Getting a New Director Up to Speed

Heidrick & Struggles partner Richard Rosen shares his strategy for integrating a new director to the board

by William J. Holstein

Boards must do a better job of orienting and training new directors, says Richard Rosen, a partner in the leadership consulting practice of search firm Heidrick & Struggles (HSII). Rosen, who is based in New York, argues that the process of "onboarding" new directors is too important to be delegated to general counsels or corporate secretaries. Here are edited excerpts from a recent conversation:

Why do new directors need training of any sort? Shouldn't we assume that they know what they're doing or they wouldn't have been chosen?

You want to get your value from them sooner rather than later. They are smart people, but the application of their smarts is what you're looking for. A lot of smart people ask for help, because they're smart enough to know what they don't know.

What does it mean that a board wants to get a new director "aligned?"

It means coming up to reality in terms of the company's market position, its success record, the trends, and the critical strategic issues. Another key question is, what are the lack of competencies the company has right now?

Doesn't that all come out as a director candidate is being interviewed?

In interviewing people, you're trying to set expectations, but at the same time you're not pulling back the curtain all the way. In the interviewing, you're also not necessarily revealing the full dynamics on the board.

Is that like a bait and switch?

At worst, it is. But what we do, for example, is try to help dysfunctional boards to begin to transform slowly. In one case, it was a founder-driven company where they've never had the power of independent directors, meaning people with real business acumen and chief executive officer experience. We needed to take out the CEO because he was getting in the way of the company and the board wasn't acting. We positioned a new director a couple of years ago. In January, he became the lead director to handle the CEO succession.

Had he known what he was getting into he might not have decided to join the board. But we helped him build a coalition he needed for change, with one other independent director, then two more.

Is the culture of boards an impediment for a new director?

Culture means how the board operates. What is its operating model? Different boards are at different points in the continuum of being fully engaged, disengaged, or overly engaged. We ask, how is that in relation to the requirements of the company?

But is there also a social culture that new directors have to buy into?

You have to know how much of that you need to join and how much of that you need to push back against and transform. A common board culture is directors saying, "We learned more about the company in the limo ride to the airport afterward than we did at the board meeting."

Is that a bad thing?

Yes. How do you get the real conversation on the agenda of the meeting?

Are boards getting better at putting the real issues on the table?

I think they are nowadays because they are culpable and responsible under the Sarbanes-Oxley Act. You'd better be working on the right things, like strategy, large investments, and the talent at the top. If you hire experienced directors, they know what kind of conversations the board ought to be engaged in.

What kind of companies do a good job of getting new directors up to speed?

Technology firms overall are moving in that direction. Industrial and energy companies are having to catch up. They've had much more of an old-school culture.

What about in the financial sector, where we've seen some pretty spectacular failures at Merrill Lynch (MER), and Citigroup (C) involving the departures of Stanley O'Neal and Charles Prince, respectively?

They had some high-powered boards where the recruitment of independent directors was critical in forcing change.