Monday, March 24, 2014

The Leap to Leadership

On the supply side of candidacy for a board role, what do you need to know? What do you need to be? What is relevant experience?

The biggest mistake candidates make, in thinking they are ready for a board role, is to assume that the skills and talent that elevated them among the rank and file of the organization are the same competencies suitable for advancement to a director's position.  What got you to the middle will not get you to the top.

There is a reason for a board. It is called oversight - it is not management. It is strategic leadership. It is the gyroscope function, not the helmsman. It's the producer, not the actor. It requires a transformation of your mental state from a focus on today and now to tomorrow and how.

How can an individual acquire those leadership competencies? How can a talented  individual contributor become a valuable resource worthy of a board role? Clearly, the answer does not lie in simply taking a leadership course or reading a leadership book.  The answer does rest in the accumulation of practical experiences on the hot seat as a leader, decision-maker, making the tough real world operational choices that only the person in charge can make.

One of the first things I advise talented women executives to do is "look up!" When I ask women to tell me if they have a woman on their company boards, I am astounded by the number who respond, "I don't know who is on our board."  Make the minimal effort to learn about the people who are guiding your own corporate future.  Where to start? Read the annual report to shareholders. Read the proxy statement. Learn their biographies, experience, committee assignments, and any speeches they might have made.  Know who is on your board and the competencies that got them there.

Today, a favorite topic of the National Association of Corporate Directors (NACD) is "asymmetrical information risk." They describe that as the risk associated with management knowing more than the directors, but the greater risk is the disconnect between the leadership potential within the company and the board's strategic needs. It is a dysfunctional two way communication gap. Directors know too little about the bench strength they need to develop while internal corporate managers are too focused on their separate and distinct silos of expertise to build the network of strengths required of  a cohesive team.

It is not enough that the board pursue new director candidates who could enhance their collective silo expertise. It is far more important that the potential candidates within the firm develop their own top level perspectives.  What does management talent need to do, themselves, to learn about leadership?

Board-interested candidates need to branch out beyond resting on their laurels as an "expert" in their chosen field. They need to acquire a board perspective.  Some things that will help:

Know the company strategies: short and long term. How does the company reveal those strategies? Listen to analyst calls to learn the challenges your board is facing from shareholders and investors. How is the board responding to those challenges?

Review the company risk assessments in proxy statements and In priorities discussed by leadership. Do these come across as merely legalese to cover all contingencies or are they substantive caution signs?

Review the company's board committee charters. What are the important cross sector issues they are trying to address? Does your area of expertise interface with any board committee? Are there opportunities to talk with board members about their priority issues? Does the committee reach into the organization to solicit you input or does the board only tap outside consultants?

Do you reach beyond your own area of expertise in the company to collaborate with  complementary areas in the firm? Do you make yourself available to address new challenges that the company is facing? Do not leapfrog you boss, but rather work with upper levels of management. Seek out leadership opportunities to take the reins of profit centers in the firm or at professional associations valued by you company.

Update your resume annually, at the new year, in spring, or on your birthday. Seek out board-level coaches to select those facets of your job-oriented resume that would be appropriate for a board-level biography.  Be sure you know the difference between the two.

Does your firm have a leadership development strategy? Ae you considered part of that potential? Do you know your financial worth in the company and in your profession?  Where do you exercise leadership skills? Do you know how effective groups make decisions? How they make tough financial trade-offs? How do you know if your leaders are succeeding? How do you measure their performance?

Making that leap from manager to leader is what will make you interesting and valuable to a potential board of directors with whom you might one day serve. It most certainly is not an entitlement. It is something to be earned.

Sunday, March 23, 2014

Seizing a Leadership Role

The March 2014 issue of T+D Magazine (Training + Development) highlighted the admonition, “Women, Seize Your Leadership Role.” Articles inside focused on what women have done and can do to rise to leadership opportunities.  My eye was caught by the infograph entitled “Women in the Workplace,” based on research from the Pew Research Center. 

Two items were especially interesting: one describing the improvement in “Women’s earnings as a percentage of men’s (among 25 to 24 year olds). The chart showed significant progress from 1980 (blue bar in the chart to the right) through 2000 (orange bar) through to 2012 (the gray bar).  That jump in the last bar, showing 2012 data, was a huge leap to a 93% parity with men’s earnings at the entry levels. 

