News and Views
July 30, 2020
Posted in: WATSON Views
The current state of the world has put CEO succession in sharp focus (more on that here). At the same time, it is also exposing a shift in how the board oversees succession of the senior team. The pandemic is accelerating a shift already in motion with the broadening role of the human resources committee (HRC), resulting in a more intentional approach to how the board oversees succession beyond the CEO.
What used to be called the compensation committee, focused largely on the performance, succession, and yes, compensation of the CEO, is now commonly referred to as the HRC and is expanding to oversee broad human capital matters throughout the organization. With a close lens on the CEO, a wider view of the senior team, and a high-level view across the organization, the HRC and board play a critical role in overseeing the health of the organization in terms of people, leadership, and culture.
While it might sound like a board creeping into operational matters, the reality is boards are recognizing that as more of their organization’s assets, value, and risks reside with people, they need to better understand the organization’s opportunities and risks in terms of human capital. Boards that manage this balance well respect the CEO’s space to lead and also recognize that they have a responsibility to focus on what is material in this area; their CEOs value the board’s thoughtful insight and oversight and benefit from having more minds engaged in this complex and nuanced space.
Hey WATSON, what is the HRC responsible for these days?
Every organization is different, but an HRC’s purview may include:
- Oversight of the CEO lifecycle, from onboarding, development planning, and performance evaluation, to forward-looking succession planning – the CEO is the board’s only employee and the HRC supports the board in ensuring the right CEO is in place and that they are supported with rich development opportunities and feedback
- Consultation on material changes to the size and level of the senior team (e.g., additions or restructuring of the senior team) – this relates to financial materiality, risk, and organizational effectiveness
- Input into performance reviews (and potentially any important actions arising from them) for executives with a close tie to the board or its committees (e.g., a CFO who works closely with a finance and audit committee) – this has a direct impact on board functioning
- Confidence, through some direct involvement and oversight, that succession risks and opportunities are known and managed for mission critical roles, including executives under the CEO – this relates to risk and strategic opportunity and can have a direct impact on CEO succession
- Insight into the health of the top team – observation and awareness of the strength of the talent at the top, the CEO’s effectiveness in leading their team, and how effectively the team partners together – this relates to risk, succession, culture, and ethics
- Human capital oversight – insight into whether the organization has the structures, talent, leadership, and culture to succeed (reviewing strategies, plans, and dashboards/reports) – this relates to risk, strategy, and operational effectiveness
Have a governance or talent question?
When it comes to succession, the board and HRC are typically accountable for CEO succession, involving the CEO as a collaborator. They generally have insight and input into succession plans for the CEO’s direct reports to ensure they have confidence and awareness. Beyond the senior team, they are provided information to have confidence that the organization can attract, retain, and build the talent it needs. If there are a few critical specialized roles in the organization, they may ask for richer insight there.
How the board engages in succession planning conversations beyond the CEO requires a delicate balance, respecting the CEO’s space to lead while ensuring the board, through the HRC, is exercising its oversight responsibility. Often the CEO will lead the work, with the clear understanding that the HRC expects to be consulted, expects regular visibility into plans, and should be able to question, influence and, if necessary, direct action. The HRC provides oversight by providing input up front, engaging as a thought partner to the CEO throughout the process, reviewing the outcomes, and working with the CEO to develop a cycle and process to refresh the plans. Often the HRC engages an advisor to partner with the committee and the CEO. Much of the advisor’s time would be spent with the CEO (and sometimes the CHRO), but their accountability is to the HRC. In the normal course of business, the work of succession planning beyond the CEO might entail the following:
|Understanding the roles||
|Understanding the talent||
|Bringing it together||
This may feel like a lot, even without the shadow of a global pandemic. As boards and HRCs deepen their role in how they oversee succession beyond the CEO, we recommend starting small and iterating from there. Start with a rough high-level approach and workshop it with an advisor. External advisors or internal strategic HR leaders can help support and guide this work (CEOs often lack the time, expertise, and/or objectivity to do it alone). Prioritize the biggest gaps, risks, and opportunities and start there, broadening focus over time as you learn and develop a framework and process.
In this moment when succession risks may be in sharp focus, consider how best to target the board and HRC’s work on the immediate opportunities and challenges. What happens if something happens to the CEO? What is the risk of multiple executives, including the CEO’s emergency successors, falling ill? Are there any executives close to retirement that may not be willing to weather the storm? Will necessary financial cuts put the retention of key leaders at risk?
When you are more reliant than ever on great leadership, people risks and vulnerability heighten. As we emerge from crisis mode into recovery and forward planning, boards, through their HRCs, need to have confidence that the organization is managing material risks related to people, and has the structure, talent, leadership, and culture in place to position the organization for success. More than ever, this includes having a clear picture and high confidence that not only do you have successors for the CEO, you have bench strength below that.
July 16, 2020
Posted in: WATSON Views
World Economic Forum, Davos Manifesto 2020: “The purpose of a company is to engage all its stakeholders in shared and sustained value creation. In creating such value, a company serves not only its shareholders, but all its stakeholders – employees, customers, suppliers, local communities, and society at large.”
