Are you ready to serve on the Board?
27 Sep 2022
As per the recent trend and more understanding on the diversification of boards, on one hand, companies are increasingly appointing board members from diverse educational and cultural backgrounds including women and minorities, to better represent their stakeholders. On the other hand, ‘board readiness’ has never been higher, directors are scrutinized for their ability to understand more complex businesses, demonstrate technical know-how, deliver effective governance and generate sustainable long-term performance. The ground reality of board readiness for directors as well as companies is not the same. For example, companies expect directors to showcase right skillsets at the right point of time to tackle the problem. But for directors, appointment may mean sitting around the table top in an air-conditioned office and giving instructions to get the work done. The biggest gap between these two mindsets have never been addressed and this is one of the reasons why companies fail to appoint right board members, leading to governance failures in the long-run.
When it comes to having the right skillsets and right knowledge, what does the word ‘right’ mean? What can leaders aspiring to board roles do to prepare themselves? How does one develop boardroom capital? Predominantly these questions may come to our minds when we desire to represent the board. Holding a board position is a fancy desire however, the ground realities attached to the position are very different. Therefore, it is important that one must concentrate on building capacities in the right manner to serve boards in an ethical way.
Let us now understand some of the essential skillsets that are required to build the boardroom capital and make directors successful. The categories might not surprise you, but it is important to understand why all are necessary and to think about how to improve in each area.
- Financial Understanding - Directors cannot fulfill their fiduciary responsibilities without being able to quickly draw an informed opinion on to the capital structure of the company; its financial gearing, the sustainability of cash flows, or its risk envelope. These fundamentals have become even more important in wake of numerous audit-related scandals and increased scrutiny from regulators. This certainly does not mean having a technical understanding of the accounts and accounting procedures, yet, ability to interpret income statements and balance sheet is necessary. Asking smart questions to the CFO is equally important.
- Strategic Understanding – Boardroom capital requires an ability of directors to foresee long term impacts of the business decisions. Directors understanding on the key areas of business, new trends, competitors positioning and competitive advantage is vital. Having a strategic mindset and ability to built appropriate strategies is a skillset that every aspiring director must possess. For example, ESG (environmental, social and governance) issues are now a top priority and any board aspirant must be knowledgeable in this area. Knowing current trends and having done the market analysis will always help board members to reach right solutions with right strategies.
- Relational Understanding – It is critical to understand that the role of the board is very distinct and vast from other positions of the company. The role is to scrutinize, encourage, and advise, not operate. You need to build successful working relationships with other directors, the company’s top executives and wider stakeholders, each of whom come with their own experience and opinions. In the boardroom, where the pressures are high and the egos numerous, success turns on the ability to clearly communicate with others and, perhaps more importantly, understand what people are trying to communicate to you.
- Understanding of the Role – Every director must make a material intervention in meetings. Ask yourself, why you’ve been picked for the board and on which issues you can add the most value. Define and understand your role completely before getting on the actions. Develop an ability to listen everyone around you to grasp things better.
- Cultural Understanding – Knowing the environment, organizational culture and behavior of people in the organization is of the utmost importance for any director. Directors must have the ability to create an environment where the executives feel willing to be forthcoming, to admit if something is not going so well, and to seek the board’s advice and guidance on how to fix it. It is important that the dynamics and chemistry between the people and directors are right.
The aforementioned pointers highlighted basic understanding that very director or aspiring director must develop to serve the board. Now, let us also understand some of the simple ways to build upon these skillsets:
- Start developing an understanding of basic accounting terms. Observe your own P&L, assets, investments etc.
- Start interacting with people from different backgrounds to develop an understanding of their mindsets and views.
- Focus on your value points. Learn and polish on what is best in you and how the same can help your board to grow.
- Develop listening skill to gain more knowledge about your surroundings and environment.
- Develop technical know-how of your subject.
- Start developing technological understanding and learn to present structured data in meetings.
- Communicate frequently with people and try to address their concerns not only strategically but also emotionally.
How can MentorMyBoard help?
MentorMyBoard is on a mission to set up effective and efficient Boards in India with great Board members. The first step of setting up effective boards starts with choosing the right candidate and shaping his / her skillsets required to serve the board. With an expert team of mentors, MentorMyBoard can help directors and aspiring directors in the following manner:
- Help you get board ready;
- Conduct personalized handholding and mentoring sessions to develop and nurture essential skillsets required to become a director;
- Conduct suitable training programs on practical aspects of the boardroom;
- Assist in developing and shaping your technical know-how;
- Help you understand your value proposition that can help boards to grow.
For more details connect with us on www.mentormyboard.com.