Beyond the Board Skills Matrix - Leadership Capacity Planning

The value of a board skills matrix goes beyond checking off a few boxes. Diverse boards are vital to an organisation’s long-term success and ability to self-assess. Yet, many non-profit leaders feel unequipped to manage certain aspects of their oversight responsibilities. A report from Stanford University found that 70% of nonprofit board directors don’t have a succession plan in place and that a third are dissatisfied with their ability to evaluate the performance of their organisation.

Adding a skills matrix to the evaluation process can seem like an insignificant administrative task. However, doing so can inform the conversations that take place in the board room and increase the organisation’s capacity to deal with problem areas. Board directors are multifaceted individuals that bring more than a set of skills and experiences to the table. Using a matrix to understand their value can help in the process of building board capacity and planning for succession.

The board skills matrix can facilitate the process of bringing together a diverse group of people from which the organisation can pull rich experiences. It is one of several tools that can assist in assessing fit and overall organisational wellness. As a snapshot of current and future strengths and abilities, a matrix can help you think about the direction your leadership wants to take the organisation in, and what the requirements are to get there.

What Is a Board Skills Matrix?

In a speech delivered to the superannuation industry in 2020, the APRA Chair Helen Rowell said boards with strong succession plans are often informed by a board skills matrix. This tool can help develop diverse boards with the ability to work strategically with a vision for the future. A skills matrix can help visualise the skills and competencies of directors, both as a collective and individually. A good skills matrix should reflect the technical, soft, and behavioural skills your organisation requires (and has), providing accurate and up-to-date information that can be updated as the table allows.

The matrix serves as a tool for assessing areas that need support. Boards that lack assessment tools like the skills matrix may be less able to identify, analyze, and communicate risk areas to investors and stakeholders. Your board skills matrix can assist you in developing a well-rounded board capable of managing a diverse range of issues and tasks, and with the ability to correct course when needed.

Benefits of a Board Skills Matrix

A board skills matrix can help you identify gaps in all areas of leadership skills and increase the variety of perspectives and solutions available to your board members. This useful tool can offer clarity and insights throughout the decision-making process and support board recruitment efforts, providing more transparency and accountability to stakeholders, investors, and the public in the process.

Having a robust skills matrix can help your board develop its capacity and ensure it continues to drive towards its mission and purpose. It can play a key role in developing the structure and composition of your leadership by identifying areas for training, membership renewal, and committee appointments.

The skills matrix is only one part of the board evaluation process but can be very helpful for clarifying everyone’s role in the governance framework, and in reviewing board composition. There are several benefits to conducting a board evaluation: Assessing your leaders’ capacity can also help identify broader board development opportunities.

Skills to Include in A Board Skills Matrix

According to the Australian Institute of Company Directors, board membership diversity is a critical way to ensure the group possesses all of the required skills to competently provide oversight to the organisation. These skills and experience should align with board responsibilities and should complement each other. A diversity of age, gender, length of time in position, and educational and cultural background can provide a range of opinions and solutions on how to best provide oversight.

Boards should have an appropriate mix of experience at an expert or substantial level in a variety of areas appropriate to the organisation, which may include:

• Finance and Economics
• Corporate Law and Governance
• Technology and Innovation
• Commercial Business Management
• Risk Management
• Business Management

An expert level is defined as substantial career experience in a senior executive, director, or professional role, while substantial expertise is considerable experience as a director, manager, or professional. Board directors should also possess these key attributes: a commitment to the mission, an ability to lead, make decision and act, a sense of integrity and ethics, effective communication skills, an ability to negotiate and influence, and strong critical thinking skills.

What To Put in a Skills Matrix

Your skills matrix is strategic document and should reflect the proficiency levels and training needs of each of your board members, as would be required to assist your organisation to reach it’s strategic goals. It should include a brief description of each skill and a space to assess their value. The first step involves creating a table with the first row indicating the key skills held by your directors. While these may vary depending on the individuals and the type of activities your organisation conducts, headings should include the name, diversity indicators, tenure length, and key skills identified as vital to overseeing the organisation. In the first column, list each of the board directors.

