TITLE: What Does It Take To Build a Modern Board? Part II
Huw Richards: Hi, I’m Huw Richards, head of Digital Investment Banking at J.P. Morgan and the host of our podcast series, What’s the Deal.
I wanted to spend some time on sort of executing the strategy. I think Susan and Rebecca, as you both said strategically, it seems very clear that this is happening. It's time it happened, and we need to work together to keep it happening.
But the execution is the hard part. Let's start with sourcing candidates today for boards. Let's start with you Rebecca, as it's your key area of expertise.
Rebecca Thornton: Yeah. It's such a great question. 'Cause I think this is the key to a successful change management is making sure that you're activating every available network to source your talent. And as far as my research career goes, and as far as my time at J.P. Morgan goes, I would answer it somewhat the same, which is the people that you know, and that you trust are your very best resources.
Rebecca Thornton: So Susan and I go back many years now. She's been a great advocate in introducing me to other people. Not only under-represented but in fact, many of them have been. And I really value her opinion. And I know that she does this with probably every network that she's connected to on any person that she knows who's on boards. And that's how it works.
Rebecca Thornton: It's very difficult to break through. And I think the old model of looking at CEOs and CFOs is gone. There's a greater openness now to all kinds of functional experts including staff functions like general counsel and HR, which typically didn't have a seat at the table.Rebecca Thornton: They had members of management, of course, representing those skills. But it's been incredibly fun to do these searches these days.
Rebecca Thornton: It's partnerships with groups like the ELC and Quorum and Ascend Pinnacle that have community with many of the underrepresented groups, and people who are in the boardroom and on management teams, and are advocating for the people that they know and think are board-ready, has been the key to all of this.
Rebecca Thornton: The challenge had always been being find-able, searchable, knowable and if you weren't in a C-suite role in a fortune 500 company, oftentimes you were being missed and or you may be find-able, but a board would say, well, they're not a CEO, so I'm not willing to make that trade off.
Rebecca Thornton: The good news is that for the most part boards have been pretty wired to understand that the aperture needs to be incredibly broad to say, "I want a female of color who's been a CEO who has board experience and has worked in Latin America," is probably not a fair set of specifications.Susan Chapman-Hughes: (laughs).
Rebecca Thornton: But if you say, "I'm looking for the best available athlete, I'd like to be as inclusive as I possibly can be, all functions are on the table. I need them to be global, but I'm willing to look at anybody," that's when you start to see real talent and can make a decision on chemistry and fit and value proposition as opposed to finding some of that window dressing. So I'm really encouraged.
And I think that really truly gets at the heart of this diversity of thought, diversity of perspective and diversity of background that boards inherently, I think really do want to, to influence discussion, debate and, and ultimately decision-making.
Huw Richards: And Susan, how are boards themselves and companies themselves stepping up in this regard? Do you find that that people willing to make themselves uncomfortable in terms of the people that they're willing to meet with, discuss about potentially being their successors? How is that working?
Susan Chapman-Hughes: I think it depends on the board. I think that boards today have to really be very thoughtful, particularly in the nom and gov committee about board composition matrix, right? So when you're looking at that matrix and saying, well, what do we really need of having an honest assessment of who needs to be in the room? Because, you know, here's a great example.
Susan Chapman-Hughes: I was talking to a, a friend of mine the other day and he described very much what Rebecca said, right?
I said, "Think about what do you really need?" And I started talking to him about the business challenges that they were having. And it turns out that what he really needs is somebody who has a really strong sourcing background, who's brought digital transformation to functions like that.
Susan Chapman-Hughes: And I said, "Okay, now we can actually go. And there's probably five people who can be on that list for you now." Going forward, I would just advise like, look, you guys need to really sit down and talk through what is the real business need. And that means that you're going to have to double down and really understand the strategy of the business so that you know who you need to bring into the boardroom."
Susan Chapman-Hughes: There's some real challenges out there, whether it's cyber security, whether it's supply chain. I mean, supply chain is a huge issue for a lot of companies right now.
Susan Chapman-Hughes: And a lot of companies are sitting there rudderless because they don't have anybody sitting in the board room to help them think about what are different challenges that they can bring or solutions they can bring to the challenges that they have.
Susan Chapman-Hughes: It's nice when you have, a good mix of people. But it also means that you have to think differently around how you manage your board. So if you want somebody who's still sitting in an operating role, you can't have four day board meetings because they can't spend four days away from their day job to do that.
Susan Chapman-Hughes: Folks like Rebecca are fantastic at helping organizations think about that. I just think they need to do a better job of reaching out to people like her and asking for help which I think sometimes boards don't do that, but through the board composition process and the board evaluation process, they can really make some big changes.
Huw Richards: So we heard a couple of things there, which I think is interesting to reflect on at this point. I'm hearing diversity in a number of different ways. Diversity from a representation perspective and a demographic perspective, ethnicity, et cetera, but also from an age perspective and also a career background perspective.
