Issue 15

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BoardWorks International
Issue 15, 2013

When Directors Retire - Addressing the Challenge of Transition and Continuity

I had been chairing a board for a number of years when I realised I lacked sufficient understanding of the background to an important stakeholder relationship. The relationship had been formalised well before my time but its current activation was inconsistent and it was under-performing its potential. I sought out the former chair of the board who had been a prime mover in establishing the relationship. He was able to explain to me the circumstances of its formation and its intent. Much of what he told me helped explained the current state of the relationship and what I might do to help get it back on track.

Several other situations recently have also underlined to me the importance of past board members as a significant source of institutional 'memory' - and wisdom. One of these concerned a professional organisation of which I am a member. This year, with much pomp, ceremony and self congratulation, it held its 'first ever' annual conference. In reality it was simply resuming a previously well established but since discontinued pattern of annual conferences. To my astonishment none of the current board or management seemed to know of the history of such events.

These experiences have reinforced to me that few organisations do not have some boardroom 'legacy' items that, for one reason or another, are not easy to get to grips with. These may relate, for example, to:

Retiring board members carry away with them valuable information that has assisted the board to run smoothly, perhaps even saved it from disaster during their time.  They have also built up a rich store of wisdom and human experience. Not least, for example, is their experience in how this collection of people works best together as a group. They are also likely to understand how to get things done in what is, by definition, a unique environment.

This value of this outgoing organisational asset may not be readily appreciated by incoming members of the board and the executive team. The natural desire to change and 'move on' may diminish the relevance of the past in the eyes of some people.  However, the valuable knowledge of outgoing board members is worth identifying, preserving and, if possible, passing on.  Here are some suggested approaches:

  1. Get outgoing directors to write up a brief report on what they view as 'must know' information for new board members. This is particularly important if it is the chairman of the board or of a committee (especially the audit committee) who is leaving.  It is also important to acknowledge that, for various reasons, there may be a reluctance to commit such information to paper and this may need to be conveyed in some other way.

  2. Provide formal one-on-one opportunities for new board members to quiz those who are leaving.  When I came to the end of my term in a previous board role I was specifically requested to brief my successor.  It was a useful experience for both of us.  Owing to the nature of my role on that board, much of that which my successor was interested in understanding was not documented and would not have been accessible from anyone but me.

  3. Arrange mentoring between a new director and any well-seasoned member of the board.  Regardless of any other induction process there should be an expectation that new directors will actively seek information and understanding of possible board vulnerabilities. Longer-serving board member should be challenged to think about what a new person should know and understand about how the board has dealt with particular governance challenges in the past and the way the board operates today.

  4. Have a general board discussion prior to the arrival of a new director to extract and pool the collective wisdom. This has the added benefit of ensuring that the whole board is conscious of the risks involved in transition and is in the right frame of mind to ensure that a new director is brought on board as quickly as possible. I recently facilitated a discussion for a board that was about to experience significant change in its membership as a result of an election process. The purpose of the discussion was to acknowledge what had been learned that might be of value to the incoming board and to document the outgoing board's advice to their successors.

  5. In some organisations it is possible to deliberately engineer a transition phase where both outgoing and newly appointed directors sit around the same board table to facilitate the transition. Provided the induction or orientation of new directors is not thought of as a one-way process there are significant benefits not only for new directors but those staying on the board.

  6. Consider establishing the position of 'emeritus' directors who, when leaving your board are paid a modest retainer for a year or two. To earn it they must be available to provide information and background to current board members. New board members might, in turn, be required to check in with emeritus directors a certain number of times per year.

Any of these or other related approaches are likely to be valuable to engineer a smooth transition and, in particular, to manage the risk of losing valuable knowledge and experience.

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