Are we going about selecting Board Directors the wrong way?

On every board I have been a part of – either as a member, advisor, or consultant – two things have consistently governed the choice of directors to join the board:  Who they knew on the current board and how they checked off on the board competency matrix.  The fact that boards transition based on who knows the candidate is nothing new and not likely to change rapidly, particularly in the relatively small pool of vetted independent directors, for a variety of credible reasons.  I wonder if it makes sense to look at the second criteria a little more in building more agile and valuable boards in the future – competency matrices.

Almost every director will be intimately familiar with a competency matrix to assess desired talent on the board – they are a part of all recruiting and on boarding everywhere.  My question is this:  with such a qualified group of individuals, are specific business competencies the right judgement framework to evaluate?  I have one exception before we explore more – regulated industries like banking and defense contracting, as well as certain committee chairs like audit, are the clear exceptions as they need very specific competencies at least represented on the board and committee.  Outside of the likes of at least one QFE, the question becomes what makes a good director (and of course the entirely separate post-worthy topic of what makes a good board)?   I would suggest that to a far greater degree than any specific competency, it is a set of attributes.

I have been involved in building several boards from inception and adding members to several others, and the three things in my opinion that make a phenomenal director are:

1.      Mental Agility

2.     Ability to respectfully disagree and constructively deal with conflict

3.     Broad thinking and prepared

It is not a surprise that these three items don’t show up on a competency matrix – they are hard to quantify.  Besides, you may ask, don’t they have to be competent?  Yes, of course they have to be competent in the core areas of management, finance, strategy, etc.  I would argue that the vast majority of senior executives (notice I am including far more than CEO’s and CFO’s) have the ability to review a set of financials and pick out issues or explain them, ask pertinent operations management and direction questions, and analyze most business situations. Certainly, a competency assessment is important, I am suggesting that it is more important to consider the attributes when evaluating the long-term value of a board member. I would love to hear other Directors opinions on this topic, particularly as we move into a new era of the independent director as a true profession as opposed to the older, more honorific reward position of years past.