Walters: Why you should focus on improving board induction

It’s time to get formal when introducing new directors to a business, writes Kath Walters.

It's important to properly orientate a new board member. This is often an informal process. It might involve a chat with the chair, a dinner with all the other directors and a big pile of papers to read. But we are all busier than ever today. Pressures on directors are mounting. The mountain of legal obligations, together with technology disruption, make it tough for directors to stay on top of their duties.

When it comes to employees, induction is a no-brainer. Failing to properly induct new employees costs American and English companies $37 billion a year, according to a study conducted by IDC in 2008. The problem was that employees misunderstood their role, the research found.

At first blush, the research supports the value of inducting new board members. But the reality is more complicated. There is a big difference in what a company expects of its employees and what it expects of its directors. Employees must act as directed by their leaders, while board directors are independent. Directors are not there to toe the company line but to apply their critical thinking skills to the strategic challenges the company faces.

An ill-considered induction risks giving new board members the impression that the current decision-making processes are not up for discussion.

New directors have a vote from their first meeting. So they need to be familiar with the company’s current business models and its history, know the culture and the challenges ahead. If your process is based on chats, briefings and dinners, it’s time for a rethink.

Directors cannot outsource risk; once they are in the role, they assume legal liability. Since directors need to conduct due diligence on a company before they accept a position on a board, it’s a natural starting point for induction.

Candidates will scrutinise financial records to assess financial risks and legal liabilities. But they will also be concerned about strategic risk. The most recent AICD Director Sentiment Index shows directors believe long-term growth and sustainability is the number one problem facing the companies they serve. Structural change and new business models come a close second.

A good board member will delve deep into your company to find out what is going on. They will find a way to meet your frontline staff, your team leaders and members of the executive team.

Make it easy for them. Let them pick and choose who to interview, when and how. Show them around, but allow them plenty of time for private conversations and give them time to explore without guidance.

Help them understand the background of everyone else on the board. Provide tools and processes to find out as much as they want to know. A media pack, for example, showing all the articles that have appeared about their fellow directors is a good start. In the past, when boards invited new directors from their networks, this was less important. Today, it is essential – and courteous.

Start your induction by encouraging the qualities that you want to foster on your board – transparency, critical inquiry and independent thinking. Now you are ready for a formal induction process.

Follow the three essential elements of brilliant board induction.

1. Welcome and introductions
It’s time to get formal Introduce your new director to every other board member, with contact details, and a little personal information to get conversations started.

2. The board manual
Provide them with links and passwords to online documents such as the board manual and board papers, and the annual schedule of board meetings.

3. Reverse learning
Ask your new board member to share their first impressions – don’t waste this valuable opportunity to see the company through fresh eyes. And remember to ask them about themselves, their goals and priorities in their new role.

When you encourage inquiry, you get good governance. And since independent and critical thinking is crucial to today’s boards, show that you support it by starting the way you mean to continue.