Realising your board’s diversity of thought - Recruitment

Part 5. Recruitment: Bringing on new board members to support your board’s diversity of thought

A recent study of New Zealand boards revealed substantial differences in relation to their diversity of thought. They varied widely not just in their potential for diverse thinking but also in the extent to which their culture supports the realisation of their diversity of thought.

Following on from those findings, the chairs from four boards with high-performing cultures in that study were interviewed to learn about the practices boards can use to develop a culture that enables diversity of thought.

As these boards demonstrated their positive cultural performance through the DOT Scorecard® – an insider’s 360-style evaluation – the selection of interviewees has an objective basis, in contrast to the more typical selection method of relying on a board’s profile and external perception of its performance.

For this reason, these interviews present a unique opportunity to gain insights into boards where diversity of thought is measurably at work. The interviews have been collated into five articles:

1. Inclusion: Building an inclusive board culture
2. Psychological safety: Ensuring all of your board members can make an authentic contribution
3. Independence: Achieving independent thought and expression
4. Effectiveness: Undertaking productive board decision-making
5. Recruitment: Bringing on new board members to support your board’s diversity of thought (see below)

Chairs we interviewed

Abby Foote CFInstD

“So many of the challenges faced by boards have a degree of complexity to them that we haven't encountered in the past. Having a variety of diverse views around the table, including creative ways of facing and responding to those challenges, is really critical.”  

Abby is chair Z Energy, independent director Freightways, and independent director Sandford. She has previously been a director TVNZ, director Museum of NZ Te Papa Tongarewa, director Livestock Improvement Corporation, director Local Government Funding Agency, director BNZ Life Insurance, director Diligent Corporation, and director Transpower.

Frazer Barton

“Have discussions as chair with the person in advance as to what is involved, expected and what you want. And then once they've joined, this continues with similar conversations – a degree of mentoring for the first few months.”

Frazer is currently South Island vice president NZ Law Society, council member, chair of Appeals Board, chair of Health & Safety and Ethics Compliance Committee University of Otago, and a partner at Anderson Lloyd. He was previously chair of Anderson Lloyd Partnership, and served as chair of Presbyterian Support Otago.

Janine Smith CFInstD MNZM

“When you induct a person, you talk about what's the culture, what are the expectations, how board meetings are conducted, the consensus decision-making, the process in terms of talking to management. You set it all up. If some challenges arise, as you’ve set the ground rules you have the opportunity to have a chat.”

Janine is chair REANNZ, and executive director and principal of The Boardroom Practice. Previously she was chair AsureQuality, director Steel and Tube, director Kensington Swann, director The Warehouse Group, deputy chair Kordia, BNZ, deputy chair Airways, executive director Arnott’s NZ.

Ngaio Merrick CMInstD

“It is ultimately based on finding people who challenge the way we think.”

Ngaio is chair KiwiNet, director Reefton Distilling Company, co-founder Nuance Connected Capital, Portfolio and Investment Manager Lewis Holdings. She was previously director Everedge Global, and director Precision Engineering.  

Part 5. Recruitment: Bringing on new board members to support your board’s diversity of thought

Appointing board members

Building a board culture that will enable diverse thinking starts with the selection of the right board members.

Abby says that, before embarking on a recruitment process, it is critical that the existing directors have embraced the objective of increasing diversity of thought on the board. From this basis, they can avoid a process of looking for someone who everyone likes, but whose thinking is closely aligned to that of the existing board.

Striking a balance between ‘fit’ and ‘difference’ is a need that Janine identifies: “You've got to be really careful that you do get their cultural fit, and at the same time you don't want someone that’s just like you.”  

Abby is increasingly looking for independent ways to measure elements such as the culture of the existing board and the impact that a prospective board member might have on it. For example, Z Energy has worked with an organisational anthropologist to help people to identify their personal values and categorise them so that the board can consider how their values might impact the way they approach issues. It’s an approach that gives more insight than traditional personality-type assessments. 

“Are their underlying values likely to be a fit? If those values are inconsistent with the way that the organisation and the rest of the people sitting around the table are orientated, then that may be an environment they would find unsatisfying. It doesn't necessarily mean that you have to be all the same, but it is about saying what's the best fit for you and how can we make sure we recognise where people might be coming from and get the best out of each other?” 

Different thinking can be especially valuable when boards are facing change or growth. Ngaio chairs KiwiNet, a growing organisation that supports the commercialisation of scientific research. She sees its growth as a driver for having people around the boardroom table who will challenge the organisation’s thinking and push it forward. 

“We need people who think differently and who challenge us because we’ve been going for 10 years now and instead of thinking we're doing a good job, we're looking to continue to challenge that premise. Our [board appointments] process is very robust in terms of due diligence, checking experience and having a mentoring and buddying system but it is ultimately based on finding people who challenge the way we think.”