Next, begin to populate the template by checking off applicable skills and adding demographic information and tenure length. At the bottom of the matrix, add a line calculating the percentage of board members who posses each skill or experience, as well as the average tenure. Your board skills matrix should focus on the most significant skills and qualifications of each director and is not meant to be exhaustive. It should provide a visual snapshot of each person, helping you determine any gaps in knowledge or experience. Demographic information can be used to calculate the percentage of directors with specific characteristics if that metric is relevant to your organisation’s board composition.

Examples:

• Sample 1
• Sample 2

What Is the Purpose of a Skills Matrix?

A skills matrix identifies both the current skills, knowledge, and experience of your board directors and the gaps in competencies you should prioritise in future appointments. After completing the template, review the results and identify strategies for improving the overall capacity of the board. The matrix results inform committee nominations, reappointments, and new appointments and is used in the annual review of leadership capacities or to support risk management.

When To Disclose the Skills Matrix

Depending on the government regulations relevant to your organisation, some entities may be legally required to disclose their skills matrix on the annual report. If there is no legal requirement the decision lies with the board in determining whether disclosure will be beneficial. According to the ASX Corporate Governance Council, disclosing the skills matrix can increase accountability and transparency, ensuring directors are meeting their obligations.

Why Is Board Diversity Important?

Deloitte in the U.S. published a report examining the absence of women and minorities on boards. It found that recruitment often involves selecting individuals who are similar to existing board members. The result is a lack diversity and connection to the broader community. A more culturally diverse board can help organisations identify unconscious bias and meet their commitments to diversity, equity, and inclusion.

Having a diverse board is critical to avoid ‘blind spots’ that may occur if directors’ perspectives are similar. Everyone brings a set of personal and professional experiences to the position and diverse perspectives and backgrounds can help your organisation to be more aware of cultural variations among stakeholders, and to make more informed decisions that will have a positive impact on your organisation’s success.

In addition, a lack of tenure diversity can lead to more financial volatility and riskier investments, according to a study. Long tenures can lead to weak monitoring practices due to entrenched habits and beliefs. The study also recommended adopting an optimal tenure length policy rather than using fixed term limits to avoid directors with less experience.

Other Skills to Look For in Board Directors

In the non-profit sector, board directors are required to have a good mix of technical and behavioural skills relevant to the sector and the organisation’s purpose. They should have a strong understanding of governance and knowledge of environmental social and governance issues (ESG). The ability to understand technology and digital media is increasingly important. Being a forward thinker that envisions the organisation’s future and knows how to help it to stay relevant is also an important skill to foster.

How To Plan for Board Succession?

If your skills matrix reveals significant gaps or excessively long (or short) tenures it may be time to consider refreshing the membership and planning for succession. Your matrix, along with self-assessment questionnaires, can offer insight into the sort of candidates you want to recruit. Law Firm, Spencer Stuart recommends using the board skills matrix as a starting point for discussions about director tenures and each organisation’s leadership needs.

Ideally, there should be a good mix of new, medium-tenure, and long-tenure directors on the board. The matrix can help mitigate departures and transitions, manage committees and select the right people for executive positions. While you may not need a formal succession plan, knowing which vacancies or skill sets need attention can help prioritise the kind of candidate you want to attract, and shape the opportunity to ensure your organisation has the best set of decision-makers to support its long-term strategy.

Further Reading

Director Selection: Finding the Right Fit

Diversity and Inclusion in the Boardroom

Risk Matrix with Examples

Director Recruitment – The Habitat for Humanity Approach

Recruiting for Not-For-Profit Boards: Building Strong Foundations

Further Resources

Board Evaluation

Board Evaluation Webinar

DIY Board Evaluation and Assessments Tool