In this guest post, Ron Thomsen and Peggie Pantsos (joint venture parties in One Direct Advisory and PBL Law), provide timely advice to aged care businesses when selecting Board members and reviewing current ones, especially those Directors who may not have the time to participate fully.
As Not For Profit (NFP) Boards approach their Annual General Meetings (AGMs) in late October/November, considerations are directed, about this time, to Board Director replenishment and successions.
Much has been written about the desired Board Director Compositions, in regard to balance of gender, age, experience and skills etc. The latter skills needs can be determined after a Board skills matrix and gap analysis is conducted.
From our experiences, two considerations which are worthy of input into your selection criteria and interview process is the time availability of the new Director applicant, and who from the Board has the experience and time to step into temporarily managing the business, in a worst case scenario, should there be an important need, such as an unexpected loss of the CEO.
Maybe a Director’s time availability and who can and will step up in a worst case scenario are interrelated, but we believe that they are separate considerations in the selection process.
In regard to time availability, the prospective new Director should be alerted to their responsibility’s in undertaking the Board role, and they should be advised that their commitment could go well beyond the preparation and attendance for the monthly Board meeting.
How many times have Board Directors explained repeated non delivery of a committed task or in answering emails, by saying that they are busy and don’t have the time? We suggest that those Directors should not have joined the Board in the first place, as they are not complying with their responsibilities, and are letting their fellow Directors down.
A Board year end review might encourage the time spare Director to remedy their lack of Board commitment but if you are in regional areas, where maybe the Board Director talent pool is limited, then this review exercise may only result in the loss of a Director. It is much better from the outset, in the interview of the new Director, for both parties to understand time availability and Board requirements.
One group which we have found to be time frustrated is the relatively younger Board Director, maybe a first time Director, who is desirable for longer term succession thoughts, but have the high priorities on a young family and a rising work career.
Whilst these people generally have good intent and purpose, there will be a need for more senior Directors to step up and cover more of the Board Executive functions, to nurture and mentor the young new Director. Our experience is that generally young Directors don’t remain on the Board for reasonably long terms, as new family members and work promotions dictate their time allocation to the NFP Board, and they will move on.
Underestimating the workload and responsibilities of a NFP Board role is generally a common problem, especially by the younger applicant.
Now, for the Board worst case scenario, and possibly a contingency Board plan, for say the loss of a CEO, or indeed the CEO needing support for a special project. Some Boards do have an emergency procedure/plan for this circumstance, but the problem is when the event happens, and who from the Board will step up and implement the temporary replacement.
Over recent years, most Boards have been taken by surprise by the unexpected impact of COVID and lockdowns. Some sectors, like residential aged care, have been disproportionately affected with pressures on management and staff, and absences through illnesses.
We think that as a consequence of the uncertainties we have experienced, it is now important for Boards to have a Director worst care contingency plan where a Director/Directors can step in to fill, say, the CEO absence, temporarily for up to possibly 4 months.
The emphasis on Board composition balance, we think, needs to have allowance for Directors who have time availability, maybe retired or semi-retired Directors, who have Business Management experience, and who can hold the fort until an external recruitment can be undertaken to permanently fill the necessary role.
This step up Director, may or may not be the Chair, but should have a good knowledge of the NFP operation, through induction and ongoing knowledge of management/staff/volunteers, and the business stakeholder commitments and responsibilities, like for funding agreements.
The importance of the Board having a thorough knowledge of the small to medium NFPs business has never been more important, and starts with a thorough new Director induction.
The success and longevity of a NFP is largely dependent on a properly functioning Board. For a Board to operate effectively, it is vital that new Board Members understand the role of a Board generally, the specific obligations of their role and how it differs from the obligations of other Board Members.
As outlined above, before a prospective Board Member is selected, the organisation should broadly consider:
1. Whether the individual will fit into the culture of the Board;
2. Undertaking good due diligence on the prospective Board Member; and
3. Ensuring that the individual understands what commitment is required to serve on the Board.
Once a desirable candidate is selected, making sure that an effective Board induction process is established and implemented is an important way to ensure that new Board Members comprehensively understand their responsibilities and the expectations of the organisation, and that they are suitably prepared take on this role.
The induction process should include the following:
– visits to all operating sites;
– meeting management, and understanding all stakeholder interests,
– social integration with other Board Members; and
– specific training or professional development in relation to the role.
Even if a new Board Member is experienced, it is important that they stay up to date and refresh their governance knowledge, specifically in relation to the NFP they have been newly appointed to.