As an example of putting this intention into practice, Ngaio describes an interview with a prospective board member who was “spectacular and had all the skills they wanted”. Halfway through the interview, the interview panel looked at each other and I said, ‘This person is just like us, that’s why we like her so much. In fact, if we knew her socially, we would be friends’.” Ngaio stopped the interview at that point and said to the candidate, “We're feeling really comfortable with you and believe you’re very much like us, and for that reason we won't be bringing you onto the board now.”  The interviewee was, unsurprisingly, disappointed. But the prospective board member was not rejected; instead, she has been factored into the board’s succession plan so that she joins at the time Ngaio leaves. In the meantime, the board has selected another member who thinks completely differently from the current board.  

While a clear mandate to prioritise diverse thinking, together with good appointment practices, will get the right outcome in the end, discerning boards should be prepared for the possibility of an extended recruitment process.

Abby explains, “For directors who value diversity of thought, the process is important. If you sense there's a degree of something short of legitimacy around the process, then it can create a difficult environment around the board table.” 

“If you're disciplined and clear, you can get the right outcomes. Boards need to use the right recruiters and constantly force themselves to be challenged by what the best candidate looks like and doesn’t look like. And not give up when it's not easy to find the right person.”

Janine feels that most of the time board appointments are successful, even when an external party is responsible for the appointment. However, working with an external appointor requires a single-minded focus on identifying and making the case for what the board needs:

“If they understand why you want a particular skill, how it fits into the strategy what you're doing with succession, then there's not much they can argue about.” 

Abby shares similar experiences: “Where you have boards with less influence on board appointments, I suspect that's a bit different because there may not be the same readiness to further a positive board culture and welcome new people joining but, in my experience, it tends to be a ‘progression’ as opposed to a ‘regression’.” 

Inducting board members

The induction process introduces new board members to the board and, for non-executives, to the organisation as well. One major part of a typical induction is to share documentation – for example, on board structure and processes, codes, terms of reference, relevant legislation and biographies of other board members. A second aspect is meeting with other board members and key management personnel, as a chance for the newcomer to gain further context and ask questions. (For more detail, see The Four Pillars of Governance Best Practice for NZ Directors.)

From a diversity of thought perspective, an effective induction process is essential. It is an opportunity for transparent information sharing with, and open inquiry from, new board members to build their capability to develop a viewpoint and be able to actively contribute their thinking in the boardroom.

Frazer acknowledges that the board nomination process in some organisations may mean that the board in reality has limited input into the selection of new board members. Therefore, he feels that you’ve got to use the influence you can apply to the induction process and beyond to ensure new board members will have a positive impact on culture. This is a view Janine shares:

“When you induct a person, you talk about what's the culture, what are the expectations, how board meetings are conducted, the consensus decision-making, the process in terms of talking to management. You set it all up. If some challenges arise, as you’ve set the ground rules you have the opportunity to have a chat. The key is not to let any issues go on for too long. It’s about people as the key driver, and the critical element is to prevent boards from being ineffective.” 

Frazer sees the induction flowing through to a longer-term relationship too:

“Have discussions as chair with the person in advance as to what is involved, expected and what you want. And then once they've joined, this continues with similar conversations – a degree of mentoring for the first few months.”  

Although the relationship should not to be too close, as Frazer notes: “But you also don't want it to be a relationship that is so cosy that they won't disagree with you.”

There are good reasons to be positive about new talent. Janine has observed that new, less experienced board members have the potential to develop substantially during their tenure. Having an open mind and being open to coaching are key prerequisites for their success. New directors often learn by observing the behaviour of others around the table.   

“If there are less experienced directors, most of them want to learn, want to be good directors, and so they're very happy to try and to get the feedback. Of course some people have got more fixed habits that are not as easy to shift, even if they want to, but fundamentally most of them do change and they grow. Like anything, the more you do it, the more experience you get and the more wisdom you get, therefore the better you get, if you’re open minded.” 

Finally, Janine recommends inducting board members individually if possible. When board members are inducted together, they may form a closer association. While this might be positive in terms of collegiality, it introduces the risk of creating a coalition, with the result that the new board members do not offer the same degree of independent thinking as they otherwise would have.  

Actions for your board:

• Start by agreeing that diversity of thought will be a recruitment priority for your board
• Structure and execute your recruitment process so that your board does not appoint new board members that think in the same way as the existing members
• Combine different thinking with consistent underlying values across your board
• Use  the induction process for new board members to set expectations around participation and conduct that will support your board to realise diversity of thought

Download Realising your board's diversity of thought series as a PDF.

About the author

Lloyd Mander CMInstD leads DOT Scorecard, a consultancy that works with boards, executive teams and other teams to understand potential for wide-ranging diversity of thought and develop the decision-making culture that is required to realise diverse thinking.

He represents the Canterbury Branch on the IoD’s National Council and has held governance roles associated with the health, housing, transport, and entrepreneurship. Lloyd was previously a co-founder and the Managing Director of a regional healthcare provider.