Onboarding the New Director

Onboarding the New Director

Is there a such thing as a “feeling out” process for new directors? There was a time in years past where a new director wouldn’t say much during his first couple of board meetings. In fact, there was an old rule of thumb that said a new director should take about a year to get accustomed to a board, its members and how the company runs.

In today’s business world, private companies do not have the luxury of waiting that long. It is imperative that the new director be brought up to speed on all aspects of the company before the first board meeting. Three directors—Janet Morrison Clarke, Bernard H. Tenenbaum, and Ed Smith—shared their best practices for new director orientation at the Private Company Governance Summit 2015, in a discussion moderated by Ray Judge of Diligent Corporation.

These directors focused on vital issues such as addressing the role of the board chair, lead director, the CEO and key managers in onboarding the new director, what types of documents and training materials are needed and what can reasonably be expected of new directors.

“You’ve got to get them prepared for the first board meeting,” Morrison said. “How do we best prepare that new individual to be hitting the ground running?”

Pre-selection Process

There are many steps that an organization should go through in the process of selecting a new director. When picking from a group of candidates, there should be a pre-selection process to make sure you are picking from the right group of people.

Once that decision is narrowed down to a few select candidates, the company needs to zero in on the right fit for its board.

“Write a document of what you’re looking for,” Tenenbaum said. “You’ve begun the process of evaluating. Do they get our DNA? Do they get who we are? Then there’s less friction in the process. You have to start with the right candidate. After that it becomes more mechanics and information flow.”

Briefing the New Director

The mechanics and information flow are important to the selection process and will ensure that the new director is well versed on all matters within the company. One question that the panel addressed was how much should directors know before they are chosen? The panelists gave a list of questions and recommendations for this process:

                • What materials do they receive in advance?

                • Who do they meet with once they arrive?

                • Facility tours: who conducts them?

                • Onboarding agenda

                • Set up a meeting with shareholders and/or family members/family council

                • What do you share: what solicitation materials are needed?

It’s important for new candidates to come into the first board meeting with a set of expectations and knowledge about the company. To keep a new director informed about the company’s history and future direction, the organization should provide historical documents, minute meetings, promotional catalogues and white paper write-ups.

“You want to educate them in advance,” Tenenbaum said. “You should have them talk to the people who actually move the levels of business. You want to ask the hard questions.”

To make sure your company is hiring the right person, Tenenbaum gave his reasons that any good director should have for joining a new board. He said they should: think they can learn something, think they can contribute, and like the management team. He added that the wrong candidate wants to join a board for money, compensation and prestige.

“Hiring the right person is a critical first step in keeping talent,” Tenenbaum said. “It’s much easier to do that than get new ones.”

It’s also important to select the right candidate the first time around because it could be extremely difficult to make a change after that.

“It’s easier to divorce your spouse than to get rid of a non-performing director,” Janet Morrison Clarke said.

Input from the New Director

“Get them into an orientation so they can meet key executives to see how the company looks at itself and its strategies,” Tenenbaum said. “The board will come in later. Get the new director in the day before the board meeting, and get them oriented then.

“There was a time where they would say, ‘Don’t say anything in the first meeting, wait until the second meeting,’” Tenenbaum said about old practices. “Now you are expected to be an expert on things you don’t even know about.

There should be somebody bringing that person forward into the first meeting. If a new director has a different point of view, he or she should feel comfortable saying it.”

The panelists stressed how bringing on a new director can be a bit of a beauty pageant where the newest board member will want to show off. He or she will be eager to show the rest of the board how smart he or she is, how good he or she is, how talented he or she is and how much value he or she will add.

“Generally speaking, it takes two or three meetings for a new director to be honest and not pump himself up at all,” Tenenbaum said. “Getting to that place of honesty, it will make the board functional.”