For some time now, there has been a greater call on all types of organizations to provide long-term, sustainable solutions to broad social issues. Recognizing the far-reaching impacts of corporate decision-making, organizations are increasingly being called upon to define their broader societal purpose and to integrate this purpose into their core business activities. In defining and living their social purpose, organizations are getting sharper in how they understand and engage with all of their stakeholders. Enter the era of Stakeholder Capitalism.
Stakeholder Capitalism focuses on ensuring organizational decision-making considers and balances the interests, risks, and opportunities of all parties affected by an organization’s operations, beyond its shareholders or members, to maximize long-term, sustainable growth. While the stakeholder capitalism concept has been evolving for some time, the current global pandemic and anti-racism protests have swiftly accelerated this conversation. At its core, stakeholder capitalism, or inclusive capitalism, is about building long-term trust with all affected stakeholders to create sustainable organizational success. Without a clear purpose and approach, it can be challenging to build this trust in a meaningful way.
Boards have an important strategic role to play in shaping and stewarding their organization’s broader social purpose and building trust with a multitude of stakeholders in the process. Recent global events have intensified the board’s role in this area and forced directors to consider what this means for their organizations. While historically boards have tended to approach this area from a disclosure and compliance perspective, boards are now beginning to focus on social purpose as a strategic imperative.
How can a board play a meaningful role in shifting their organization to a more inclusive, stakeholder-driven approach? For many boards, it can be challenging to know where to start. As a board, it’s important to understand where your organization is at, where it needs to get to, and what gaps need to be addressed to bridge the difference.
Start by understanding where your organization is at. What practices and structures do you have in place already? How well do they align with an inclusive, stakeholder-focused approach?
The following survey will help you assess your current state:
Where is your board at? Are your governance structures and practices helping you to achieve an effective and inclusive stakeholder-driven approach? Consider which areas need further development, what your board needs to move forward, and what support you need to get there. Then start thinking about where you want to be as an organization.
Moving beyond your current state can be a challenging process. It takes time, understanding, well-structured discussion, and guidance. We are here to help. We can support your board in identifying gaps, aligning the board on tangible actions, and developing a practical roadmap forward. We’ll help you navigate the complexity and get to greater impact – for your organization and the stakeholders you serve.
Have a governance question?
Let us know. We are here to help.
July 8, 2020
Posted in: WATSON Views
When it comes to getting on a board, the resume that got you your job may not make it past the first round of screening. Boards are taking a more sophisticated approach to director recruitment, putting renewal on their forward calendars well in advance of anticipated director turnover and bringing tested executive recruitment practices to the boardroom. More boards are also working with specialized governance and talent firms, such as WATSON, to either guide them through the selection of directors, or to conduct the entire director search process.
As recruitment processes gain rigour, without a board-ready resume chances are your good name and experience may end up at the bottom of the pile. With an increasing number of highly experienced professionals seeking board positions, how do you stand out from the crowd?
First, Do Your Homework
Before even beginning to edit your resume, get to know the board. Understand the industry and the issues facing your target organization. Try to understand what’s most important to the Nominating Committee. Research the organization and examine the current talent around the board table. Think about:
- What skills, expertise, and experience do you have that will complement the current board?
- Do you bring specific talents that the board currently lacks?
- What attributes will be of value to the long-term achievement of the organization’s strategy?
- Why do they need you at the table?
Next, Shift Your Approach
Your experience and skills as an executive are valuable, but boards are not looking for operators with brilliant execution. Don’t get us wrong, what made you successful as an executive is incredibly important, but board work requires a shift in perspective. Your current resume is likely structured around corporate accomplishments with a detailed summary of your achievements. Boards are looking for directors who can assess and steer strategy, and oversee risk, financial reporting, management performance, and governance. Take a step back and view your experience through a big-picture lens. Ask yourself:
- How have you addressed organizational issues that are significant to stakeholders?
- What experience do you have guiding decision making and working collaboratively with others?
- How would you describe your strategic agility?
Then, Tailor Your Resume
Your resume should be customized to your target board. Remember, in governance, one size does not fit all, and each board will put different weight on specific skills and experience. However, there are some competencies that appeal to many boards, including:
- Visionary leadership
- Strategic perspective
- Collaborating on high impact decisions with a multi-disciplinary team
- Strong communication skills
- Demonstrated problem-solving abilities
In addition, given the ever-increasing scrutiny on boards over the past few years, most boards place considerable value on financial acumen, risk management, and ethics oversight. In addition, growth in the tech industry, the blurring of borders through ecommerce, and the immediacy and impact of social media on company brand and performance signals a strong push by many boards to add technical acumen in the boardroom, regardless of industry. (Side bar – the desire for stronger IT expertise and tech industry experience is shaking up board composition and lowering the average boardroom age by as much as a decade, as many of the most sought-after tech executives have careers rich in expertise, but short in tenure, making this a perfect time for younger executives to seek board positions.)
A good exercise to spark your thinking is to highlight transferable skills and board-relevant experience in your career resume and then further expand on them. Consider what talent and skills are going to be the most important to the specific board that you’re interested in, and then structure your resume to showcase ‘why you?’