Huw Richards: I love the ideas that you put forward in terms of, there's no point in setting impossible hurdles for people to overcome, to get on slates. But once you're on a slate, the interview process, how is that changing?
Huw Richards: Let's start with Susan on this one. How are we seeing once you're on the slate, the evaluation process, how has that changing specifically?
Susan Chapman-Hughes: I have actually heard conversations from some of my friends who've gone through the process in the last couple of months in particular because the boards have woken up and said, "Oh, we need diversity." And they call me and said, "Oh my God, this was the most awkward conversation I've ever had. Like, is that normal?"
Susan Chapman-Hughes: And I'm like, that just means that board really doesn't know how to manage and handle you through the process. And, you should be trying them on as much as they're trying you on. And so I think that is one thing that has changed is that people do have options and they are going to be very discerning about where they wanna go.
Susan Chapman-Hughes: And so unlike, years ago when they were like, oh, I'm just so happy to be on a board, they're not going to do that anymore. There are other things that are changing. I think some of the research consultants are being more creative about how they coach and present people through the process.
Susan Chapman-Hughes: The other thing that I think is changing is there are so many more organizations out there that are doing prep for people who wanna be on boards to help them get up to speed and understand what's required to go through the process. Candidates are likely more prepared than they could have been in the past to go through a process.
Susan Chapman-Hughes: I always tell people there are a few specific things that I look for. Obviously, is it a company that is doing something that I'm passionate about or that I really wanna learn about because you're going to be spending a lot of time in that business. And if you're not interested in the business, then essentially it's going to be a slug for you and it's going to be a slug for them, and that will come out through the process.
Susan Chapman-Hughes: The second is, do you respect the values of the company and the people that you are going to be spending time with on the board and the leadership team.
Susan Chapman-Hughes: It's really important for you to ask tough questions of the board members, the nom gov committee and others that you meet, the CEO about, their values, how they're thinking about the business, what that looks like and how they move forward. The other thing I always advise people, which is something that's just very tactical, is how is it going to fit into your life?
Susan Chapman-Hughes: It could be an amazing board, but they could be in California and you could be in New York and they have, four board meetings a year and you gotta spend a day on a plane and then two days in a meeting and another day in a plane, that's hard. It's changing somewhat. I think it still has lots of opportunity to evolve.
Huw Richards: Interesting. I want to just pick up on something, a tactical question I had for you based on something you just said. How are boards adapting to sort of the hybrid work model right now? Are you seeing more virtual board meetings. is that something that you think is, is going to be persistent?
Susan Chapman-Hughes: For a whole year, everybody had to be virtual, so you didn't have a choice. The boards I'm on are all hybrid or at least that's the plan going forward.
Susan Chapman-Hughes: Boards have to just be thoughtful about what is the impact to the organization and how will it be perceived in terms of how they operate versus the rest of the organization. It can't be an us versus them thing because employees will find out about it and they will vote with their feet or be very vocal and loud about it.
Susan Chapman-Hughes: I do think that a lot of boards are going to leverage the hybrid model. It's also a great way to get, somebody who's got a really big operating job on your board to get them to say yes, because now it's probably a commitment of two times a year where they've gotta be away from their families and away from their routine.
Huw Richards: Right. So we've covered sourcing, we've covered selection and things that have changed there. I think we're brought to a point in the conversation where I'm sort of reminded of, and I think it's captured by, Verna Myers quote, diversity is being invited to the party and inclusion is being asked to dance.
Huw Richards: What do companies and boards need to be thinking about their processes beyond the sort of the tactical stuff to let those individuals really contribute to the process, which will contribute to the company that they're obviously passionate about because they're there. What has to change there?
Susan Chapman-Hughes: I just draw on my own experience of onboarding to three boards. And the ones that have been most effective for me are the ones that have had a really good mix of just deep dive one-on-one about, hey, this is the business. These are the people, the leaders of the business, giving exposure to those people.
Susan Chapman-Hughes: I'm really spending quality time, learning who those folks are, but also having the lead director pick up the phone and call me and say, "Hey, listen, we brought you on this board because we really want your perspective." And so what we don't want you to do is to sit there and just be quiet for the first three meetings. We want you to actually share your perspective.
Susan Chapman-Hughes: The nuance for me is, I try not to come in with predisposed notions of what's happening. I ask a lot of questions. I roll up my sleeves and really try to learn what's happening and what's going on. And I think that, boards just have to be mindful and conscious of what that means.
Susan Chapman-Hughes: One of the other tactics that I've seen is to have that new person come in and just do an overall external perspectives discussion that they lead with the board to say, this is what I've been seeing as it relates to what I'm seeing in my business or, trends that I think you should be aware of.
Susan Chapman-Hughes: And that tends to open up the conversation for the broader board to go, "Oh, okay, well, that's great." And they can ask questions. And it builds that that level of camaraderie. I also think that lots of one-on-ones between board members who are existing on the board and new board members is very important so people can get to know folks and establish a connection with them.
