I’ve recently returned from the National Association of Corporate Directors Board Leadership Conference. Spending a few days immersed in best practices and thought leadership regarding governance, with over 1300 directors of organizations ranging from well-known, large-cap, publicly traded companies to small-cap, privately held firms, was incredibly energizing and thought-provoking.
Some of those thoughts were scary.
I heard someone say that a study several years ago found the average Fortune 500 director is 71 years old. I think the news is a little better than that—Deloitte reported in 2013 that the average age of independent directors is just under 63. But that report found that 44 percent of S&P 500 boards have an average age of 64 and older; we’re talking about homogeneity of experience and outlook. A board that is over-stocked with people who are “male, pale, and stale” puts the organization it governs at risk.
I don’t mean to diminish what these talented executives bring to the boards on which they serve: I am incredibly respectful of their amazing wisdom. These directors have seen it all, from shareholder activism to hostile takeovers, to CEOs with front-page behavioral fails. They have an enormous amount of experience, and that is invaluable.
But I see several reasons to be concerned.
Organizational agility has become a competitive advantage. The competitive landscape for every company in every industry now fundamentally mandates an unprecedented degree of agility. Last century’s thinking will not be terribly useful in this new norm. In an economy where consumers pull instead of marketers push, traditional board planning, stewardship, governance is inside out. The market and economy we are heading into is going to demand a lot more focus, concentration, effort, on outside-in. Will older directors be able to listen louder, as the new reality demands? Will they be able to coach and counsel their company’s leaders toward greater agility? Will they even perceive the need?
The Millennials are here, and they are your customers. Sixty- or seventy-something board members are unlikely to understand the needs, wants, or behaviors of the Millennials who are their company’s customers. Younger directors who resemble and can identify with the company’s growing customer demographic will be better stewards of that company.
Corporate boards are overdue for digital directors. Wal-Mart just named Instagram Chief Executive Kevin Systrom to its board. The Wall Street Journal described this as in a bid to expand Walmart’s technology expertise, in response to competition from online rivals (especially Amazon). Systrom is a quintessential digital director: younger, tech-savvy, with chops learned founding a company that has transformed its industry through social and mobile strategies. Older directors are unlikely to have a deep grasp of digital, or disruptive technologies and could have blind spots about the company’s digital strategy moving forward. Boards need to diversify their makeup with some digital leaders, who will bring transformative insights with them.
Three actions will help address the risk inherent in many current board structures:
- Encourage older directors to go out while they’re on top. I’m reminded of athletes who stay in their sport and on the team and league far beyond their prime. Help senior directors recognize that by opening up seats for digital-native directors, they make the company stronger.
- Create mentoring programs to transfer some of the older board members’ “village knowledge,” that seasoned insight they’ve gained through experience, to the next generation of board members. It cannot be a mentoring program in name only; it must be definitive, fundamental, and supported by the board Chair.
- Find and recruit directors who can bring to your board what Systrom brings to Wal-Mart. Your next generation of board members should be people who have served disruptor companies, driving change through innovative technology.
A range of ages on a company’s board practically guarantees broader perspectives, better customer instincts, and more digital-native thinking that can generate or respond to disruption from technological innovation. Will your company survive without those competitive advantages?
- A stagnate board poses a risk to the company it governs.
- Organizations must be agile, responsive to millennial customers, and able to compete in a marketplace dominated by digital technology innovations. An older board puts a company at a disadvantage.
- Corporate boards need more emphasis on resignation by stale leaders, more mentoring for knowledge transfer, and recruitment strategies that bring digital directors onboard.
David Nour is an enterprise growth strategist and the thought leader on Relationship Economics® —the quantifiable value of business relationships. In a global economy that is becoming increasingly disconnected, The Nour Group, Inc. has attracted consulting engagements from over 100 marquee organizations in driving unprecedented growth through unique return on their strategic relationships. Nour has pioneered the phenomenon that relationships are the greatest off balance sheet asset any organizations possesses, large and small, public and private. He is the author of several books including the best selling Relationship Economics— Revised (Wiley), ConnectAbility (McGraw-Hill), The Entrepreneur’s Guide to Raising Capital (Praeger) and Return on Impact—Leadership Strategies for the age of Connected Relationships (ASAE). Learn more at www.NourGroup.com.