Boards missing succession trick

Generational change offers boards the opportunity to improve performance and increase diversity, but there is little consensus on how to seize these opportunities.

This was the key finding of a new report from executive and board search firm Heidrick and Struggles (H&S) which examined the dynamics of generational changes on company boards and how many tackle, or fail to tackle, succession planning.

Titled Generational Dynamics: How boards tackle succession, the study sought the views of 487 corporate board members from around the world, which included 104 from Australia.

It found that boards are not using age limits as a trigger for board succession but rather full board evaluations (90 per cent) and individual performance evaluations of each director (53 per cent).  However only 77 per cent considered these evaluations as robust – which equates to just over 40 per cent of all directors.

Given that the directors viewed these evaluations as a “powerful tool for change” only 54 per cent actually felt the board was effective in exiting underperforming directors.

With regards to age limits (and understanding that many countries prohibit age discrimination) most boards felt that arbitrary age limits were not helpful, but the majority (65 per cent) responded that 70 − 74 years of age was the ideal director retirement age.

H&S said: “We agree that age is not the issue. In our experience, it’s all about judgement, and while many companies desire older board members who can play the role of ‘wise counselor’ to a board, we also routinely encounter younger directors who have wisdom or expertise beyond their years.”

In conclusion, H&S states: “Refreshing a board is not an easy task, and there is little consensus on how to get there. Tenure limits, age limits, and the use of board assessments are all viable tools to assist boards in planning succession and rejuvenating themselves. The key, however, is to ensure a timely source of fresh perspectives that matches the company’s long-term strategic challenges.”

The study can be found here.