BRIEFINGS PODCAST: PLAY THE BOARD GAME

Play the Board Game

NOTE: While this transcript has been reviewed, it may contain errors. Please review the episode audio before quoting from this transcript.

[Brad Pitt as Billy – ‘Moneyball’ movie]:

Why don't you walk me through the board.

Jill Wiltfong:

Some turnover is needed in the boardroom. Many are near retirement age.

Jane Stevenson:

We're really at the juncture of a generational shift in the boardroom. The challenge of attracting the right person at the right time.

Jill Wiltfong:

What does that process look like?

Anthony Goodman:

We'll put up with things that maybe we shouldn't.

Jill Wiltfong:

It's a risk anytime you make a change, right?

Anthony Goodman:

I would say no.

[Announcer]:

Dear board members, instead of our normal proxy voting system to elect new board members, this year, we're going to be doing something a bit different.

That's right. Time for a game of musical board chairs.

[Board member]:

Hey, there's no chair for me.

[Announcer]:

And how many boards do you serve on?

[Board member]:

Uh, five. Kinda lost count.

[Announcer]:

That can be a problem. Too spread out. Thank you for your service.

[Board member 2]:

Now wait a minute. I know I deserve a seat.

[Announcer]:

Your area of expertise?

[Board member 2]:

Well, I don't have an area per se. I'm more of a generalist.

[Announcer]:

Some generalists are needed, but this board has too many. Thank you for your service.

[Board member 3]:

But now there are only eight of us.

[Announcer]:

Eight diversely skilled, supremely motivated board members. Now that's what I call a perfect composition. I'll be going now. See you next year.

Jill Wiltfong:

Hi, I am Jill Wiltfong, Chief Marketing Officer for Korn Ferry and this is "Briefings," our deep dive into topics that corporate leaders need to care about.

If there's one thing both company management and boards can agree on, it's that some turnover is needed in the boardroom. In fact, a remarkable nine out of 10 executives, and nearly half of directors, think at least one board member should be replaced. The likely reason, only 28% of executives feel their current boards are armed with the right combination of skills and expertise. Despite some directors being reluctant to step down voluntarily, the issue of replacing directors is currently steam rolling to a head, as many are near retirement age, as of last year, directors age 66 to 70, held almost a quarter of S&P 500 director seats.

Though, we're at a crossroads for boards, which of course continue to play a crucial role in setting corporate agendas. Let's jump to the heart of what, and the why of how to play the board game. Before we start, if you're watching us on YouTube, please be sure to like, subscribe, and leave a comment to let us know your thoughts on this topic.

Meanwhile, I'm joined today by Jane Stevenson, Korn Ferry's Vice Chair of Board and CEO services. She's placed directors on many major boards over the years and has some deep insight on this issue. Jane, thank you for being with us today.

Jane Stevenson:

It's great to be here.

Jill Wiltfong:

As I mentioned at the top, fewer than one third of executives feel their current boards have the right skills. Is that what's mainly behind this push for director turnover, or are there other factors at play here?

Jane Stevenson:

The need for new skills is really only one part of what's needed in directors in the boardroom. We're really at the juncture of a generational shift in the boardroom today. And what we're seeing is, for a variety of reasons, some are reaching the end of a term if there's a term limit or age requirements, or we're also seeing a number of directors who are in their late 60's, and they're just ready to move on from being directors.

Jill Wiltfong:

Got it. So, as I understand it, boards of major corporations are coming to you, and saying, "Hey, we'd like your help to find a successor to our outgoing director." And you're actually saying to them, "You know what? Let me help you find your next four or five directors." and you call this concept "board progression" as to board, as opposed to "board succession," and it's fascinating to me. Can you talk a little bit more about this progression versus succession notion?

Jane Stevenson:

The concept in the past has been, a director says that they're gonna be retiring or stepping off the board, and then there is an iterative director transition, right? So, you're looking for a replacement for an individual director, as opposed to holistically looking at that board as a team. And as you think about that sort of juxtaposition of all the directors, and you start to think about not only who's next going to be stepping off the board, but maybe two or three people after that, you start to think in terms of a composition, as opposed to just one transition.

[Dan Martel]:

Benefits of having an incredible advisory board. Number one is credibility. Number two is connections, built-in network. Three, is conversations. They're gonna give you guidance that are gonna help you get through those tough times.

