non-executive director appointments. Many challenges are likely to surprise these new directors in their first year of board service. But in my conversations with the directors I have worked with as a search professional over the years, one surprise in particular comes up repeatedly: you’re expected to speak up right away, despite being new to the board.

Conventional wisdom says that new directors should keep their heads down for the first few meetings, say little, and wait until they get their feet under them before venturing an opinion. At one time that might have been good advice. But today new directors are increasingly expected to contribute to the board’s deliberations right away. Here’s why.

The velocity of business no longer leaves room for a leisurely pace in the boardroom. In today’s hyper-competitive world, organizations must be able to accelerate performance—to build and change momentum to get results more quickly than competitors. Boards too are feeling that pressure—as a result, they are adding new competencies in rapidly evolving areas that hardly existed a decade ago. If a new director was brought onto a board for his or her expertise in artificial intelligence or cybersecurity, for instance, the group can’t wait nine months or a year before hearing from that new board member on the subject in a substantive way. Further, even if initially the new director has been sought to fill a hole in the board’s expertise—in a market, a geography, a discipline, and so on—he or she is likely able to contribute in many areas, not simply function more narrowly in that area of specific expertise.

Onboarding practices are increasingly designed to enable new directors to contribute right away. These practices will likely include setting up time for a substantial conversation between the CEO and the new director to inform that person of how management views the company’s most critical challenges. He or she may be briefed by the chief legal officer and the lead director and chair. The new director may be encouraged to contact other board members and management, including senior staff and key business unit heads and to visit company sites and plants and facilities. And that new board member may be paired with an experienced director who will help him or her acquire some “cultural literacy” through post-meeting debriefings. Boards that take such care with onboarding have the right to expect that they will get the full value of the skills, expertise, and leadership of new directors from day one of their tenure. (That applies to the boards of some nonprofits, too, but a recent study conducted by our firm found that many nonprofit boards do no onboarding or do it poorly.)

New directors may have been brought in to help shake things up. Now that the business value of diversity has been widely recognized, some boards are seeking to become more diverse than ever—in background, age, national origin, gender, ethnicity, and experience. Unfortunately, if the new director is bringing something clearly different to a homogeneous board, he or she may feel too intimidated to speak up right away. Be sure to encourage new directors to speak up. Their appointment suggests that the board recognizes its need for other voices.

The company may suddenly find itself in a crisis that requires all hands on deck. Crises come in all shapes and sizes—activist investors, defective products, hostile takeovers, executive misconduct, natural disasters that threaten operations, and many more. From the point of view of directors, they all have one thing in common: they threaten the stock price and sometimes the continued existence of the company. There are few situations in which the director’s fiduciary duty to the stockholders is so starkly in play as in times of crisis, when all directors need to be heard. Be ready to hold new directors to task when all hands are needed.

Remind new directors that it’s their duty to speak, even in the face of opposition. Once in a great while the company and the board may be about to embark on a course that everything you know and believe tells you is likely to have dire consequences—for the brand, the business, or the stakeholders. Seasoned directors are aware of this, and they should iterate to new directors that if they sincerely think that remaining silent would do a grave disservice to the company and their colleagues, they owe it to the company—and to their own conscience—to offer their perspective. If they do it with visible concern for stakeholders, a manifest passion for the business, and genuine good will toward those with whom they disagree, they will deserve—and likely earn—far more respect than if nothing was said.

Not surprisingly, the encouragement to speak up should also come with some caveats: No talking just to hear yourself talk. No playing the expert card. No misplaced idealism that sends you tilting at windmills. No playing the gadfly, the nitpicker, or the contrarian—three ways to make a negative first impression and virtually ensure that your colleagues tune you out now and in the future. New directors should also be reminded that they are not the CEO or management.

In order for new directors to make themselves heard, they need to have credibility. Credibility is gained by building meaningful relationships with the other members of the board as soon as possible. That is perhaps the second most surprising takeaway for new board members that I hear. It’s not that they don’t believe in relationship building; it’s that they don’t think it can be done quickly given that boards meet infrequently and the members are usually widely dispersed. But those obstacles, coupled with the expectation that they will contribute out of the gate, are all the more reason to pour effort into connecting with new colleagues.

New directors who have been paired with a more experienced colleague should take full advantage of the opportunity to learn the ecosystem of the board, where the centers of power lie, and how consensus is typically reached. They should have dinner with members who live in their city or who might be visiting in the near future. They should schedule phone conversations with others. And while these encounters will help new directors get to know their colleagues as people, the focus should be on the concerns of the board and the company and how to add value. By building respect and trust at the outset, directors will feel far more comfortable when communicating —and ensure that as a director, your voice will be heard.