Summary
In our latest report, Managing Partner Michael Henry examines:
- How incumbent and prospective directors can prepare for the unprecedented leadership challenges ahead.
- Three critical competencies that are essential for directors to be effective in the workforce of the future.
- The role of psychometric testing and behavioural interviewing in assessing these critical competencies.
In today’s evolving business, economic, and social climate, the importance of assessing board directors for forward-thinking competencies such as judgement, learning agility, and numeracy cannot be understated. Whether managing global complexities, capital markets, or adapting to shifting regulatory environments, there is significant value for boards in assessing for these key skills to help address the unprecedented leadership challenges ahead.
Our latest report examines three critical competencies essential for financial services board directors to address the emerging leadership challenges ahead.
Introduction
The coming decade will produce unprecedented and complex challenges for financial services companies and boards to navigate.
In anticipation of these challenges, much has been written in recent years about the rapid shift in Board Director (“director”) competencies. This has given rise to many companion checklists and guidelines, accompanied by a growing list of focus areas. The magnitude and speed of changes resulting from COVID-19, technological advancements, and evolving geopolitical considerations are all key catalysts for this reimagination of core director competencies.
In this article, we will explore how incumbent and prospective directors can prepare for the leadership challenges ahead — many of which organizations have never experienced before.
The magnitude and speed of changes resulting from COVID, technological advancements, and evolving geopolitical considerations are all key catalysts for this reimagination of core director competencies.
Defining the Challenges
While boards face many concurrent challenges, factors such as artificial intelligence, the normalization of the cost of money, and a reordering of economic structure all present complex strategic challenges for governance and organizational stewardship.
A combination of these powerful forces will shift the required competency sets and profiles for directors. The relative stability and prosperity of the post-war era has shaped societal expectations and economic relationship between organizations, employees, and customers.
However, as we move forward, functional skills will be less critical for most directors. Rather, there will be a premium on the ability to make crucial decisions based on complex and ambiguous information within fundamentally different social and economic constructs.
Given these conditions, three competencies will be essential for directors to be effective in the workforce of the future: learning agility, judgement, and numeracy.
1) Learning Agility
Learning agility refers to learning from previous experiences and applying that knowledge to provide clarity and context in novel decision-making situations.
Essentially, it is the skill of knowing how to act on ideas quickly while being open to new approaches with the confidence to experiment and take appropriate risks.
In the coming years, the ability to make key decisions without comparative reference points, or having to lead based on ambiguous information (e.g., Artificial Intelligence), will further emphasize the need for this competency.
2) Judgement
Judgement refers to combining one’s capabilities and experiences with knowledge and facts to determine optimal solutions and decisions. In this regard, the emphasis is on ‘optimal’ — not ‘perfect’.
While judgement is a complex competency to assess, predicting its impact on time-sensitive and critical decision-making is even more difficult. Despite the inherent challenges in evaluating a candidate’s judgement, it remains one of the most valuable governance skill sets.
To support the assessment of this competency, Massey Henry often leverages external psychometric tools, such as the Hogan Assessment suite, through our Leadership Practice to measure both cognitive ability and the personality characteristics that drive decision-making.
3) Numeracy & Analysis
In the coming decade, the volume of the quantitative information and analysis provided to directors from internal and external resources will increase exponentially.
As such, analytical skills can no longer be considered a key requirement solely for the Audit or Risk Committee within a board.
The rapid adoption of machine learning and artificial intelligence will continue to generate vast amounts of data and information. The volume and complexity of information will require directors to capture digestible and applicable information from a plethora of ‘noise’.
Understanding a leader’s unique personality profile and decision making style — particularly when the stakes are high and the pressure is on — allows us to better understand and predict a leader’s judgement and, most importantly, when and how that judgement might falter.
Refining the Director Selection Process
Psychometric Testing and Behavioural Interviews
Given the nature and significance of the competencies highlighted above, traditional approaches to director selection will need to be amended to better assess such qualifications.
Candidate reputation and profile are essential aspects of a director’s assessment, but they should not be given disproportionate weight in the selection process. Rather, boards will benefit from placing emphasis on complementary approaches such as psychometric testing and behavioural interviewing.
As noted, these evaluative approaches provide deeper insights into a candidate’s judgement and learning agility; they also offer a comparative framework for candidate assessment.
A structured interview process should be supplemented with an interactive session where the candidate provides commentary and recommendations regarding decision-making scenarios. These case studies and hypotheticals should enable the candidate to demonstrate the depth of their judgement, learning agility, and numeracy competencies.
Candidate reputation and profile are essential aspects of a director’s assessment, but they should not be given disproportionate weight in the selection process. Rather, boards will benefit from placing emphasis on complementary approaches such as psychometric testing and behavioural interviewing.
Conclusion
Nomination and governance committees may believe the candidate evaluation steps we have described are not necessary at this time.
However, the need for these competencies will only continue to increase given the complexity of business issues and heightened stakeholder advocacy facing for-profit and not-for-profit enterprises.
As the world enters a profoundly altered economic and social reality, the approach used by organizations and boards to determine key skillsets and competencies to provide strong governance in this new era must also evolve accordingly.
About Massey Henry
Executive Search, Coaching, Assessment, and Advisory Services
Massey Henry is one of North America’s leading executive search and board advisory firms exclusively serving the financial services sector.
With an experienced team of former industry leaders and talent management specialists, the firm combines innovative technology with in-depth sector expertise to provide clients with full-scope executive search, talent assessment, coaching, and leadership advisory services.
Michael Henry
Managing Partner, Massey Henry
John Sanders
Senior Partner, Board & CEO Services
Charlotte Berry
Partner
Elaine Lajeunesse
Partner & Co-Head, Leadership Practice
Alex Bunyan
Partner & Co-Head, Leadership Practice