When interviewing potential directors, nominations committees should not forget to investigate the hidden soft skills without which hard skills can prove less than useful, says Sarita Martin, a facilitator of the Institute for Directors in Southern Africa (IoDSA) and an independent non-executive director.
According to Martin there’s more to a successful board than just assembling the right skills, knowledge and experience around the table. The dynamics around the boardroom table are influenced by the individual personalities on the Board.
“Boards often comprise a group of dynamic, highly accomplished individuals with strong views,” she comments. “If those individual directors are to deliver real value to their organisations through robust and productive discussions, they must have what have historically been referred to as the soft skills to operate within the context of the group, or one simply ends up with a set of individual opinions and no coherent decision.”
“Board members need to have the ability to be able to present their views in a respectful and coherent manner rather than be dictatorial.”
Read the room
The level of in depth discussion needed at board level is only possible if directors are able to listen well and are flexible enough to engage with others board members’ ideas to come up with new insights.
The courage to express one’s opinion while also engaging genuinely with other points of view is particularly difficult as today’s boards become more diverse from – among other things – a gender, age and cultural perspective. This diversity is obviously intended to provide the organisation with better visibility across the full socio-economic and political landscape, but it can mean that boards have to balance widely divergent points of views.
Often it is the body language and tone of voice of individual board members rather than their words that indicates their stance on a particular matter.
Replace “me” with “we”
Although eliciting the views of individual board members is crucial, it is important to remember that any board decision is a decision of the collective, of the majority of board members – the “we”.
An observation is that many of the new generation of board members may have no board or executive experience. In particular, they may be unaware of the protocol of board meetings, which is designed to support a non-adversarial atmosphere whilst promoting robust discussion and debate.
They may also not fully comprehend that the boardroom model is not a parliamentary one: the object is not to state one’s view as forcefully as possible and then vote, but rather to interrogate an issue from all angles in order to arrive at a decision in the best interest of the company.
“It’s not who gets to make the decision, but the quality of the decision-making process itself. Directors have a fiduciary duty to act in the best interests of the company, not themselves or a certain viewpoint,” Ms Martin says.
According to Parmi Natesan, IoDSA Executive Director, “The personal and social competencies for directors are just as critical and the functional/technical ones. In the awarding of the Chartered Director SA designation, significant emphasis is placed on assessing these softer skills. In addition, the IoDSA has also added two new programmes to its repertoire of director training – a practical boardroom simulation experience where delegates get to practices these skills; as well as a programme providing individuals who intend to become a non-executive director with a road-map to get there”
Get it right, right from the start
So how do nominations committees set about establishing whether prospective directors have not only the correct understanding of how board decisions are reached, but the emotional balance and insight to handle difficult discussions in such a way as to promote the best outcome for the organisation? It’s not easy, Ms Martin acknowledges, because potential directors cannot simply be asked to take a psychometric test. However, typical interview questions can be used to probe these areas.
Understanding what motivates an individual to be a director in the first place can reveal how well he or she understands the role of the board. Nominations committees can assess during discussion with candidates about the business and corporate context how able the individual is to connect the dots to see the big picture. It also necessary to determine their understanding of corporate governance and how aware they are of current affairs.
Verbal communication skills, so important in a board interaction, can also be judged during an interview.
“Perhaps most important of all, nomination committees should look very carefully at what candidates have done in their lives and careers. This will not only show them whether the candidate possesses the requisite hard skills and experience, but also something about how they see themselves, and how they have displayed the ‘board temperament’ in the past.”
“Ensuring that board members are emotionally aware and possess the soft skills including good verbal communication and listening skills will assist in effective board dynamics and ultimately robust decision-making at a board level,” she concludes.
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The ongoing parliamentary enquiry into the SABC has eluded to the suggestion that one of the causes of the public broadcaster’s poor performance was a board that did not possess the right mix of knowledge, skills and experience to be able to discharge its duties effectively. Parmi Natesan, Executive, Centre for Corporate Governance, Institute of Directors in Southern Africa (IoDSA), says that the investigation’s findings make a strong case for the benefits of professionalising directorship.
“The parliamentary enquiry into the SABC demonstrates that the quality of governance exercised by the board has a knock-on effect on a company’s operational effectiveness,” Natesan says. “It’s also clear that board members must have certain knowledge, skills and experience in order to fulfil their responsibilities. To give one example, recent media reports indicate that some of the board members did not properly understand the Broadcast Act, and thus were not in a position to ensure the legal mandate was fulfilled.
“However, board members cannot claim ignorance as an excuse, and the onus is on them to be properly informed prior to making decisions.”
This kind of situation can be avoided if board members are properly inducted onto the board, and proactively expand their knowledge of the company, the market/legislative regime in which it operates and developments in corporate governance. But they also need to have a good understanding of what their duties and responsibilities as directors are.
Angela Cherrington, CEO of the IoDSA, says that because markets change so rapidly and are increasingly competitive, boards are under increasing pressure to maintain the right levels and types of skill, experience and diversity to keep the company on the right course.