Jill Wiltfong:

That's Executive Coach and Entrepreneur, Dan Martel talking about why it's helpful to have an advisory board. He's speaking more from the perspective of an entrepreneur.

But Jane, you mentioned that when there are no open board seats, director candidates could join the board in an advisory capacity. What's the reasoning behind that?

Jane Stevenson:

This is a novel concept, and certainly not traditional, but I have had situations where you've got someone who's available, they're a very compelling background, and you want them to participate in the board, come up the curve in time for an open seat that may come in a year from now or so.

It's one way that I've seen a couple boards actually address the challenge of attracting the right person at the right time.

Jill Wiltfong:

You have a particularly interesting example of someone who was brought in as an advisory board member, and within just a few years, was elected board chair. It's this Cinderella story I'd love to leave our listeners with. Can you, can you walk me through how all of that transpired?

Jane Stevenson:

Yeah. Well, this was someone that had a very unique background. And frankly, we thought was gonna be compelling. He went on the board as an advisory board member, and a year later, served as a voting board member, and a year later, it was announced that the chair was gonna retire. So literally two years after sitting on the board as a voting member, he became the board chair, and has done a phenomenal job in that role.

Jill Wiltfong:

It's great. It happens, right? It happens. Thank you so much for, for coming on. Appreciate your insights today.

Jane Stevenson:

Oh, it's such a pleasure. Thank you, Jill.

Jill Wiltfong:

So, we've explored the what and why of doing a board refresh. After the break, we'll take a look at how sitting directors are being evaluated, and if they're being evaluated at all. Stay with us.

Rupak Bhattacharya:

Hi, and welcome to "This Week in Leadership." I'm Rupak Bhattacharya, and here's a quick look at what else is happening in business.

[Announcer]:

Let's talk about imposter syndrome.

Rupak Bhattacharya:

According to Korn Ferry's Workforce 2024 report, 71% of CEOs say they feel like impostors. Experts say CEO's sheer quantity of responsibilities, including satisfying investors, transforming the business, and speaking out on social issues is a big reason that many may feel overwhelmed.

[Announcer]:

Shipping prices, shipping prices, shipping prices.

Rupak Bhattacharya:

Many retailers say shipping suppliers have hiked prices by almost 20%, causing retailers to pass on the cost to customers. The higher shipping fees reportedly stem from a leap in fuel and labor costs, as well as an overall shift to pricier home delivery shopping.

[Announcer]:

It's an increase in job seekers adding AI skills, or AI experience to their resumes.

Rupak Bhattacharya:

Recently released data indicated a 142-fold increase in applicants listing AI knowhow on their resumes over the last year. However, experts caution much of it may be overstated, since claiming to have AI abilities is currently critical to getting past resume filters.

For more insights on business and leadership, head to kornferry.com/insights. Now back to Jill, in our episode, "Play the Board Game."

[Anthony Goodman]:

You know whether someone's sitting at the table and not saying anything, or whether they're sitting at the table, and talking too much, and talking over everybody.

[Participant]:

Right.

[Anthony Goodman]:

And you can do something about that, and you can help your board be much more effective. And understand who are the A players, and who are the B players.

Jill Wiltfong:

With us now is Anthony Goodman, head of Korn Ferry's Board Effectiveness Practice. We're fortunate to have Anthony, because he oversees one of the rare surveys of S&P 500 companies that measures board evaluations. Anthony, thanks for joining us.

Anthony Goodman:

Hi, Jill. Nice to be here.

Jill Wiltfong:

So that last clip featured you, talking about how director assessments can help strengthen boards. But in your study, you found that last year, less than half of companies conducted individual director evaluations as part of their ongoing board assessment. If assessments can be so beneficial for companies, why is that figure so low?

Anthony Goodman:

You know, when we think about why might that be? My own theory is that collegiality, which is the number one word, if you ask a board director, "What's the culture of your board like?" The first thing they're gonna tell you is it's very collegial. It's a sort of need to get along, and therefore, you know, we'll put up with things that maybe we shouldn't. But, you know, there's so few seats on the board, why would you give up one to somebody who's maybe not contributing what they should be?

