GovernWith Blog

Mastering Director Transitions for Enhanced Board Effectiveness

In today's intricate board management landscape, increasing intricacies in operational realms have ushered in higher stakeholder expectations. There's a growing belief that director competencies should mirror those in the corporate world. Boards, irrespective of their sector, are now expected to play a pivotal role in risk management, offer strategic guidance to senior management, and lead succession planning initiatives.

Planning Transition Snippet

Navigating Director Transitions: Elevating Governance Through Collaboration

The query arises – who monitors the board? Though largely a self-regulated exercise, fostering a strong relationship between the board and senior management can yield superior governance outcomes. This collaboration transforms the board from being a risk to an invaluable asset. When structured and managed adeptly, a board can evolve into a competitive advantage, a desirable feature across various sectors.

In this context, a crucial question surfaces – how should boards navigate director transitions? A holistic response is vital, transcending industry boundaries. Veteran experts, Rebecca and Fi, guide us through the intricate director transition cycle, encompassing stages such as recruitment, induction, development, and retirement.

Proactive Measures for Director Vacancies:

The heart of the director transition cycle lies in its capacity to revolutionise how boards approach vacancies. Rather than reactive actions, foresighted planning is key. It involves projecting beyond immediate needs, aligning incoming directors with the organisation's ethos, culture, and long-term objectives.

Rebecca Murphy advocates for strategic planning as an antidote to director vacancies. Beyond addressing immediate gaps, a proactive stance demands a comprehensive strategy that unites incoming directors with the organisational values and overarching goals.

Embracing Diversity and Skills for a Robust Board:

Fi Mercer stresses the significance of cultivating diversity in board composition. Going beyond skill-centricity, contemporary recruitment demands a broader approach. Directors must possess a profound sectoral understanding, blend professional acumen with modern proficiencies, and encompass environmental, social, and governance skills – crucial for manoeuvring modern governance complexities.

Interestingly, diversity extends beyond skills and sector insights, encompassing leadership styles, behaviours, and representing minority groups. This holistic view enriches board dialogues, nurturing an all-encompassing perspective in sync with the organisation's intricate dimensions.

A Comprehensive Approach to Director Transition Planning:

Embracing the core tenets of the director transition cycle, boards – irrespective of their sector – should anchor their approach in foresight and strategic depth. A proactive strategy anticipates vacancies, aligns incoming directors with organisational objectives, and champions diversity in skills and viewpoints. The cycle's components of recruitment, induction, development, and retirement transcend sectors, fostering effective governance that propels organisations toward sustainable triumph.

In essence, the director transition cycle offers more than just reactive governance tactics. It heralds a paradigm shift that harmonises directors' roles across diverse sectors, elevating them to strategic architects. As organisations navigate the labyrinthine landscape of governance, the director transition cycle emerges as a guiding light, directing them toward a future where boards not only govern but also flourish, shaping their realms with unmatched precision.

44% of Directors are not confident their induction process effectively prepares new directors for their role on the Board. A further 54% of Directors are not confident that their Board adequately addresses succession planning. If the start and end of the Director lifecycle are like this – what is the middle like? 

GovernWith’s CEO & Founder Fi Mercer will be joined by special guest Megan Motto, CEO of Governance Institute of Australia to discuss each stage of the Director's lifecycle and their learnings. They will also provide tips on how to ensure Directors have the tools and resources they need to succeed at each stage. 

A life cycle is a series of events bringing something new into existence, whether that’s a life, a product, or a director. The life cycle follows its growth and progression into maturity, eventual critical mass and finally, its decline. 

The stages of the Director’s lifecycle are recruitment, induction, development, mentorship, and retirement. These stages encompass the progression a director goes through over their tenure with a Board and whilst there are some common factors, the length of each stage is unique for every Board and Director. 

Let’s break down each stage: 

 Recruitment 

The first step of any life cycle is important, because without the right foundation being built at the beginning, you’re setting yourself up for failure. Therefore, having the right people on your Board is key to being able to achieve your purpose. Choosing the right Directors is hard, it’s a balancing act between choosing between the people you have apply and the skills, experience, qualifications, and behaviours you need to fill from the Directors departing. Knowing how these potential Directors are going to complement the existing ones, (or perhaps not), is critical to ensuring that the right people are recruited. 