“Directors play a hugely important role, and their job is becoming much harder. The case for a new breed of professional directors is growing stronger by the day. Companies would be able to assess objectively what skills individuals have, and thus whether they would complement the existing board’s skills. As professionals, directors would also have to commit to a formal, ongoing programme of professional development,” she explains. “Professional directors would be bound by a code of conduct enforced by a professional body.”
In response to this growing need in corporate South Africa, the IoDSA launched a professional designation, Chartered Director (SA), or CD(SA). According to Cherrington, this initiative recognises that directors require specialist skills, experience and integrity alongside their purely business skills. The CD(SA) designation also gives directors a way to demonstrate their mastery of the director competencies, and to enhance them through a formal continuous professional development programme. They would have to subscribe to a code of professional ethics.
In addition, the IoDSA will soon be re-launching Certified Director, an interim designation on the pathway to CD(SA). This re-introduction aims to capture those individuals who do not yet have the board experience to enter the CD(SA) process, but who have the knowledge necessary to start their directorship journey.
The IoDSA administers, and is the custodian of, the both designations.
“We were delighted to see that PWC’s Non-executive directors: Practices and remuneration trends report for 2017 predicts that ‘non-executives will become specialised professionals’ in order to meet the challenge of increased business risk,” Cherrington concludes. “The CD(SA) designation provides a framework against which directors can be measured and grown, and it will increasingly become the gold standard for directors in both the public and private sectors.”
MEDIA CONTACT: Cathlen Fourie, 082 222 9198, firstname.lastname@example.org, www.atthatpoint.co.za
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Professionalising the practice of directorship could help state-owned enterprises overcome governance crisis
South Africa’s state-owned enterprises have a key role to play not only in delivering services to citizens, but also in funding the National Development Plan. However, it is clear that many major parastatals are still not in a position to fulfil this mandate.
A recent editorial in Business Day places the blame squarely on a lack of governance. Parmi Natesan, Executive: Centre for Corporate Governance at the Institute of Directors in Southern Africa (IoDSA) broadly agrees, arguing that solving this problem begins with the board.
“The challenges besetting our parastatals are complex, so it would be naïve to suggest that there is a silver bullet that can magically fix them. But, as many commentators have pointed out, one common shortcoming is the effectiveness of the boards. One of the findings of the IoDSA’s board appraisals benchmark study was that public sector boards lag behind private sector boards in their performance.
Given that boards play such an important strategic and governance role, the IoDSA believes that the parastatals should seriously consider a professionalisation mandate including Chartered Director(SA)’s for the boards of state-owned entities,” she says.
Natesan says that greater attention needs to be paid to the selection of board members at parastatals to ensure that they have the necessary professional and personal skills, as well as industry knowledge and experience. As the IoDSA’s annual board appraisal benchmarking study consistently shows, public-sector boards suffer from the fact that board members (as well as members of the executive team) are often seen to be appointed or political reasons.
“It’s vital that proper due diligence on potential directors is carried out. Being a director is a tough job, particularly in the public sector, and much depends on his or her performance,” Natesan says. “Care must be taken to find and appoint such people, or the board’s—and ultimately the company’s—performance will be adversely affected.”
According to Angela Oosthuizen, Chief Executive Officer at the IoDSA, the directorship role in both the public and private sectors is so important and so complex now that the IoDSA has launched a formal professional designation, the Chartered Director(SA), or CD(SA). The IoDSA’s intent is to professionalise directorship. The CD(SA) initiative recognises that directors require specialist skills, experience and integrity alongside their purely business skills. Administered by the IoDSA, the CD(SA) designation gives directors a way to demonstrate their qualifications objectively, and to enhance them through a formal continuous professional development programme. Professional directors also subscribe to a code of professional ethics, and can be subject to the designation being revoked under certain circumstances.
A credible professional designation also helps selection committees identify candidates with the right skills, objectively assessed.
Oosthuizen says that government is aware of the potential for using the CD(SA) designation as a way of identifying the right calibre of directors. For example, at a recent IoDSA event, the Public Protector, Thuli Madonsela, indicated that the Minister of Public Enterprises, Lynne Brown, would support the certification of directors as part of the appointment criteria for parastatal boards.
“The CD(SA) designation is relatively new, so the pool of people entitled to use it is still small, but the Minister should certainly be encouraging parastatal board members to begin the process of certification,” Oosthuizen says. “In the meantime, members of parastatal boards need to keep abreast of developments, attend governance training, and generally make sure they understand their role. Board members who are professional in their attitude, their skillsets and their commitment to a code of conduct will do better for the company.”
Another benefit of improving the skills of directors would be the strong signal that government is serious about governance, and that it respects the role that boards have to play.
“The board sets the tone for the whole company, oversees its strategy and ensures it is governed properly—a successful company needs a good board,” says Natesan. “If parastatals are going to be able to become contributors to the fiscus, they need to be properly governed, and ensuring that their directors are at the match makes sound business sense.”
Editor’s note: Click http://bit.ly/1gGntmW for supportive audio of Parmi Natesan, Executive: Centre for Corporate Governance at the Institute of Directors in Southern Africa
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