Don’t close the door to a source of wisdom and advice that can aid better decision making
Nine years is usually the maximum amount of time a director can serve on a board and be viewed as independent, with 75 years of age commonly the upper limit for retirement.
Over the years this leads to board renewal and the regular loss to the board of departing directors who have a significant amount of knowledge, experience and contacts.
At a time when many boards are in the thick of navigating their way out of the pandemic, with all the associated ambiguity and uncertainty, experienced, suitably qualified retired directors could play a very important role in providing an additional source of support and insight to their former board.
Subject to confidentiality constraints, and the goodwill of current and former board members, the relevant former board members could be considered to be a valuable potential source of insight. As well as insight, they may provide useful “corporate knowledge” to the board to assist them with their decision making.
However, before engaging with alumni the board must identify the challenges they are facing, and how they could benefit from the insight of former directors. It’s vital the board thinks broadly and deeply across all areas where the former board members could provide vital input and value. It’s also important to recognise that some former directors may bring historical baggage and not current thinking, so this may not suit all board alumni.
How can retired directors add value?
There are various ways former directors can add value. For example, if looking to appoint a new auditor the retired director who had responsibility for leading the previous auditor selection could be consulted to advise on the appointment.
Importantly, alumni can serve as a valuable sounding board and source of powerful corporate and sector memory which may help boards navigate significant uncertainty and strategic decisions.
Every business needs a wide circle of influence to ensure that their interests are represented amongst groups that could impact on their future. This includes contacts with key stakeholders, such as politicians at local and central government, along with the senior staff at the appropriate regulatory bodies. As the fortunes of political parties fluctuate, along with the careers of politicians, for example, it may be that a retired director has contacts at a senior level with those at the new governing party. The board can then empower that person to engage with those stakeholders on their behalf for the benefit of their organisation. Some far sighted boards will have a stakeholder map, which enables them to identify the contacts of current and retired board members.
How to encourage retired directors to engage
For those boards keen to be able to harness the wealth of insight from their ex-colleagues in the future to improve their decision making and efficiency, it’s worth setting up an informal alumni group of retired directors.
As a first step to encourage ex-directors to join an alumni group, it’s crucial that there’s a retirement date clearly communicated to all the soon to be retirees many months, though ideally, a year or two in advance. Then, when it comes to their transition off the board, it must be handled with maturity and good planning. To this end, it’s important that boards have an exit interview with the departing director as a thank you, and to enable the board to make learnings to improve processes, recruitment and board effectiveness in the future.
The board should automatically welcome all retiring directors to be members of the alumni group and participate in occasional updates or gatherings. This could include, for example, an annual dinner between the alumni and the board. These events will make the retirees feel special and encourage them to be willing participants when approached for help and advice by the board at a later date. It can also provide a mutually beneficial valuable connection between the departing director and the new board.
However, when engaging with alumni it’s important to set expectations. Boards must clearly define the role they want them to undertake, being clear about their time and responsibilities, and perhaps most importantly, what they’re not responsible for – namely board-level decision making.
Retired directors are a valuable resource. Many still have much they can offer to the board. Forward-thinking boards looking to improve their decision making and efficiency, particularly in these challenging times, should look, if they have not done so already, at setting up an alumni group of retired directors they can engage with as required.
By John Harte, the Managing Partner at Integrity Governance