Induction 

44% of Directors (from our governance data insights) are not confident their induction process effectively prepares new Directors for their role on the Board. This is not a comforting statistic for any new Directors who might be looking to join a Board. Having spoken to Directors old and new about what their induction programs looked like, and what works and what doesn’t, we’ve found that having an individually, targeted approach is key. It’s not a good use of time and resources to be educating new Directors on something they are already experts in, nor is it wise to assume that a director already knows something, especially when it is sector related. Connecting a directors induction program to their skills and capabilities is proving to help fast track a director’s confidence, engagement, and satisfaction. 

Development 

We’ve spoken about it at length in previous blog posts, such as Board Skill Sets - New Requirements for a New World , in this new world we find ourselves in when it comes to the skills required on a Board. With this in mind, it’s more important than ever that we’re not only upskilling Directors in the areas that they need, but also in a way that ensures the Board is well rounded. A well-rounded Board has a combination of Sector Specific Skills, Professional skills, Contemporary skills and, of course, Behavioural Skills. Knowing where each Directors areas are for opportunities of development is key for a sensible development plan rather than a scattered, generic approach. Targeted Education relevant to the identified capability gaps is proving to be far more important than the old “one size fits all” Governance Education that used to be rolled out regardless. 

Mentorship 

Whilst this may not be a stage that every Director goes through or spends much time in, it is a vital step to ensure the continuation of their organisational knowledge. Where possible, it is essential that more tenured Directors take newer Directors under their wing. Even something as simple as offering to have a cup of tea pre and post a Board Meeting to go over any items that they may want clarification on, helps build their understanding and confidence and ultimately helps meetings run smoother. What can then also be gained, is that they both bring forward something to the other, the more tenured Directors offer Board experience and knowledge, and the newer Directors can remotivate and remind those older directors who might be feeling stagnant or stuck in their Board roles. It reignites the question – Why are you on the Board? – What is my “Why”? because they have someone asking. 

Retirement 

And finally, after the Director has served their term and is ready for their next step, it’s time to consider their retirement. However, how is a director supposed to be assured that all their hard work will be continued when 54% of Directors (from our Governance Data Insights) are not confident that their Board adequately addresses succession planning. The fundamental piece to understand here is what skills are about to leave the Board, so that you can look for someone with similar skills to replace those gaps. Or it can be used as an opportunity to broaden the skills on the Board and diversify those around the table. 

As we’ve outlined in the life cycle progression above, being a director is a varied position that has five unique stages, each of which have specific requirements. 

 Thankfully, there is also the help of Boardroom Plus to assist with each stage of this life cycle as well. The Individual Director Development program that is now available – it helps people who want to be Directors become more prepared and the Whole Board Governance program that includes features to help with induction, development, recruitment, mentorship, and retirement. 

Book into a demonstration below 

Boardroom Plus

The Evolving Skillset for Directors

The skills needed to be a director is an ever-changing list and in an environment of legislation changes, added media scrutiny and increased requirements to the scope of work required of a director – not matter the industry, it’s getting trickier for Boards to keep them.

Rising Employee Well-being Concerns

Added to this is the stressor of increasing exhaustion and burnout levels throughout every staffing level of the organisation and the struggle to replace staff who leave. A recent Deloitte survey suggests that in their survey of 2,100 employees and C-level executives across the USA, UK, Canada and Australia “nearly 70% of the C-suite are seriously considering quitting for a job that better supports their well-being.”

The Great Resignation

Looking beyond the C-suit, with the great resignation now at our shores, the Bureau of Statistics confirms that there has been an increase in the proportion of workers switching jobs – from a low of 7.5% in 2021 to 9.5% as at February 2022. Compounding this issue is a talent shortage, which is making it harder, taking longer and more expensive to replace the staff that leave. 

The Impact on Boards and Communities

Anecdotally, we’re hearing about this a lot from Boards, CEO’s and Executives who are having long serving staff, executive and Board members leaving and taking their wealth of sector and organisation specific knowledge with them. And especially in the smaller communities where they’ve always had a hard time recruiting for Directors it has become that much harder with the added external pressures. 

A Call to Action

Fi Mercer, GovernWith’s CEO and Founder, has spoken a lot about this over the last 12-months in the Aged Care sector, from the 2021 and 2022 Govern with Care conference, 2021 LASA Aged Services Innovation: Owning the Future Now, however it’s an issue for all Directors and not just those in Aged Care. We believe that it is such as important element that Directors must be aware of an act upon before it’s too late. 

Reimagining Succession Planning

Whilst this situation could be framed negatively, we think that it’s the perfect time to shake up succession planning and director appointments to give both a fresh perspective. With only 46% of Boards in 2021 feeling that they address all levels of succession planning there is room for improvement for all Boards. 

