Time to Assess Yourself
April 01, 2019
In his new book, The Talent Manifesto, Korn Ferry Vice Chairman RJ Heckman lays out the case for why an organization’s talent and its business strategy are in harmony. That doesn’t only apply to employees, either. In this excerpt, Heckman explains the importance of directors taking rigorous assessments and being clear-eyed about one another’s performance.
How board directors interact and build chemistry with one another is critical to their success, particularly when the organizations they oversee encounter a crisis. As former CEOs and senior leaders, board members are accustomed to getting their own way and having the bucks stop at their desks. In this new scenario of working with other “alphas,” they often have to figure out—some for the first time in their careers—a different style of influence than the one that got them to the CEO job in their own company.
Given the mix of personalities, varied areas of expertise, and the fact that boards only convene a few times a year, there is a threat that boards are really a “roomful of strangers.” Such a development can be dangerous, especially when boards face high-stakes decisions during a crisis and it’s important they move quickly to reach consensus.
“There is an elusive thing on boards called chemistry,” says Bill George, a professor at the Harvard Business School and the former CEO of Medtronic. “You can check all of your governance boxes, but if you don’t have the right chemistry among your board members, things will not usually go well.”
George knows firsthand the importance of building strong board relationships. As a member of the Goldman Sachs board during the subprime mortgage crisis, George and his board colleagues were faced with momentous decisions that needed to be made on tight timelines.
“The board was under enormous pressure, and since we were based all over the world, it was hard for us to gather in one place,” George says. “We had big decisions to make quickly, such as whether to take an equity investment from Warren Buffett or become a bank holding company. These were decisions with huge long-term consequences, and if we didn’t have the chemistry on the board that had been built up over a 10-year period, it could have been a disaster.”
Directors are given board effectiveness surveys each year, a requirement for publicly traded firms. But those assessments are usually perfunctory and tied solely to compliance and legal matters. It’s important that board members get a deeper insight into one another’s decision-making styles and personality differences. That’s because there is typically a mix of risk avoiders and risk takers, extroverts and introverts, and varied thinking styles on any given board.
In addition to required annual governance audits, the best way to gain these insights is through a formal, qualitative assessment of each director, who then receives confidential feedback about his or her leadership and thinking style. A composite drawn from all director assessments reveals the tendencies of the entire board, as well as defines the spectrum of traits and behaviors. This can help to clearly define the roles of all board members by evaluating the tendencies they will display that distinguish and differentiate them from other directors in both positive and potentially negative ways.
Such an assessment helps board members develop a better understanding of themselves and how to work more effectively with their equally strong-ego board colleagues. When they understand their own traits and drivers relative to those of the other directors, it usually gets them to high performance faster than a roomful of strangers would.
Reflecting on the impact of this type of board evaluation, Mike Marberry, CEO of JM Huber, says the consulting Korn Ferry did with the JM Huber board afforded them an opportunity to “have more individual interaction among board members prior to board meetings, and caused us as a group to think more about the agenda, how the agenda gets set, and to make sure that we’re sensitive to different perspectives and drivers among our board members so we’re focusing on the right things to meet critical needs.”
George says board members with good chemistry often invest considerable time in getting to know one another, in some cases by taking trips together, such as one taken by the members of a board he was on to meet with venture capitalists in Silicon Valley. “You need to take time to get to know each other as human beings. “You don’t get to know someone’s personal side when you only see them in meetings. I think boards need to do that as much as any executive team does. Building that chemistry will pay off when facing difficult times together.”
As businesses continue to get hit with the inevitable challenges and crises, such as a data breach, unethical behavior by senior leaders, activist investors, environmental accidents, or accounting scandals, it’s becoming increasingly important for board members to work well together to help executive teams steer through those difficulties.
By gaining insights into how fellow board members think and operate, directors build trust and improve their ability to handle these challenges. Boards that are skilled at managing disasters also are more effective at driving their companies to higher levels of performance as they apply those skills to help senior leaders allocate capital, mitigate risk, plan CEO succession, and enhance diversity and inclusion. These accomplishments are all difficult for boards to achieve until the members have greater insight into one another’s leadership and thinking styles.
Copyright © 2019 by McGraw-Hill Education LLC. Reprinted with permission.