Board-Ready Resume Must Haves
The top half of your resume is the most important and unfortunately, is often the only section that gets read in the first round of resume reviews. Board-ready resumes visually and concisely draw the Nominating Committee’s attention to the details that make you really stand out above the competition.
Expertise Headliner Highlight your top three to five areas of expertise
Expert in: Mergers & Acquisitions – International Expansion – Private Companies – Asian Pacific Markets
Board Profile Capture the breadth and depth of your experience and the value you will add to the board in three to five sentences. Spotlight governance, education, and corporate experience while illuminating the competencies and attributes the target board will consider in their interviewing process and final selection.
Board Experience Provide an overview of your board experience (including committees). If you haven’t gained any formal board experience, think about any internal governance experience you may have such as participating on a special task force or committee, serving as a company representative on an industry committee, involvement in negotiating a joint venture or merger, or advising or reporting to a board.
Career Achievements Summarize and quantify your career achievements over the past 10 years and include a brief overview of each organization and the scope of your role in terms of functional leadership, size of team, and financial/budget responsibilities. If you worked for a lesser-known brand, include a short description of the company and industry. When summarizing your accomplishments, present them in categories that reflect the talent and skills that would interest a board, such as:
- Product Innovation
- International Expansion
- Business Strategy and Revenue Growth
- Change Management
Education, Professional Designations, Memberships, and Awards Keep them concise and ensure they add to your value proposition. Too often we get too attached to particular accomplishments and fail to view our achievements through the board’s lens. Be selective.
Lastly, Polish Your Resume
Keep your resume to two pages. Re-read it, eliminate duplication, delete buzzwords and jargon, and re-read it again for spelling and grammar. Tap into your network and ask a director to read your resume based on your target board. Does your resume paint the picture of a director who will add the most value to this board?
Next step – get ready for the interview.
July 2, 2020
Posted in: WATSON Views
In a crisis, no matter the sector or organization, CEOs and chairs have to recalibrate their relationship and engagement to find the right balance and learn as they go. They must flex together to redefine the relationship for the current moment in a way that provides mutual value and support. For those navigating a changing relationship, we offer some advice to guide the way.
The best CEO-chair partnerships follow an ongoing rhythm of open communication, while being dynamic and flexible to changing circumstances. The relationship will evolve and change over time, depending on the organization’s internal and external context and the needs of each party. There are times when the relationship will inevitably deepen and require more active engagement from both the CEO and the chair. For example:
- When a new CEO or chair comes into the role
- When there are significant organizational changes – a new strategic plan, an upcoming merger/acquisition, major legislative changes
- When there is a question of leadership or ethics at the top – an issue where the chair needs to understand the process or dynamics to report back to the board
Or when there is a major shock to the system – a crisis. A low-likelihood, high-impact event that can threaten the organization’s survival. We are currently in one of these times. We are in a moment that not only tests the strength of this key relationship but requires the CEO and chair to engage in an entirely different way. Chairs might find themselves unsure of how to strike the right balance between giving the CEO space to lead and ensuring they feel the support and confidence of the board. At the same time, CEOs might find themselves carrying a heavy load and unsure of how best to mobilize the board and chair to respond to the crisis at hand.
The board has a responsibility to monitor the organization’s crisis response and the implications for its people, finances, and strategy, in addition to its regular oversight responsibilities. In order to do this, many boards are meeting more often and receiving regular updates on the organization’s situation and response. For a CEO, this level of engagement could feel like a burden or a blessing – the chair plays a key role in ensuring it is the latter.
The CEO should be focused on the crisis response and managing ongoing operations, drawing on the chair as a sounding-board and strategic advisor. While the CEO is concentrated on the immediate operational details, the chair can add value by complementing this with a higher-level view. The chair plays an important role in reminding the CEO of the long-term vision and purpose of the organization to ensure immediate actions align with the organization’s purpose, values, and longer-term aspirations. Together, they lead the organization to a recovery that is grounded in the organization’s purpose, culture, and values.
|Advice for chairs||Advice for CEOs||Advice for the partnership|
Hey WATSON, how can you future-proof the CEO-chair relationship for times of crisis?
The best way to future-proof your relationship for times of crisis is to build a solid foundation of trust and respect, coupled with clear roles, communications, and expectations. At the same time, ensure you maintain professional boundaries so you can have frank and honest discussions and challenge each other, bringing a level of objectivity and avoiding the potential for a close relationship to cloud judgement.
Go one step further and take the lead in future-proofing the board-management relationship. Cultural and personal fault lines have a tendency to crack open in a crisis, creating new challenges that can distract from the real issues at hand. Building a healthy board culture and a constructive board-management dynamic will serve the organization immeasurably in a time of crisis.
Have a governance question?
The chemistry, communication, and trust between the CEO and chair have a direct impact on an organization’s ability to meet the challenges presented in a crisis and move forward with purpose. Successful response and recovery depend on the ability for this key strategic partnership to evolve to meet the needs of the day. Across organizations and sectors, we are seeing this partnership evolve and strengthen, bringing balance and focus through uncertainty and preparing organizations for the challenges and opportunities the next paradigm brings.
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