Innovative Approaches to Director Appointments

Apart from a focus on the future skills required for successful Boards there are other aspects to consider for thinking outside the box in terms of achieving director appointments. As companies are getting more creative and flexible in order to attract and retain staff members, Boards should think about doing the same for Board positions where they can. For example, there is an increase in the number of virtual director positions available where Directors who aren’t living in the community but have the skills needed by the Board are able to virtually be a part of the meetings and only travel to in person meetings on occasion. Another example is Boards who are recruiting younger professionals who are interested in becoming part of the Board but need to be upskilled in a particular area. These young professionals are then put onto sub-committees to learn and be nurtured by the more experienced Directors to gain the skills they need. This helps ensure future succession for the Board and gives opportunity to those who might not normally get it. 

Investing in Director Development

Along the same lines, more Boards are offering development opportunities for their directors as well. By organising for their directors to participate in a skills matrix to identify relevant and targeted training opportunities to upskill themselves Boards better able to attract professionals who are still growing their careers rather than at the end of it. 

Building Collaborative Alliances in Governance

Another opportunity that boards should consider is growing their relationships with other boards in the community. These affiliations, especially in areas like health and aged care where there is a real focus on this notion of partnerships, can help to share the load of governance. 

A final question for you to think about heading into the second half of the year - Is your Board looking at the skills, qualifications, experience and behavioural attributes of everyone around the table to ensure that should something happen you’d know the real breadth of skills that were being lost? 

If you want to learn the skills, qualifications, experience and behavioural attributes of your board or for yourself as an individual, register to attend one of our demonstration sessions here 

A key factor for building high functioning boards that have the ability to lead successful organisations is for the board to have the right systems, processes and supports in place to empower a group of experts to become an expert group. 

An effective induction is an essential process that enables directors to be ‘on boarded’ in a timelier fashion, allowing them to contribute their expertise better at the board room table, to feel more confident about their knowledge of the organisation and its risks, and ultimately to improve their ability to govern. 

However, our research shows that boards across multiple industries consistently identify effective director induction as a critical gap in their governance processes. While effective induction is actually quite a straightforward process to achieve, many boards are missing the mark, with the result being directors who lack the understanding, expertise, engagement  and confidence required to properly govern the organisation. 

What does an effective director induction process look like? 

An effective induction process provides new directors with information about their role so that they quickly become useful, integrated and satisfied members of the board, and are able to contribute effectively. 

It is important that the induction process is relevant to each director’s skillset, and is an engaging process. This is a shared responsibility for imparting and gaining knowledge about governance requirements as well as the organisation and its top risks. 

A quality induction process should include a well thought out combination of: 

1. Knowledge about the director’s skills and experience, with corresponding supports & information: mentoring/buddying, board online systems and supports tailored for their gaps. 
2. Information about the organisation and director roles, including strategy, services provided, top risks and tolerances, directors’ roles and responsibilities, board processes, governance policies and procedures, board resources and training, as well as tours of the organisation and social events. 
3. Information about the industry/sector, including key information about the sector and its unique requirements, frameworks, legislations and legal structure 

When should the director induction process begin? 

Induction should commence in the recruitment stage, before election or appointment, to ensure that directors with the necessary strengths are appointed. The Governance Evaluator Director Development & Skills Matrix is invaluable at this stage in identifying the current skills, experience or cultural gaps on the board that will inform the recruitment process as well as explain the board’s priority areas to potential new directors. 

The induction program itself should comprise a stepped process that includes actions before, during and after the first board meeting. New directors should start by completing the Director Development & Skills Matrix and their results should inform key elements of their induction plan prior to commencement on the board.  For example, a director may be starting on the board of a healthcare organisation, but their Development & Skills Matrix results show that while they have high finance and legal skills and experience, they have low clinical governance and data analysis skills. This will therefore inform the most suitable director to be their mentor, as well as the educational resources on which they should focus. 

Their individual induction action plan would therefore include standard organisation and sector components but also include individually tailored content to help them address their specific development needs to more quickly onboard and contribute. In addition, the process enables new directors to become more aware of their strengths, so they feel more confident to contribute in that area at the board room table. 

How long should director induction take? 

Being realistic about the time it takes to become familiar with an organisation is important. An effective induction process may take up to 6 months for the initial actions and is important to be ongoing. It should also include regular check ins between the chair, mentor and the new director to ensure they feel welcome, comfortable and confident to contribute.  Good practice is to have director induction and check in as a board meeting agenda item. 