Susan Chapman-Hughes: You just are surprised at the number of connections you have with people once you get a chance to start talking to them. And there's nothing that trumps a relationship.
Susan Chapman-Hughes: And that's how you sit at the table with them and realize, okay, well, I'm willing to go to battle with them, or I'm willing to sit here and be contrarian and have to say, well, you know what, I don't actually agree with you, or here's another perspective that I think you should think about.
Huw Richards: Yeah. And Rebecca, tell us a little bit about your experience in terms of how you are seeing boards. Are they leaning on you for a slightly different interpretation of how they blend new board members into their existing processes?
Rebecca Thornton: I don't think that the onboarding has changed so much from the client perspective. I would say that candidates are being much more discerning about where they engage.Huw Richards: Mm-hmm (affirmative).
Rebecca Thornton: And I think some of the topics around purpose and mission and culture that have been touched on in Susan's earlier comments are spot on. It can't be about window dressing, it can't be about meeting a diversity requirement. It needs to be an authentic and sincere alignment with the business and the mission. And nobody wants to be there just to fill a quota.
Rebecca Thornton: They wanna be there because their voice and experience can be valued and received so I'm seeing candidates really taking a hard look at a company: does the management team reflect the mission statement on the company's website? Are there other women and people of color in senior positions on the board?
Rebecca Thornton: And in our on boardings with candidates, I cannot tell you, I think it's probably in the 95% range of people who say, I only wanna serve on a board that is aligned with my interest in leaving this planet better than we inherited it.
Rebecca Thornton: And it doesn't need to be that every business is creating, a recyclable plastic that we've never seen before. It's that they want to make sure that the company is as focused on their people and on their products and on their innovation as they are in the bottom line.
Rebecca Thornton: And I think that's a dramatic shift from where we were even 10 years ago, where a lot of the board candidates sort of said, "Well, I don't really care what board I'm on. I just wanna be on a board." There are still some people who say that, but most people really do vote with their heart, vote with their feet and only wanna lend their brand and their time to places that really are going to be a good value, equitable value proposition, for them and the company.
Huw Richards: This has been a very comprehensive discussion, but I wanna wrap on, possibly one of the more difficult areas with regards to this which is actually measuring the outcomes.
Huw Richards: We have strategy, we have execution, but then obviously sometimes the difficulty comes in translating these intentions that we all have to actually specific measurable outcomes. And I'm personally, I think a lot of us are great believers that you get what you measure at the end of the day.
Huw Richards: And as you think about it right now, a lot of the measurement tools around ESG feel a little blunt, do you have a woman on the board? Yes or no? How do you see those measuring tools so that we can start driving real tangible, demonstrable outcomes to people?
Susan Chapman-Hughes: Well, I mean the bottom line is you've gotta start somewhere.
Susan Chapman-Hughes: The reality of the situation is senior executives are very driven by how they're compensated.
Susan Chapman-Hughes: It's important for boards to build structurally into the comp plan for their executives in a meaningful way. So it can't be like 1% of your comp is whether or not you hit your ESG goals. It has to be a meaningful measure.
Susan Chapman-Hughes: And it's okay if you are starting with the basics of, you checked the boxes of these people in your organization. I believe that it will evolve, but it cannot evolve if you don't have some level of critical mass in your organization and on your board. It just can't.
Susan Chapman-Hughes: Boards are going to have to be very clear about the metrics and the measures, but also why they're doing those things as it relates to the outcomes for the business. That'll help people vote in terms of whether or not they wanna invest in the stock or work at the company or do whatever. But I think clarity is really what people need to aim for.
Susan Chapman-Hughes: If you look at the metrics of how you're driving these issues in your business, and it's hard to measure, you're probably over-complicating it.
Susan Chapman-Hughes: I have to believe that whether it's shareholders or their proxy advisors, like whoever the stakeholders are, you're going to see a push for more consistency in the measurement over time by industry. And I think that's fine. And if I'm sitting on a board, I wanna be a part of helping define that. I don't want that to be defined for me.
Huw Richards: Great advice. So this has been a fantastic conversation to wrap up this series on ESG and thank you so much for taking the time to join us and sharing your perspective. On behalf of J.P. Morgan and all of our listeners, I'd really like to say, thank you very much.
Susan Chapman-Hughes: Thank you for having me.Rebecca Thornton: And you too Huw, thank you for having us.
Huw Richards: Great. And to our listeners, please stay tuned for some more episodes of What's The Deal? where I'll continue to be joined by other global business and industry leaders to talk about more timely topics, transforming the future of deal-making.
Huw Richards: This material was prepared by the investment banking group of J.P. Morgan Securities, LLC and not the firm's research department. It is for informational purposes only and is not intended as an offer or solicitation for the purchase, sale or tender of any financial instrument.
[End of the Podcast]
In part II of this podcast, Huw Richards picks back up again with Susan Chapman-Hughes and Rebecca Thornton to dive deeper on executing board strategies from sourcing diverse candidates to measuring outcomes.