Investing in succession

MTF Finance is facing the board succession challenge head on with a programme to create ‘future directors’ with governance experience from within the ranks of its membership.

On a board comprising a majority of owner-operators, rather than experienced directors, it can be a challenge to ensure the members have not just have business skills, but also effective governance skills.

MTF is effectively a cooperative. It is a nationwide group of vehicle dealers and finance providers that offers personal and business loans, predominantly to enable vehicle purchases but also for other purposes.

Its board is small, just six directors. It is comprised of four MTF members/owners elected by the shareholders – all of whom are themselves franchisees or MTF motor vehicle dealers – and two independent directors.

Chair Mark Darrow CFInstD, one of the independents on the board, says the organisation has adapted the IoD’s Future Directors’ programme, which enables people interested in governance to spend time with a board, to prepare for future succession needs.

In the Future Directors’ programme, host boards take on one ‘future director’, with the aim to improve that person’s governance knowledge and capability.

In 2023, MTF hosted three future directors, each for three months with the dual aims of improving governance skills and creating a pipeline of talent. Darrow describes it as “future directors on steroids”.

“The board we have at the moment is exceptional and the directors are up there with any professional board I have been involved with,” says Darrow, an experienced director who also chairs TSB Bank, Armstrong’s, MTF Finance, Invivo & Co, Riverton Farms and is deputy chair of Auckland Transport.

“But we have to make sure we have succession planning. The base we are drawing from are not professional directors and have little experience beyond their own businesses, so we have to make sure we have got people ready. That’s the problem we need to solve, long term.”

The first three MTF members to go through the programme also became ambassadors for the work the board is doing. It instils confidence from the membership that they have a capable board, Darrow says.

“We didn’t want to only prepare people for that opportunity, we also wanted our shareholders to better understand what actually happens around the board table. After their first meeting they tend to be almost speechless at what a board does – the complexity and the depth we go into, the work the subcommittees do and how that feeds into board deliberations. By the end they are excited by it, by understanding the business at a completely different level.”

MTF Finance Thorndon owner Hamish Jacob MInstD was one of the 2023 Future Directors. He says it was a rewarding experience that gave him an insight into how governance decisions are made.

“Many do not realise the work that is put in by company directors behind the scenes and the unseen hours invested by these directors,” Jacob says.

MTF Finance Fraser Street owner and MTF Taupo co-owner Lauren Silkstone MInstD says the programme helped her understand how much work directors are asked to put in.

“The role can be demanding of your time, and there’s a lot of work to be done before the board meeting itself occurs and within the subcommittees.

If you are thinking of giving it a go you should commit fully, come prepared with your reading and analysis done, have a view to share and prepare to have it challenged,” Silkstone says.

For Darrow, the 2023 programme showed MTF’s Future Directors “on steroids” will produce a talent pool that helps the board continue to operate at a high governance level.

“As a member organisation it is important we develop new directors from within the small shareholder base. We have been delighted with the calibre and number of people putting their hand up,” he says.

In 2024, the MTF Finance board will again be augmented by three members of its shareholder base, learning about governance now in order to step up in the future.