The Building Blocks of Board Service: Determining if Board Service is Right For You
Published in the ACC Docket by Carly O'Halloran Alameda and Olga Mack.
Understanding the basics of board service is a necessary first step for those interested in joining a board of directors. In part one of this three-part series, we shared insights from Sheila Ronning, CEO and founder of Women in the Boardroom, regarding some of these basics, including the various types of boards, responsibilities of being a director, and the risks of board service. In part two, we will explore another aspect of the basics: understanding your motivations, the value you can bring to a board, potential compensation for your efforts, and how to start your journey. “Staying true to yourself, your interests, and your comfort level are key pieces to the decision about and the approach for seeking a board position,” Ronning explains.
The benefits of board service: What a board can do for you
“People’s motivations for board service are not the same, but nearly all board members agree that they get more out of their board service than they give,” says Ronning. Some common reasons for board service include the intellectual challenge of learning a new industry, the ability to contribute in a different way to a familiar industry, interacting with highly intelligent peers to help a company achieve its goals, service to others, or pursuing a fulfilling “second career.” Many board members who juggle board service while still engaged in their “primary career” also view board service as enhancing their resume and reputation, and demonstrating C-suite readiness. “Many companies encourage and help their senior management to join boards,” says Ronning. “This helps with succession planning and determining CEO readiness. In fact, the CEO is often a board member or chairman.” Board service can therefore bring great value to most professionals.
Understanding and articulating your value: What you can do for a board
To determine whether and how to start a journey toward board service, you must also be able to understand and explain the value you can add to a board. This includes identifying your relevant skill set, knowledge and industry experience, and which types of companies you might be a good fit for. “You need to know what types of companies’ boards you are qualified to serve on, and you need to articulate your value very well. You can’t market yourself or network productively if you can’t articulate this well.”
The way you market yourself is in fact a key for your networking efforts (networking will be discussed in greater length in part three). First, understanding your skill set helps you narrow your target audience and deliver a compelling message to those you are networking with. Second, it can also provide an important first impression. “It’s important to be able to discuss yourself and be forthcoming, without diminishing other individuals or companies and without over-sharing. It is a fine line to walk,” admits Ronning. “Your behavior and ability to do this with good judgment will be observed.”
Identifying your value can also help you determine gaps. “You don’t necessarily need all the right experience immediately,” Ronning says. “Once you have clarified your goals, you can fill in any gaps by pursuing volunteer or professional experience in any areas you are lacking.” The most important thing is to know who you are and what you have to offer, and what type of board would be the best match for you.
Compensation for board service
Although for many directors the money is not their primary motivation, it is helpful to understand how the compensation will work. Public companies’ board positions are usually the most highly compensated, although exact compensation (which can include salary and other value, including stock) depends on the size of the company. Annual compensation for public companies under one billion dollars in revenue often ranges between US$75,000-US$200,000, companies around five billion in revenue average around US$250,000, and companies with more than five billion in revenue can reach US$500,000 and higher.
At private companies, compensation also varies. Larger, well-established companies often have compensation plans similar to public boards. Medium and small companies, however, generally have annual compensation ranging from US$15,000 to US$40,000. Compensation also varies greatly for advisory boards. An advisory board member may receive a small stipend for each meeting, ranging from several hundred to several thousand dollars. Members may also be asked to participate in annual strategic planning sessions, for example, for a payment of several thousand dollars. Alternatively, a board member may receive stock in the company. Nonprofit boards usually pay nothing. In fact, many require a substantial contribution that directors are required to “give or get.”
Ronning recommends avoiding companies that do not provide any compensation. “They need to have skin in the game,” she says. “Companies want to see passion and motivations to serve other than for the compensation, but the companies need to show the board has value by offering something appropriate to the company’s position.
5 steps for pursuing a board position
Once you understand the basics of board service, Ronning recommends five key steps to pursue a board position:
- Develop a reputation for excellence and show leadership in your main job and industry. “Bring your A game, because you will be scrutinized when you begin pursuing board service. Dress well, be prepared, and show up for everything,” says Ronning. Build a strong profile and personal brand.
- Assess your skill set and ask yourself what you will bring to the table. If you notice anything lacking, fill in the gaps with experience that develops or demonstrates the necessary skills. “Write a ‘board bio’ to help articulate your value,” Ronning recommends.
- Develop a strategic plan. Educate yourself on board responsibilities, and various industry or company boards, and based on your skill set and your motivations, determine where you’d like to serve and how to focus your efforts.
- Get started on getting involved. For example, Ronning recommends working to get on a government commission or committee. Or seek out acquaintances who own their own companies, and volunteer to start or serve on their advisory boards. “You don’t need to wait for the board position to start demonstrating your leadership and involvement.”
- Network. Part three of this series will address networking more specifically, and it cannot be overstated as a key step in pursuing a board position. “Tell people you know and respect, especially sitting directors or those who interact with directors, that you are seeking a board seat,” Ronning says. Get to know recruiters at search firms. Make sure that you have your plan set and a reputation and expertise to back it up, and people will notice.
The journey to a board position can be a long one, and you cannot expect immediate success. But by understanding your motivations for joining a board and the value you can bring, and following Ronning’s five-step plan, you can begin building your path to the boardroom. With dedicated effort, these building blocks can be the foundation to a fulfilling board service career.