A panel of three distinguished directors provided some insights for younger would-be directors at Company Directors’ annual conference on Hamilton Island in May. Zilla Efrat reports.
Question: If your aim is to end up on a large listed board, is it better to start on a smaller board or a not-for-profit (NFP), or should you move up through management?
Yasmin Allen: You are better throwing yourself into a C-suite position at the age of 20 or 30 and moving up through management. As a director, you don’t only need the skills, you also need the insights into what your skills can provide for the strategic direction of a company and those insights are generally gained from your experience. Sitting on boards at a very young age or spending, say, 10 years on smaller boards is very difficult.
Elizabeth Proust: It’s also not “either or”. You can be in an executive role or work for a professional services firm, and sit on a NFP board to get the experience. If you decide to sit on NFP and small company boards, remember that NFPs don’t pay. Usually, they offer “negative remuneration”. So if you have to earn your way, and most of us do, then you need a paid job. An executive career is more likely to lead you to a place where you might want to be.
Question: What does it take to become a good director?
Peter Yates: I am a great believer that you need to enjoy asking good questions and seeing management give the answers. I have recently been doing some work for someone and I forgot how demanding it is to actually answer a question. So, the key thing as a director is to learn that your job is to ask a question and, therefore, how to frame that question in a clear, concise and insightful way and one that actually reveals information rather than a pat on the back. In addition to knowing how to ask the question, you need to learn how to keep on point. It is also incredibly important to realise all organisations – businesses, NFPs or whatever – normally have about three, four or five things that are vital to their success and you have to learn what they are. They are different for different businesses, but once you know what these are, that’s what you ask the questions about. The rest you don’t worry about.
Proust: I agree with that. I also think that once you do make the move, as I did, from executive life to non-executive life (I was on boards when I was an executive), you have to learn to flick the switch from doing, leading and managing to a different tone – that’s asking the questions. You are now managing through the board and executive team. You are no longer making things happen as you used to. We all know that, but making that transition takes a little while.
Allen: One of the things I enjoy on boards around the questioning is the ability to have that subtle influence. You cannot come in and say: “We are going to do this and that.” You are not management. It’s that constructive influence that you have that continually grows with your time on the board. I enjoy it if that influence increases, but that influence will only increase if your questioning is insightful and to the point. And it can only be to the point if you understand the value drivers of the business that you are in.
Sometimes a deep dive into operations is something you need to do because there is an issue. But if you are doing it because you are just interested in something, that can be very detrimental to your ability to influence the board and the effect you have on management. It’s about really understanding the drivers of a business, for example, the drivers of an insurance business will be around risk and that of a medical device company around technology.
Hopefully you have already built your credibility through your understanding of the business so that when you think there is a change out there that you are not quite certain about, you can have some influence [in getting the board to see it].
Question: Boards often consist of directors in their 50s and older. Should they be appointing more younger directors in this age of consumerism?
Proust: I think you need a combination of wisdom, which doesn’t always come with years. You need people who bring a range of experiences and skills. When I look back to my own experience of being on a range of bodies, I don’t believe this is an ageist thing.
But I think that when you are putting a board together, whether it is for a NFP or a listed company, you are looking for that wisdom that often comes from grey hair, but not very grey hair perhaps.
I have given up having coffee with women in their 20s and 30s who say to me that being on a board would help their lifestyles. Being on a board actually isn’t a lifestyle choice. It may seem like it – only 10 meetings a year. But we know that is never the case. It comes with a range of risks and some great challenges and experiences. There are some exceptional people who, at a relatively young age, have been on major boards, but we are looking for wisdom and you can make your own decisions about what age one gets that.
Yates: I am often asked by others for career advice. I say life is all about learnt tasks and built skills. You get experience, but ultimately it is wisdom that gets paid for.
I think when we put a board together, you need to recognise that you don’t want “tasks” because that is what management is meant to be doing. Skills are useful and so you can have a younger person who has the right skills on your board. And, you do need people who have experience in fast-moving industries, such as in the social media space. Now the assumption is that it’s only the young that have this experience, but that is really not true. I am an example of that.
You also need wisdom and, on balance, wisdom is going to come with someone who has a bit of vintage.
Yasmin Allen FAICD — an experienced non-executive director who sits on the Insurance Australia Group (IAG) and Cochlear boards
Elizabeth Proust AO FAICD — a veteran director who is chairman of Nestle Australia and the Bank of Melbourne
Peter Yates AM MAICD — chairman of several NFPs and deputy chairman of The Myer Family Company. Director of AIA Australia
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