What steps contribute to an effective induction process? 

As outlined in figure 1, an effective induction process consists of often concurrent steps that seek to optimise: 

• The culture of the board – promoting a welcoming, collegiate culture that values and appreciates the new director. Achieving this culture will result in directors who are engaged, passionate and have a long tenure. 
• The contribution of the director – educating and empowering the new director in relation to the organisation, broader sector and their governance requirements, but also in relation to their own skills and areas for development. Achieving this will result in directors who quickly make a meaningful contribution to the board and continue to improve throughout their tenure. 
• Continuous improvement – ongoing evaluation and improvement of the induction process to ensure that future new directors, and the organisation, will benefit. 

Fig 1: An effective director induction process. Steps are often concurrent. Read on for more details about each step. 

Getting started for your board 

As you can see, an effective director induction process is based on understanding the new director’s skills and experience, and working within a health board culture with a commitment to contribution and continuous improvement. The benefits of achieving this from the outset are significant, in terms of director satisfaction, tenure and contribution right from their first board meeting, as well as the effective governance of the organisation. 

The Governance Evaluator Director Development Program is the perfect place to begin, as it supports boards to achieve the key characteristics of effective governance, ensuring a consistent and high functioning level of the right skills, experience, and behaviours across all directors. 

Our expert conveners support boards to optimise their induction process, and guide directors to build and maintain their Individual Director Development Plans. 

Steps to an effective director induction process in further detail 

Culture 

• Welcome*: As soon as possible after the board has confirmed/been notified of the appointment of a new director, the chair sends a welcome and congratulations letter, inclusive of requirements for commencing the induction process prior to participating in the first board meeting. 
• Appointment*: The new director signs all relevant contracts, statements and disclosures. 
• Introductions*: The chair introduces the new director to existing directors (and senior staff, if appropriate) as soon as possible after their appointment and seeks to involve the director socially in board activities. 

Contribution 

• Development & Skills Matrix*: The new director completes a Director Development & Skills Matrix to identify areas of high strength/expertise and areas where development may be required. 
• Individual Director Development Plan*: The chair assists the new director in building a tailored development plan to guide their education, training and development priorities throughout their tenure on the board. 
• Chair briefing*: The chair takes the new director through the minutes of recent meetings, and briefs them on the issues the board is dealing with at the moment, or will be looking at in the future. The chair also draws the new director’s attention to the roles and responsibilities of the board in general, and the roles and responsibilities they will be expected to undertake as an individual, and discusses any concerns they may have. 
• Mentoring*: Based on the results of the Development & Skills Matrix, the chair nominates a more senior member of the board with differing skills and experience to the new director to act as mentor to the new director. The mentor supports the new director in a variety of mutually agreed and scheduled ways, such as taking the new director through board papers, sitting next to the new director in board meetings and regularly checking in by phone or face to face, accompanying the new director on a walk around the organisation. The chair is kept informed throughout the mentoring process. 
• Background reading*: The new director is provided with a copy of the organisation’s relevant governance manuals by the chair and/or board support person, which will serve as an initial introduction to the group as well as an ongoing reference. It should include:  
  • relevant organisational documents such as the mission statement, organisational purpose & strategic plan, constitution/rules 
  • financial information, including current year-to-date budget, financial position and funding model and the most recent annual report 
  • services provided by the organisation, their top risks and assurances, and the risk reporting strategy to the board 
  • introduction to the organisation’s operational and committee structure 
  • information about the organisation’s social media, newsletter and other communication methods for the new director to subscribe to and/or follow 
  • information about IT systems and networks used by the board for intra-board communication, with necessary logins 
  • basic biographical and contact information about board members, and staff (if appropriate) 
  • basic meeting schedule and board annual calendar 
  • roles and responsibilities of the board and its directors 
• Organisation tour: The chair invites the new director to take a tour of the organisation’s facilities and introduce them to staff, volunteers, members and the beneficiaries of the organisation. The chair and/or board support person also shows the new director where the board meets, and all other general housekeeping requirements, to ensure the new director feels comfortable. 

Continuous Improvement 

• Induction review: The chair and/or board support person surveys the new director regarding the induction process to identify any potential areas for improvement 
• Regular Check-ins: The chair and/or mentor meets with the new director each month for the first 6 months of their tenure to monitor their Individual Director Development Plan, address any issues and ensure they feel engaged and confident to contribute. 

*These steps should take place prior to attending the first board meeting. 

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