Finding the right board composition balance is challenging for organisations, but it is essential in the current climate. As investment firm Abrdn states, “a balanced composition allows it [the board] to adapt to the changing demands of the business environment and ensures that it can fulfil its role in driving sustainable corporate performance.”
Businesses in Europe have to be working towards increasing diversity. With the upcoming Women on Boards Directive, every listed company within the European Union will be obligated to recruit at least 40% female non-executive directors by 2026. In the UK, the Parker Review has set a target for 50 large private companies to have at least one board member representing an ethnic minority by December 2027.
However, board diversity is about more than demographics. It also includes experience, attitude, outlook, personality traits and skillset. Being able to understand where the gaps are in your board and who the best candidates are to fill them requires a robust strategy, which is where a board composition matrix can help.
This article explains what the matrix is, how to design one for your organisation and how to implement it to increase the effectiveness of your board.
What is a board composition matrix?
A board composition matrix is a tool that allows you to visualise the skills, experience, background and other attributes of both your current board members and prospective board directors that you are considering for a place on the board.
By laying out this data in a matrix, you can better identify where the gaps are in the board’s composition and what you need to look for in future board members to achieve the balance that you require.
A board composition matrix is an essential tool for informing your recruitment and succession processes.
How to design a board composition matrix for diversity
1. Assess current board composition
You need to understand where your board currently sits in terms of composition to develop a matrix that makes a tangible positive difference in the future.
Evaluate the backgrounds and demographics of your directors, as well taking into account the diverse range of knowledge that they bring to the table. By creating a benchmark, you can find out the areas that are missing in the boardroom, whether there is underrepresentation of a particular gender or ethnic background, or you are lacking board or industry experience, for example.
2. Define diversity objectives
Think about what you need to do to enhance representation on the board and how diversity of skill and experience will help your board and the company achieve its aims. What are the attributes that are required for the most effective oversight of the organisation?
For example, the regulatory landscape might be becoming more complicated and you want to improve the board’s understanding of compliance topics. Alternatively, if the company is heading for a digital transformation, it might be necessary to increase the IT knowledge on the board.
Think about your future challenges and how you intend to overcome them.
3. Set goals
You have your benchmark for board composition and you understand where you need to get to, so now is the time to develop the goals that will place your board on the right track. Keep your broader goals in mind as you develop your targets.
Use the SMART goals framework to create specific and measurable objectives for the areas in which you want your board to develop, ensuring they are reasonable and achievable within a certain period of time. This allows you to create the momentum that will put you on the right path to achieving your objectives.
4. Create the matrix
Once you know which aspects of diversity are key to reaching your objectives, you can create the visual board skills matrix. Plot the current board members along the top of the table and add rows that relate to their skills, experience and demographics, listed along the left-hand side.
For each director, tick the boxes relating to the attributes they bring to the board and, once all data is inputted, you will be able to see areas that require attention.
This helps you visualise what you need to look for in a new recruit and, when you have a candidate in mind for a position, you can add them to the matrix to see which gaps they fill in your quest for board diversity.
See the examples below to get a better understanding.
5. Develop a recruitment strategy and policy
Create a procedure to help you find the candidates that meet your diversity gaps. Consider where you advertise for positions or where you seek out new talent for your board. Ask directors to poll their networks to see if they know of a prospective board member who meets your criteria.
Reach out to diverse communities and representative bodies that can help you find the right-fit talent within your industry. Involve these bodies in the recruitment process and make yourself visible as a company to a wider range of potential recruits.
Make sure your new recruitment policy is transparent and accountable so everyone understands why the company is looking to change the way it recruits board members.
6. Ongoing monitoring and evaluation
Like with any process, once implemented, you should monitor the effectiveness of the matrix and whether it is helping you create a more well-rounded board that makes better decisions.
Consider whether your matrix has helped you move towards your targets and any limitations that it may have. Tweak it if you need to, adding or taking away attributes to ensure you are focused on your organisation’s goals.
Board composition matrix examples
| Attributes | Director 1 | Director 2 | Director 3 | Director 4 | Director 5 | |
|---|---|---|---|---|---|---|
| CEO experience | x | x | ||||
| CFO experience | x | x | x | |||
| Board experience | x | x | x | x | x | |
| Compliance | ||||||
| Legal | x | x | x | |||
| Compensation/HR | x | x | ||||
| Financial | x | x | x | x | ||
| M&A | x | x | x | x | ||
| International business | x | |||||
| Traits | Director 1 | Director 2 | Director 3 | Director 4 | Director 5 | |
|---|---|---|---|---|---|---|
| Leadership | 9 | 8 | 5 | 6 | 8 | |
| Communication | 5 | 9 | 8 | 6 | 7 | |
| Problem-solving | 7 | 9 | 8 | 7 | 8 | |
| Decision-making | 9 | 7 | 9 | 8 | 7 | |
| Strategic thinking | 7 | 8 | 7 | 7 | 7 | |
| Demographics | Director 1 | Director 2 | Director 3 | Director 4 | Director 5 | ||
|---|---|---|---|---|---|---|---|
| Gender | Male | x | x | ||||
| Female | x | x | |||||
| Non-binary | x | ||||||
| Prefer not to say | |||||||
| Ethnicity | White | x | x | x | |||
| Black | x | ||||||
| Asian | |||||||
| Two or more ethnicities or races | x | ||||||
| Disability | x | ||||||
| LGBTQ+ | x | x | |||||
Best practices for creating a board composition matrix
- Be clear in your objectives
The easier it is to understand what you want to achieve with your board composition, the more useful the board matrix will be. This also leads to better outcomes once you have recruited candidates to fill the gaps in your board.
- Include key dimensions and balance hard and soft skills
The attributes and traits that you include in your matrix depend on your business and its goals. However, ensure to include skills, demographics and personality traits as well, as all three have a bearing on the way the board of directors operates as a whole. A mix of hard skills and soft skills gives you a better overview of what people will bring to the board.
- Be transparent in your communication
The matrix affects all stakeholders on the board, so they should know that it exists and how you use it to develop the composition of the board. It is also worth mentioning to potential candidates so that they understand what you want during the recruitment process. Use it for board evaluations as well as in your selection procedures.
FAQ
What does board composition depend on?
Board composition depends on finding the right candidates to fill your skills or demographic gaps. This puts the onus on the recruiting team, including the nomination committee, to be proactive in seeking out candidates that might not fit the criteria that they previously approached.
What are the most critical skills for board members?
There is a range of skills that make a board tick and help to facilitate well-rounded decision-making. They include:
- Strategic thinking
- Financial expertise
- Risk management
- Leadership and decision-making
- Industry expertise
- Governance experience
- Communication skills
- Problem-solving
- Adaptability
You should consider adding these to your board matrix for composition.
How can technology improve board governance?
Board technology helps to enhance communication between board members, using digital means to message and collaborate on documents. It streamlines the workflows of the board and provides analytics to assess board engagement, as well as allowing the board to monitor the implementation of action points from meetings.
The security aspect of a board portal is another way that it improves governance. It gives you the ability to run virtual or hybrid board meetings for more flexibility and improved attendance.
Conclusion
A board composition matrix helps you to recruit new members who fill the skills gaps in your board, as well as adding additional traits and experiences to create well-rounded decision-making. It is a visual representation of the composition of your board as it stands and allows you to see how that will shift if you take on a particular candidate.
iBabs’ board portal helps new directors settle in by providing more opportunities for collaboration and interaction with their new colleagues during and between meetings. Request a demo for your company today.
