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Landmark policy paper champions board diversity

3 min read

The Global Network of Director Institutes brings together membership organisations from around the world with the aim of sharing governance expertise and furthering professional director development. Earlier this year, the institute released a joint policy paper that highlighted the significant and positive impact a diverse board can have on organisational outcomes.

Why is it important to have a diverse not-for-profit (NFP) board?

NFP directors are subject to the same duties and responsibilities as their counterparts in the for-profit sector and are facing increasingly complex organisations, regulatory environments and funding pressures.

An effective board of directors is crucial to the success of any organisation. Ensuring that a board contains an appropriate mix of skills, experience and background, is crucial for maximising board performance and an essential part of good corporate governance.

What attributes should NFP board members have in common?

There is no set formula for determining the effective composition of a board. Each board is different and much will depend on a range of factors including the organisation’s size and its stage of development.

The board or its nomination committee should consider implementing a plan for identifying, assessing and enhancing director competencies. Competencies for board members can be broken into job-related skills and personal qualities necessary to perform their role as a director. It’s important to acknowledge that not all directors will possess each necessary skill or quality, but the board as a whole must seek to possess them.

While it will vary greatly between organisations, the common job-related competencies sought on boards include:

  • Strategic expertise
  • Accounting and finance
  • Legal
  • Risk management
  • Managing people and achieving change
  • Familiarity with the industry or issue.

Different directors will bring different technical skills and knowledge to a board. Nevertheless there are certain personal qualities desirable in all directors:

  • Integrity
  • Business/organisational acumen
  • Curiosity and courage
  • Interpersonal skills
  • Genuine interest and passion
  • Active contribution.

What does a skills gap analysis entail?

There are some general skills that every board member should possess, and other specialised skills that only one or two members need to possess if the board is to be properly functional.

An evaluation of the range of skills, experience and expertise that exist on the board is important when considering new candidates for nomination or appointment. Such an evaluation requires identification of the particular skills that will best increase board effectiveness.

In short, this evaluation should include:

  • Determining precisely the type of candidate that is needed
  • Preparing a skills matrix that identifies the desired mix of constituencies, skills and experience needed on the board
  • Arranging for all existing board members to self-evaluate their skills and experience according to the matrix
  • Recognising the strengths and weaknesses of the current board and identifying any gaps. This includes critically assessing the skill set of the board.

What can NFP boards do to ensure ongoing board diversity?

Boards should adopt a range of measures for achieving greater diversity, which are tailored to the needs of the organisation. It’s not only good social policy but it makes good sense that our boards and NFP organisations benefit from all the talent that is available to them.

This may include:

  • Adopting a planned and considered approach to board composition and selection
  • Ensuring that the board contains an appropriate balance of executive, non-executive and independent directors
  • Considering whether it’s appropriate for the board to delegate some key matters to specialist board committees
  • Considering whether the board size is appropriate
  • Reviewing the composition of the board regularly
  • Considering whether each director has sufficient time to commit to the role, having regard to the needs of the board and its committees and the organisation generally
  • Considering whether the directors have the appropriate skills, experience and expertise needed
  • Ensuring that the board has succession plans in place for each director to maintain an appropriate mix of skills, experience, expertise and diversity on the board at all times
  • Reconsidering the board’s current selection practices and considering whether they are in line with best practice, reflect the current needs of the board and appropriately take into account diversity issues
  • Providing transparency around the selection of board candidates by publishing the methodology adopted for selecting and appointing directors on the organisation’s website.
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