Even more impressive are the results concerning whether or not women (or men) aspire to leadership roles.  In the past, only 21% of women Baby Boomers (compared to 32% of men), as shown by the blue bar in the chart below, stated that “they would like to be a top manager or boss someday,” as indicated in the blue bar of the chart below. Baby Boomers, today are between the ages of 50 and 68 (having been born between 1946 and 1964).  If we wonder why less than 20% of board seats or top CEO positions are held by women, the lack of aspirations favoring leadership among women in this cohort may be a contributing factor.

Generation-Xers, as shown by the orange bar of the chart below, showed significantly more interest in leadership.  Among women Gen-X-ers, 41% stated (vs 58% of men) they aspired to top roles. Gen-Xers are those born between early 1960s and early 1980s. Today (2014), Gen-Xers are between 34 and 54 year of age, just considering top leadership opportunities.  At least a significant percentage are open to the possibility of their taking on leadership roles.

The biggest change is for Millennials.  Among women Millennials, a resounding 61% (vs. 70% of men) stated they aspired to be a top manager or a boss someday as indicated by the gray bar in the chart above. Millennials were born roughly between the early 1980s and the early 2000s. Clearly, they are today’s youth, aged around 14 to 34 years. The fact that they are considering leadership as a possibility for their career certainly is impressive and indicative of social and cultural change at its best.

Thursday, March 13, 2014

We Can’t Find Women Director Candidates

Let’s assume this is a genuine and honest response, shall we?

At a recent venture capital panel in California, I heard the above response when the question was raised, “Why are there no women on your board of directors?” A representative of an all-male board said that they have searched, but have been unable to find qualified women candidates to serve on their VC board. Of course, executive women in the audience shook their heads in disbelief. But I’ve heard this statement so many times, now, that I believe we need to dig deeper and find out what is the foundation for the belief behind the statement.

The male who said this didn’t remain after the event to answer questions about their search experience, so it was not possible to delve deeper into his statement.  That’s often the trouble: we seldom get a chance to converse intelligently on this topic because one side or the other digs their heels into the dirt and assumes the other side of the debate will only attack. Digging in deeper into knee-jerk reactions is not how we will generate a better understanding or respect for each other’s experience or views.   

Women react with near outrage at the allegation that there are not enough talented executive women in the marketplace to serve as directors. They cite business case after business case, data after data.  They point to “diversity director databases” and to “lists of board-ready-women” prepared by graduate business schools in the U.S. and abroad.  They conclude that, in light of all the efforts over the years to advance women to leadership, if women are not getting appointed to boards of directors, it must still be because of male bias, discrimination, and prejudice.

I would have liked to talk with the director who made the statement because I would have like to explore his board’s specific experience with their unsuccessful search.  I would like to learn more about what they tried and why it proved unsatisfactory.  The bottom line is that we don’t have to satisfy women’s arguments about there being “enough women in the pipeline” of board candidates.  We have to address the hypothesis presented by sitting (male) directors that they have been unable to find qualified women board candidates.  I know we wish that would not be the case. I know many women will once again dig in their heels and tell me that there is only one answer to this question, but I suspect it is more complex than we have assumed.

The most significant probable explanation for the “we can’t find them” argument lies in the definition of “them.” A CEO looking for board candidates is searching for experienced wisdom on how to guide the business to the next level of growth.  They want to know how to scale the business successfully. The real question, then, is “how many women have that experience?” CEOs and board nominating and governance committees look for peer-caliber wisdom, not just “friends of friends,” as often alleged by detractors.

If I am the CEO of my company, I want expertise that matches the needs of my strategic growth trajectory and gives me access to expert input, filling any “gaps” in my company’s leadership expertise.  I want directors who know what it’s like to navigate between the rocks and shoals of decision-making required to generate consistent revenue streams.  If I need a General Counsel or a CPA, I can always hire an individual for his/her expertise, but I want a more complete set of leadership credentials advising me 220-plus hours out of the year as my board. I want leaders capable of reaching beyond the “silos of their expertise” in any given field.

Are CEOs being overly selective, “picky?” Are they accepting a second- or third-rate male director candidate when they could have a first-rate woman director candidate?  Or are there more male leaders outside of corporate channels demonstrating their abilities elsewhere?