Jill Wiltfong:

Talk to me about how most boards currently conduct director assessments. Did, do directors interview each other? Do they fill out a form? What does, what does that process look like?

Anthony Goodman:

Very commonly, there is a board evaluation that is done with a survey, and they use the same survey to ask questions about the directors as well. And we all know the US is a very litigious society, and these things can be discovered, and that would explain why people don't like to give very good feedback via a form, a survey. Much better, is where the board chair, the independent board chair, or independent lead director, actually will conduct interviews with each of the directors, and ask them to assess their own performance, and then ask them to assess the performance of the other directors, collect all that information up, and then also give each director the feedback. How many really do that in that in that kind of rigorous way where it really is useful feedback, very constructive, developmental feedback. I think it's minority.

Jill Wiltfong:

You also found in your study that only a third of companies use an outside party for evaluations. Wouldn't that be a more objective source for those things?

Anthony Goodman:

Well, yes, but I would say that, wouldn't I? But I do think it is true, that if you use a third party, whoever it may be, to go and conduct the interviews, I think you're gonna get a higher level of candor. Because you're asking someone who's outside the system, to actually be able to go in and look at what's going on, rather than somebody who's part of the system, may be part of the problem, attempting to actually do it themselves.

[Brad Pitt as Billy – ‘Moneyball’ movie]:

Why don't you walk me through the board.

[Jonah Hill as Peter – ‘Moneyball’ movie]:

It's about getting things down to one number. Using stats the way we read them, we'll find value in players that nobody else can see. People are overlooked for a variety of biased reasons and perceived flaws, age, appearance, personality. Bill James, and mathematics cut straight through that.

Jill Wiltfong:

That's a scene from the movie, "Moneyball," starring Brad Pitt, where a radical new concept behind determining player value is first discussed.

Anthony, we showed that clip, because you actually use a statistical term from baseball known as VORP, or Value Over Replacement Player when thinking about board members. Tell me how that applies.

Anthony Goodman:

Yeah, so it's more of a concept that we use to help boards think about the valuable contributions that they're getting from the board members they have. Because I mentioned earlier on in the conversation, there's almost, you know, I'm willing to put up with Fred not really doing that much for the board because he's a little bit out of touch. So, I'll let him sit on the board, and until he's, reaches 75, and then he'll have to retire. That's fine. And you think that Fred's doing no harm, and he probably is doing no harm, but he's also doing no good. And imagine what the value of a replacement player, in this case, another board director, who maybe is a sitting executive, or someone who's only recently retired, and is much more current, and will be able to contribute so much more to your strategy conversations.

Jill Wiltfong:

So, leave me with a prediction here. Over the next, we'll say five years, do you think the increasing pace of change we're seeing in the world at large will force a more rapid turnover in boards, or would you guess that the process will stay similar to how it is now?

Anthony Goodman:

You know, one of the things that working with boards I see all the time, is that you companies are going through a lot of transformation because of what's happening in the outside world because of AI, and other technologies, because of supply chain changes, et cetera, et cetera. There's a lot of change for companies. The last thing to change is usually the board. I describe it as being a lagging indicator of the change in the company. That's my perspective there, is that they are a little bit slow to the party when it comes to transformation, and they could be a lot quicker.

Jill Wiltfong:

Yeah, yeah. Well, we will, we will see, right? It's going to unfold in real-time for all of us. Thank you very much for all of your insight today. It was really great to have you on.

Anthony Goodman:

Great. Thank you for having me.

Jill Wiltfong:

The Executive Producer of "Briefings" is Jonathan Dahl. Today's episode was produced by Rupak Bhattacharya, Nadira Putri, and Teresa Allan. And it was edited by Jaron Henrie-McCrea. It contains reporting by Russell Pearlman, Arianne Cohen, and Peter Lauria.

Our video segment contains original artwork by Frazer Milton, Hayley Kennell, Jonathan Pink, and Sasha Kostyuk.

Don't forget to read our magazine, available at newsstands and at kornferry.com/briefings. That's it for Korn Ferry “Briefings”. I'm Jill Wiltfong. See you next time.

Jill Wiltfong:

Everyone except me should go.

Anthony Goodman:

Yeah, exactly.

Jill Wiltfong:

They can all go, but I'm good.

Anthony Goodman:

He can go, but not me.