The magnitude of the COVID-19 health crisis and collapse in economic activity is unlike anything we have seen. Within most organizations, traditional in-person work patterns have been disrupted, while others have seen widespread layoffs or furloughs. Anxiety about job loss, economic uncertainty, personal well-being, safety and ongoing disruption is prevalent.
Boards are not free from these pressures. They must deal with both the strategic implications of COVID-19 — how the business will rebound out of the crisis and the bets the organization should make for the future — and the disruptions to their routines and processes. Boards have adjusted how they work by embracing virtual meetings, new communications and information-sharing technologies, and even virtual shareholder meetings. In our recent survey of nominating/governance (nom/gov) committee chairs of S&P 500 and Fortune 500 companies, most (84%) anticipated that boards would continue to have more virtual meetings after the crisis, and almost half (48%) expected to eliminate their annual in-person shareholder meeting.
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A responsibility some directors are less comfortable conducting virtually is director recruiting. A majority (58%) of nom/gov chairs said they feel somewhat or very uncomfortable appointing a director to the board without meeting in person, with nearly one-quarter (24%) anticipating that the crisis will slow their board's refreshment plans.
It is unsurprising that directors would feel some discomfort nominating new board members without in-person interviews given the importance of healthy boardroom dynamics to board effectiveness. It is harder to read a person's body language and soft skills in a video meeting, or to recreate the casual interactions that often happen before or after the formal interview that might give clues to the candidate's chemistry with other directors. An added pressure for video interviewing is the risk of technical difficulties: lag on the call, internet connection issues, poor video quality, etc., that can disrupt the flow of the conversation during the limited time the meeting is scheduled.
But for the foreseeable future, virtual meetings and interviews are the new reality for boards, and refreshing the board is an imperative, even in the current environment.
The case for virtual succession planning
The crisis has underscored the benefits of having a strong mix of skills — for example, deep technology expertise and finance experience. It's also beneficial to have the perspective of experienced executives as well as directors serving on multiple boards, who can bring valuable ideas and observations from other organizations. But as company strategy evolves, the board must keep current and ensure the right up-to-date skill sets are represented.
Board composition and quality are other top-of-mind issues for institutional investors, and factors such as board diversity, director capacity and board refreshment practices are now routinely assessed. Some investors have policies holding boards accountable for a lack of gender diversity. While investor voting policies are currently not prescriptive when it comes to racial/ethnic diversity in the boardroom, boards should anticipate increased focus on the issue.
We have found that much of the director recruiting process has not changed in a virtual environment. A thoughtful and strategic succession planning process serves as the foundation for director recruiting, enabling boards to identify specific areas of expertise needed in a new director — which may include a specific committee assignment. Once boards determine their needs, they discreetly cast a wide net for candidates using a search firm or their own networks to identify people with those skills or leadership.
The candidate screening process is also largely unchanged. Interviews should still cover the knowledge and expertise a candidate brings to the table and try to assess candidate traits such as interpersonal skills, intellectual acuity, communication skills and integrity that speak to his or her ability to engage on key board issues and work collegially with other directors.
While it may be harder to have the same personal interactions online as occur during in-person meetings, there are some benefits to virtual interviewing. Video interviews tend to be more structured and somewhat more formal, encouraging everyone to be more prepared. Board members conducting these interviews are more likely to use a focused set of questions with all candidates, increasing continuity across the discussions.
Since candidates and directors won't have to travel for in-person meetings, scheduling meetings is easier, potentially allowing more board members to meet a candidate. This can help the board get a better sense of a director candidate and provide the candidate more opportunity to learn about the board culture through the eyes of sitting directors.
Tailor onboarding for a virtual world
A thoughtful onboarding program that helps new directors build rapport, quickly learn about the issues facing the business and pick up on cultural cues is even more important in a virtual environment. Board leadership should pay close attention to the onboarding process, overcommunicating and making sure the new director feels welcome, begins to develop relationships with each of the other directors and has the necessary resources to get smart about the business and the work of the board.
The good news is that technology can extend the reach of the new director, making it easier to meet one-on-one with other directors and key members of management around the world in a more condensed time frame. These meetings should be an explicit part of the onboarding process.
In addition, boards should consider pairing a new director with an experienced director to provide perspective on boardroom activities and dynamics, help with meeting preparation and explain aspects of board papers. By debriefing after meetings and serving as a sounding board between meetings, the informal mentor can help the new director get a read on the culture.
To remain relevant — to be able to make a meaningful contribution to strategy and challenge management effectively — boards should refresh continually and seek directors who bring diverse perspectives and much-needed knowledge from the front line as well as experience navigating at the top of an organization. Boards can't afford to lose momentum recruiting because of COVID-19 and the restrictions on travel and in-person meetings. The simple fact is that even in the current environment, investors will require boards to refresh. Boards that embrace technology and tailor the recruiting and onboarding processes to a virtual world will be in the best position to have the right people around the board table for the future.
Julie Daum leads the North American Board Practice of Spencer Stuart.