Every month, according to Challenger, Gray & Christmas Inc. statistics, somewhere between 100 and 130 CEOs exit top tier firms in the US.  About half are replaced by executives from the inside of the company, but more often than not these are “interim” appointments that subsequently are replaced by an external candidate.  John Challenger, CEO of Challenger & Gray, said this pattern “could indicate that these companies do not have a solid succession plan in place.” Alternatively, the companies who appoint external candidates might be pursing new strategies that are different from the strategy of the previous CEO, The bottom line, again, is that the gradual elevation of talent to leadership ranks from within corporations appears to be a distant memory.  If women are counting on promotions to elevate them to top rungs of leadership, they are building careers based on outdated concepts.  Women might need to be creating companies where they can take leadership roles and demonstrate their competence outside of the traditional ladder up the hierarchy.

As a CEO, I want director candidates with some knowledge of my firm’s industry sector or the challenges that a firm of my size and complexity will face. As a CEO, I want to feel comfortable with the candidate – or at least I don’t want to feel that person would add risks to the concerns I already have on my plate.  It’s natural for me to look to people I trust to recommend people they trust as candidates.

Are sitting women directors recommending other executive women candidates? There are organizations consisting exclusively of sitting women corporate directors.  If it were clear to them that there are many competent and talented women executives in the pipeline, then why have not these women brought forth more women candidates to their boards of directors?  They must be respected directors, themselves.  Why have they not identified more women director candidates to serve with them? More often than not, these sitting women directors will coach and counsel executive women candidates about what they need to do to better prepare themselves for a board role.  That is clearly different from nominating more executive women to serve at board levels.

Another issue concerns the number of women-owned businesses that are viable and successful – what do their boards of directors look like?  (Assuming they even have a board of directors.) In most cases, they will be mixed gender or dominantly-male boards.  We don’t really know for sure because we do not track or measure boards of directors at women-owned businesses.  Occasionally, we have snap-shots of that data, but long-term decisions cannot be based on sporadic surveys.  We need continuity of long-term tracking. If we don’t measure that data, then we can’t really evaluate the performance of directors at women-owned business boards. 

If I am a CEO looking for top tier executive women in leadership as potential director candidates, how seriously would I consider a woman who espouses legislation that would mandate some artificial percentage of board headcount at major U.S. firms be set aside as a quota for women candidates? Wouldn’t that look a lot like an activist shareholder? Is that realistically the type of director candidate a company would like to bring into the corporate culture of the boardroom? If I am a woman CEO, how responsive would I be to a comparable legislative quota mandating that I bring on a fixed percentage of any sub-group into my boardroom? The debate around legislative mandates for board representation clouds an already risk-averse director search process. In a business environment that expects leaders to “show me you understand that you can help us constructively and creatively address the issues we will face in this boardroom,” the advocacy of board quotas is a distraction at best and generates abject fear at its worst.

As a CEO of my own firm, I do know a lot of talented executive women.  Many of them have taken themselves “out of the running” in specific ways.  Some have retired completely or retired to take care of the grandkids or other family members.  A choice, certainly.  But, they were the cream of the crop in my opinion, and now they are simply not available.  Furthermore, many executive women have bought into the belief that service on a non-profit board of directors is “the path into the boardroom.” Again, some have taken this concept to extremes by over-boarding on charitable or philanthropic boards. Again, a choice and preference.  But, if those women now invest 220-plus hours on each of those non-profit boards, they have limited availability to serve on another demanding company board.  And the experience giving away money does not translate into experience generating revenues in a highly competitive economy.

Still and all, I know there were women in that room who were more than qualified and capable of serving on that VC board of directors.  When I asked them why they weren’t on the board, uniformly they replied, “We haven’t been invited.” To which I responded, “What initiatives have you taken to broach the subject with the individual members of that board?” In other words, have women initiated the conversations to present themselves as individual board candidates? Have they opened the dialog, themselves, with directors?  Have they presented themselves as a viable, cohesive slate of candidates?

Maybe these points are obsolete or irrelevant in the contemporary matter of searching for new director candidates among today’s executive women.  Maybe one or two of them are “on target.”  In my view, the discussion of the issue of refreshing boards of directors with new and creative talent too often flies at the 30,000 foot level – abstract, vague, indefinite enough to avoid offending even the most hyper-sensitive opinionated director or executive.   I would argue that we need to come back to earth and talk through some of these crucial issues if we really want to see better talent on our boards.

I submit that, like any other issue facing corporations today, the statement “We Can’t Find Women Director Candidates” is simply a hypothesis worthy of better measurement, evaluation and discussion.  It does not need to be the flint that strikes fire in the bellies of either men or women searching for best practices for their company boards of directors.  It could be the beginning of a better dialog and perhaps better companies and boards of directors for the future.