Jennifer Duvalier and Simon Garrett discuss what the 'DNA' of the independent non-executive director looks like in the wake of the Higgs Review
The Higgs Review has put the role of independent non-executive directors under the spotlight as never before. It not only describes their role and many of their responsibilities in detail, but also suggests changes to board composition and board committee membership. The result is that the demand for independent non-executive directors will increase. At the same time, the Review proposes a tighter definition of 'independence', which means that it will be harder for some of the usual candidates to qualify, and that some existing non-executive directors will not.
The traditional pool for non-executive director talent has always been small – usually those who already have plc main board experience. Higgs recognises this, and suggests that, in future, the net should be cast wider to encompass senior executives below board level (perhaps in larger, non-competing companies), professionals (for example lawyers and accountants) and individuals from non-commercial backgrounds (such as the public sector and charities).
But the costs of attracting any new blood into the non-executive director gene pool may not be insignificant. The job is tough, risky (financially and reputationally) and requires a level of skill and character that, many argue, is not matched by the rewards currently on offer. The law of supply and demand makes it likely that companies will have to pay more to obtain the services of non-executive directors who are the best of breed.
However, the best of breed independent non-executive director, as identified in the Higgs Review, already exists. The challenge now is to ensure that general practice lives up to the best standard and does not get diluted as the demand for independent non-executive directors increases. Companies must get value for money from their increased spend on non-executive directors.
Hay Group's view is that complying with Higgs in this respect will mean going beyond the traditional non-executive director requirements in skills and experience to gain a deeper understanding of the behavioural attributes of the best of breed. We have defined a number and combination of behavioural characteristics that should be considered essential when selecting non-executive directors to meet the standard required by Higgs:
Insightful integrity
Integrity is a word frequently used in the Higgs report, but it needs to be defined in the context of the non-executive director. What should this particular form of integrity look like?
In many respects this goes beyond the dictionary meaning of integrity and could be described as 'insightful integrity'.
One area where insightful integrity might have made a positive impact is in the number of organisations that have been derailed by their executive directors' ambition, Might some of these situations have been avoided if the non-executive directors had taken an unpopular stand and persuaded the board to focus on delivering the existing strategy instead?
Active self-confidence
It is not enough just to demonstrate insightful integrity. It needs to be combined with self-confidence that is matched by a willingness and ability to act. In practice, what would this mean?
Without this active demonstration of self-confidence, insightful integrity alone will be insufficient.
Working the context
Working the context is the third strand of behaviour that non-executive directors must demonstrate if they are to put insightful integrity and active self confidence into action and to fulfil the stretching requirements of the role. This has three legs:
Finding them
Non-executive directors with all of these attributes do exist. The challenge now is to find more with the required 'DNA', as well as the required track record, experience and skills.
If the new breed of non-executive directors looks different, the processes used to identify and select them also need to change. This need not be left to instinct, luck or personal networks; there are tried and tested assessment approaches which many large organisations already use to select executive directors, and which would translate well for this purpose.
One appropriate assessment approach might be to incorporate a competency-based interview into the existing selection process, conducted by an individual who has been professionally trained in behavioural interviewing. The data generated by the interview is then analysed for evidence of critical patterns of behaviour and for the strength with which the individual has demonstrated each of the competencies identified as critical for effective performance in the role under consideration.
Sometimes the output of this stage of the selection process is a recommendation as to whether to 'stop' or 'go' with the discussions under way. More often, the interview provides useful additional data on the individual's strengths and style, which may prove helpful in clarifying what he or she would bring to the role.
Finally, the feedback gained through this process is a valuable starting point for professional development, an area which may, and arguably should, now become a much higher priority for non-executive directors as the role becomes more demanding.
Jennifer Duvalier is a director and Simon Garrett is an associate director of UK people management consultancy Hay Group, Tel: 020 7881 7266, E-mail: jennifer_duvalier@haygroup.com
