The Koblentz Group continues to be quite active in recruiting Directors for public companies, as well as providing advice to Boards on effective governance and CEO and Board of Director succession.
Based on our work with Boards, below we explore two increasingly important and interdependent trends.
Bolder Strategic Moves
For the past few years, Boards have emphasized stability and enterprise risk over opportunity. While conservative in approach, and with uncertainty at a high pitch, clearly this was a prudent course of action.
Now, Boards are fast tracking toward enterprise opportunity while remaining cognizant of their responsibilities of governing risk. This trend is the result of a number of factors, including a “tick up” in the global economy creating a “will” to press forward, a higher stored amount of cash that is available for M&A or expansion opportunities, and pressure from shareholders to seek both short-term and longer plays that raise valuation, including buybacks, dividends, but most importantly a repositioning of resources to enhance an increasing appetite for value.
As a result, Boards are emphasizing forward-thinking, and accordingly, are pressing their CEOs to identify, evaluate, and bring forward growth-oriented proposals. Interestingly, the dynamics of these boardroom discussions, how boards will evaluate their CEO’s performance, and their plans for succession are also being adjusted. These dynamics are requiring more director diligence and effort. Strategy is at the forefront.
Who Should Lead?
Turnover of CEOs has once again begun to accelerate. And, accordingly, it is the Board’s most important role to select its next leader.
Given the complexities that CEOs are addressing, Boards are increasingly more diligent in selecting their next CEO, recognizing the selection makes a statement and will have impact across a broad spectrum of stakeholders.
Here is the principal challenge.
In a rapidly transforming global economy, where information is ubiquitous, CEOs are asked to enhance valuation while dealing with accelerating uncertainty. Boards struggle with balancing short-term outcomes with the experience and competencies that their current, and future, CEOs must possess to have a reasonable opportunity for sustainable results.
We believe this angst of the “unknowns” leads to a reliance on “process checklists” and inconsistent metrics which result in risky CEO appointments.
To “get succession right,” the best Boards avoid being too rigid, but are rigorous, viewing succession evaluation as a regular and ongoing responsibility. Having observed and been a part of guiding this process, we have found that providing a roadmap, incorporating flexibility and unique to each succession situation, permits Directors’ time to perform a more thorough and ongoing exchange of views, and encourages a full and candid discussion and debate over time. In doing so, Boards are better able to deal with the disruption of a CEO departure, forced or otherwise.
We expect that CEO and leadership succession will continue to be a topic of issue, and Directors will increasingly invest their time and effort expended to gain insights, evaluate, and assess their company’s dynamics in aligning strategies with selecting the best qualified CEO to lead their company forward.
Outcome
In sum, we predict that these trends will result in significant Board of Director turnover, given the increasing time demands on Directors. Looking forward, Boards will require a new generation of corporate directors, with experiences that most boardrooms seek but currently lack, albeit that there is simply no substitute for experience, judgment, and bearing.
We welcome your thoughts.
The Koblentz Group is an executive search firm specializing in recruiting “C” level leaders and corporate directors for companies in the multi-unit consumer and business service sectors. Over the past 30 years, its partners have successfully conducted hundreds of “sensitive matter” recruitments for public, investor owned and emerging companies. The Firm serves its clients worldwide.