A skills matrix is a visual framework that can be used to evaluate and map the skills and key attributes of a board of directors. When built with rigour it provides a comprehensive view of the relevant skills required for the board to oversee the organisation. Every board benefits from developing a skills matrix – provided the data it presents is accurate and there has been careful consideration of the skills that will support the organisation for the following three to five years.
Without a rigorous board skills assessment that hones in on the right areas for the organisation, the skills matrix runs the very real risk of being left in the bottom drawer. In this article, we’ll explain how to identify which skills should be included in a board skills assessment, as well as how an assessment should be structured to achieve consistency of results.
What skills should be included in a board skills assessment?
There are a number of possible approaches for a board to take when it comes to identifying the skills, competencies and diversity requirements that are important to it. BoardOutlook’s purpose-built skills matrix software makes this process simple through the use of an initial diagnostic assessment. It allows all board members to have their say on what skills should be included, as well as rating their criticality given the organisation’s strategy and the challenges and opportunities it faces.
Some of the common skills we see included in a board skills assessment across listed entities include:
- Risk management oversight
- Safety
- Innovation and disruption oversight
- Major change and transformation oversight
- Communications and corporate affairs oversight
- Marketing and brand oversight
- Accounting and financial reporting oversight
- Corporate governance experience
- Technology and data oversight
- Talent, culture and diversity oversight
- Sustainability
- Strategy oversight
Of course, what is most important here isn’t simply the skills, but how the expertise is defined relative to the organisation. We go into this in more detail below.
How should a board skills assessment be structured?
The board skills assessment framework BoardOutlook uses is broken down into critical skills and general skills. Critical skills are those not easily delegated to management and are imperative to an organisation’s strategy and key risks. General skills are important, but are less unique to the organisation and can be supplemented through external support, management capability and director training. Most boards will have three to four critical skills and anywhere from ten to twelve general skills.
By breaking up skills into critical versus general, the process of assessing any skills gaps becomes significantly easier. It helps the board to prioritise which areas to focus on for board succession planning, and gain alignment on any trade-offs required on future candidates.
A matrix may also include diversity information, however this is seldom covered in the assessment. The three core sections BoardOutlook focuses on are outlined below.
Clear definitions of skills
Each skill definition should offer more nuance and context specific to the organisation. As an example, once a director has selected their level of capability in strategy oversight, BoardOutlook’s software will verify the answer with additional context that was provided in the initial diagnostic. This additional insight could include:
- The strategic process
- Board portfolio-based capital allocation
- Business planning and budgeting
- Implementation of strategic measurement/accountability
Relative capability
The start of our board skills assessment lists all the identified skills relevant to the board and asks directors to rank from their strongest to weakest capability areas. This gives directors pause and encourages them to think deeply about their expertise and growth areas. The underlying frame here is that you cannot be an expert in everything, but that everyone has some areas where they are stronger than others.
Peer reviews
The last component of the board skills assessment is a peer review, which asks the director whether they believe any other board members are experts in the particular skill being assessed. By asking this question, it provides additional context to the overall results, and also gives the individual an opportunity to recalibrate their own answers relative to their peers.
In light of peer assessment challenges, completing a peer review of skills is fast becoming the market standard. It’s been shown to increase consistency of results and is a feature highly sought after by Chairs and directors, keen to add additional rigour to the assessment process.
Interpreting the results of a board skills assessment
Once the skills assessment has been completed, the Chair will be able to review the results and compare the individual directors assessment with their peer results. This can be navigated manually through various spreadsheets if the assessments have been completely internally – or if completed with BoardOutlook, this data will be provided online in an interactive format. In many cases, there will be individuals who have either under or over-rated their skills.
By having this data on hand, the Chair will have an opportunity to discuss with the individual directors and make adjustments to the final skills matrix as required, offering a far more accurate picture of board composition, which is particularly valuable in the case of succession planning and director development.
Getting the most out of board performance
When coupled with a thorough board skills assessment, a board skills matrix significantly enhances decision-making relating to board composition and ultimately board performance. Being able to easily predict retirements and understand what this means for committee structures and the board overall has a meaningful impact on succession planning and development discussions, which ultimately benefits the whole organisation.