Why You Should Treat Your Board as a Design Problem

By Darren Rawson

Darren Rawson is the chair of five private companies including AltaML and Chandos Construction. He’s a former CEO of three different private companies and has done business internationally for over 25 years in numerous industry sectors.

The first question many ask when putting a board together or adding directors is “who do we know” or “who can we find”? 

A great board is not a challenge of finding candidates or recruiting, it is a design challenge.  

Virtually every board we have worked with has a skills matrix. It is a recognized best practice to assess what skills we would like on our board.  

Is this tool serving us well? More appropriately, is it the right tool for today’s board?

Understanding the ideal board composition is a critical component of it's design. Well before the search for people begins, it is critical to spend time on the design.

The Problem with the Skills Matrix

The skills matrix is the right concept for board design. However, it often is not used effectively and provides a result with low added value to the composition of the board. There are many reasons for this.

• REASON 1. The Word “Skills” Is Limiting

As implied in its name, “skills” matrix focuses on skills. Many boards start with the question “what skills do we need on our board?” resulting in a long list of skills such as legal, finance, marketing, etc.  

Do we want just skills or are we also interested in experiences?  

Skill can be defined as the ability to do something well. Does a skill alone inform enough about whether or not a candidate would be a great director on a particular board?

Experiences adds the practical context of how skills have been applied through an individual’s career and life.

For example, a skills matrix might have engineer listed as a target skill. Would a mechanical engineer be equivalent to an electrical engineer in the board context? Would a mechanical engineer with experience designing automated assembly systems in automobile manufacturing be equivalent to one managing maintenance operations in a chemical plant to one enjoying a career as an entrepreneur in a start-up technology company? Clearly, they all may be important, depending on the board, and each may or may not be a great candidate. There is a benefit in being more explicit to ensure you get the ideal board composition.

• REASON 2. Lack of or Weak Criteria

Often skills matrices have limited or no criteria regarding how to satisfy the skill. Sometimes we see a high-medium-low rating or a numerical scale and leave it to each individual to self-assess. Or we see high-level criteria such as “mastery of the skill”, “working knowledge”, etc.  

With no or subjective criteria, one c-suite executive might score themselves high on virtually any skill as they have managed leaders or functions in marketing, finance, sales, operations, etc. A similar c-suite executive might score themselves low on the same skills if they imply each skill expects professional accreditation.

The best criterion for each skill is highly dependent on the organization and the strategy. A c-suite executive comfortable with financial statements and financing should score high on finance for the board of a small non-profit organization. However, that same c-suite executive should score low on finance for the board of an organization specializing in derivatives and complex financial instruments.

We recommend drafting extremely tight, tough criteria on what would qualify for each rating. Make it extremely clear what would satisfy these criteria, and do not feel any anxiety if directors check very few boxes.

• REASON 3. Too Many Skills

This is probably the most frequent mistake, and the most challenging to get right. 

Many skills matrices include an exhaustive list representing the superset of skills that could help the organization. However, this broad approach limits the opportunity to focus on what perspectives are truly important on the board.

In our experience, it is preferable to have a small set of targeted skills and experiences to provide the insights to help the organization succeed. Focusing on fewer target skills and experiences (with clear criteria) will help ensure you have the best board possible.  

The critical few can be selected by looking carefully at the strategy and the management team. What is needed to implement the strategy that can be augmented at the board level? What ideal perspectives will help stretch the organization, bring perspective, and help identify blind spots.

• REASON 4.  White Space not Grey Space

Most skills matrices are designed or updated by the existing directors. Human nature dictates we all want to feel valued and validate our position on the board.  

With a lengthy list of skills and a lack of criteria, followed by self-assessments completed by directors with a bias to feel valued, the completed skills matrix often looks like a dark mass or “grey space” of high scores. The directors feel comfortable and valued as they feel like they fit. The board feels like it is good. Unfortunately, this could be a missed opportunity. As per Jim Collins, good is the enemy of great.

Every board can be better. The goal of the completed skills matrix should be to identify the “white space”, which means the key gaps or opportunities to add to the capability of the board. This exercise is an opportunity for every board to focus on the critical skills and experiences to help stretch the organization, enable the strategy and realize its goals. 

Even if the gaps cannot be immediately filled by adding a director, being aware of those gaps can inform board training, create opportunities for guest speakers, and challenge the board to be conscious of what is missing from the discussions. 

Mindsets & Capabilities

Instead of building a skills matrix, consider building a mindsets & capabilities matrix (see figure 1). While subtle, the shift in nomenclature can have significant benefits. Figure 1 below shows how board design should ideally bring together these two critical dimensions.

Figure 1. Board Design: Intentionality Makes all the Difference

• Capabilities represent the combination of skills and experiences that would be beneficial to have on your board. It represents not just knowledge but also the lived experiences of a director, providing a unique perspective to the board conversation. It stretches our thinking beyond just technical skills or training towards lived experience and perspective.
• Mindsets represent how directors show up. In our desire for diversity on boards, we are really looking for diversity of mindset. For example, does a director have a growth mindset or an operating mindset? Are they risk averse, or do they readily embrace risk? Are they a last in voice or a first in voice? Are they reflective or do they think out loud? There are many great books on mindsets, and we will explore this in more detail in a future article.
• Mindsets are also where we can explore dimensions of diversity. Research continues to suggest that diversity on boards is important, however it is diversity of thought that is critical. Characteristics such as gender, ethnicity, and age are good proxies to ensure we are exploring the appropriate diversity. For this reason, we recommend considering key dimensions of diversity as part of mindset. 

Conclusion

Simply viewing your board, new or established, as a design challenge is already a constructive step. 

In future articles, we will explore capabilities and mindsets in more detail, and practical ways to design a board using these principles, along with real examples that show how this approach makes a real difference in board effectiveness.