Knowing what skills your directors have and what the board might need to acquire can help create the level and diversity of expertise and experience that will benefit the organisation.
Companies should have — and disclose — a board skills matrix that sets out the expertise mix the board currently has or is looking to achieve in its membership.
This is according to the ASX Corporate Governance Council’s Corporate Governance Principles and Recommendations. Larger listed companies have been using a board skills matrix of some description for a number of years to assess the current skills, background and experience of those on the board and to identify any gaps.
Disclosing the board skills matrix has the incentive of increasing the accountability of the board in ensuring it has the ability to add value and meet obligations. The AICD has prepared guidance and a template example to assist with the preparation of your Board Skills Matrix.
Things to consider Boards should regularly assess whether changes are likely to occur in the short to medium term to strategy, and in the external environment, that might impact on the board’s desired skills/ experience/backgrounds mix.
The board’s composition should take into account different scenarios that might call for a different combination of expertise, experience and/or background.
The increasing diversity of issues boards are expected to understand and discuss means many will expect directors to have specialist skills, experience or backgrounds. If not, then these skills might need to be drawn from management or external advisers.
This will largely depend on the size of the organisation and the board. Sometimes, advisory boards can assist with special issues for a period of time until the board feels confident it has the required level of knowledge and skills.
To help decide what is required, engaging an external expert to undertake a review of the board and board committee compositional attributes and needs could be useful.
This can help to identify any gaps in the matrix. The next step would be to discuss how they could be addressed through current board members undergoing professional development.
Any self-assessment process adopted by board members would need to ensure a consistent approach and outcome. Boards should be aware of privacy issues and what is disclosed to external stakeholders in any statement of existing skills, experience and backgrounds.
The board could consider developing both an internal skills matrix that is easily adapted for regular use, and an external matrix that can be communicated to stakeholders.
Do's
Identify the board’s desired skills, experience and backgrounds as a whole under relevant headings and, using a matrix, map them against the skills and experience of each board member.
- Tie desired board composition to the organisation’s strategy and the key issues facing the organisation.
- Differentiate between the skills and experience expected of the board and the chair.
- Separately prepare a skills/experience/ background matrix for each board committee, where they exist.
- Include term expiry dates (where relevant) for each board member in the matrix to assist with succession planning.
- Use a rating scale rather than a simple yes or no response to assess the extent to which desired skills, experience and backgrounds exist on the board.
- Have the board, or a designated committee — for example a nominations committee — critically examine the matrix at appropriate intervals. This checking procedure should be done at least once a year.
Dont’s
- There is no need to include the basic competencies that are expected of all directors — for example, knowledge of director duties. Nor should vague or overly general sets of skills or experience be included in the matrix.
Self-assessment
The AICD’s Self-assessment Tool (SAT) allows directors to assess their current director capabilities and skills. By understanding your current skill set, you can better focus your professional development, enhance your skills and confidently undertake your role in the ever-evolving governance environment.
The assessment takes 20 minutes and can be completed at any time, anywhere, on any device. It will:
- Provide a real-time customised report detailing areas of strength and areas for development
- Suggest a detailed learning pathway tailored to your sector
- Compare your report with previous reports to confirm the shift in your skills and capability
- Enable you to compare yourself with other members who are in the same sector and have completed the SAT
- Give you the option of sharing your report with an AICD executive to engage in a personalised career conversation.
The tool is appropriate for directors of all levels of expertise and experience.
By completing it at least once a year, directors can track their development progress and gain an understanding of how to improve their board performance and decision-making with professional development.
This article first appeared under the headline ‘Build a board skills matrix’ in the March 2025 issue of Company Director magazine.
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