Building a Competency-Based Board

Director Competency is a Trend

One of the most fundamental trends in current corporate governance is the upwards shift in Director competency.

On competency-based Boards, the expertise of the Directors mirrors the challenges and opportunities that the organization is facing. These opportunities and challenges could range from corporate governance and financial stability through to operating challenges like information security and industry innovation.

Strong Corporate Governance

In the past, the composition of many not-for-profit and association Boards directly reflected constituent representation. Directors were chosen based on their ability to speak for clients and members. There was also lots of regional representation, as regional differences were considered fundamental to good governance.

There are a couple of weaknesses with this approach.

First, constituent representation falls short of effective corporate governance. The role of a Board of Directors is to identify and mitigate risk, oversee strategy and performance manage the CEO. The Board does this on behalf of the entire organization, not just individual constituents.

Second, the knowledge and skills of constituent representation are frequently different from those required to oversee a sustainable, stable organization. There are many challenges an organization must overcome to survive into the future. Financially stability is one. There are many others, including meeting the needs of clients and members. Boards must have the expertise to identify and deal with these challenges.

Building a competency-based Board depends on both understanding the objectives of strong governance, then identifying and attracting the expertise required that reflects the challenges and opportunities the organization is facing.

Governance for the Future

I see that not-for-profit and association governance is changing. Traditional governance structures and approaches are being adapted and sometimes blown away by the impact of new threats and opportunities. The future depends on Boards that have the competency to meet this challenge.