New kid on the block

Much is made of diversity as a source of advantage and good thinking on boards. Not enough is made of the value of a new kid on the block.

One of my friends is now a shiny, newly minted non-exec director on the board of a regulated business listed on the London Stock Exchange. I was very pleased when they invited her to join, as I was one of her referees.

Over the course of the process, I had shared some of my learnings with her. One of these learnings was about how to be proactive about managing conflict and preserving independence. I had advised that she will need express permission from her then-employer, a regulated business in the same sector, since she was a senior and critical executive, before she can accept the non-exec position offer if it is made. Unfortunately as I had feared that permission did not materialise. She chose the non-exec role over her exec role.

And now she is noticing things.

As we know, boards have a role in shaping an organisation’s strategy and direction, to deliver shareholder and stakeholder returns. Being able to discharge that role well requires the right culture, some formal distance between board and exec, the right informal and formal processes and channels to seek information and assurance, and a delicate balance between formal and informal avenues to ensure the board remains well-informed but not start running the company.

A fresh pair of eyes notices what works and does not work.

She observed how her new board seems to prefer formal committees to obtain information that they feel they get too late or receive only for rubber-stamping since it is too late in the cycle to make any meaningful changes to or impact upon it.

She also noticed that crucial committees are organising several separate sessions on minutiae of fiduciary detail while falling short of anchoring the conversation in the overall strategic picture, especially in 2020 when the pandemic requires a very different approach to board oversight.

These two examples suggest that the board has some challenges with culture and process to address. Not insurmountable issues of course.

New directors can take a while, sometimes a few months, to become productive and effective. But this period soon after joining is a fertile time.

As a new non-exec finds her way around the organisation through formal induction and informal conversations, she can ask questions with an aim to understanding but also with an aim to surfacing obvious dysfunctions and weaknesses; some of these can be fixed easily, and others with some effort and commitment. After all the new way of working that the pandemic has forced on us all also presents an opportunity to clean out the cobwebs and fix things that have just never worked.

The board has after all hired the new non-exec for her skills and expertise, and she should take advantage of this early time to share her observations.

When boards hire a new non-exec, they seem to prize sector experience and to seek assurance from blue chip employer names on the candidate’s CV. Those are easy hiring decisions.

What they should seek is a new and unique perspective, and also to ensure that they have the right culture and openness of mind to benefit from the insights from the new kid on the block. That is much harder.

(Disclaimer: These are my own views and do not reflect the views of the boards of JP Morgan US Smaller Co.s Investment Trust or Temple Bar Investment Trust or London Metropolitan University, where I serve as a non-exec director.)