The Skillset for today’s Board of Directors

I have served on boards of various companies for over 20 years and I have looked at corporate governance, read about it and written about it. There are always questions on what skills should a board member have. I will straight away say three important skills, but there is an emerging one that is all more important

   1)    The ability to see and interpret financials at a glance

   2)    The ability to understand people including your colleagues at the board and be able to constitute a performance team

  3)    Strategic analysis

  4)    The emerging skill is digital skills

Working with today’s students, one of the most difficult things you find is not only their lack of knowledge in financials but even the simple arithmetic skills of adding  together number let on computing simple percentages that they have been given. When you get involved with many things everyday you will need to add up a few figures, the first thing you see with young people these days is that they go blank when asked to add up a few things. Even adding up figures below a hundred it is a big problem! This means if they have to compute figures in an income statement and a balance sheet which are in billion of shillings, they will have a problem. Putting them in percentages will a worse problem, comparing several years’ figures or even relating figures in the same table will be simply be a nightmare. And what is the problem? The problem is not only hatred for numerals from a young age but also the advent of the calculator and the computer. On many boards that I have sat, over 50% of the board members do not have this knowledge and this is combined with the formal training in finance and accounting which are essential in understanding the performance and positions of an organization

Strategic analysis is the other skill that is very crucial for a board member. The environment in which organizations operate is very dynamic, understanding the environment requires analytical skills. A board member must have a broad understanding of an economy or the economies where the business operates. The ability to understand the economy is what gives the opportunity for the business to do the business itself.  The Director must also have knowledge of the specific industry where the business operates.  If one is unable to understand this industry environment and generally the environment where the business is operating, it is very likely that one will not be able to exploit the business opportunities that exist. The board member will not understand the business itself

Interestingly, to understand the environment one needs knowledge in finance, marketing, human resources, economics. This is a tall order for board members. Of course those with an MBA have the basic requirement for it but it’s not a panacea still. Having one doesn’t make you an expert in business environment. You must have paid the attention to the details of the programme. Because Board members especially of public enterprises are appointed for public reasons, many do not attempt to secure the necessary knowledge. In many cases, it is a political reward or finding something to do for a political association. In the private enterprises, the Board has very little role to play especially if the owners are very good at their business, they use the board as a rubber stamp. This is more so in small companies where shareholders are few and serve as board members and directors. The same people on the board are in management. There is therefore no need for the board. Of course for public companies with many shareholders where there is need for independent board members, it is crucial that the members have the knowledge that we are talking about.

The people skills Is required more within the board itself.  When you meet as a new board, you have to learn one another and get to be able to relate well with one another. As the knowledge and skills of each come out, members start respecting one another based on their knowledge. Later personal skills come to play when conflicts arises. Conflict may arise because of selfish interest of board members or because of inherent weaknesses members have and many other causes. As board members, there is little interaction with management therefore little worry about conflict with management which is typical when people come together.

The new skills

The skills required today in boards are digital. Notice of meeting, minutes, reminders come by mail. Anybody who has no skills in this respect will not access them. ICTs have enabled organizations to be more efficient. They can produce monthly reports. They can communicate at a click of the mouse, can share information on the economy, on the industry at any time at the click of the mouse. Can make computations from a spread sheet that will give instant analysis and there is much more that is possible with digital technology. But how many board members can word process a document, produce a worksheet, send out emails, use social media including Wikipedia and other modern digital technologies. The board member of the future must have this knowledge to succeed. How is your board fairing and how are you fairing as an individual?

Taming, harnessing and exploiting the environment. The case of Norway

I was in Norway as I earlier posted, this world is not short of interesting things to see and learn from. I came to learn that china is the biggest exporter of sea food in the world and Norway is the second largest exporter. Today china is the world’s biggest producer of everything. China has been able to take leadership in everything except of course financial markets and innovation where the US still beats china and will do so for some time. For a five million people country to compare with an over 1 billion population country, it means that the Norwegians are exporting a lot of sea food and how many people are in this industry, I was told about 10,000 Norwegians. If you think a lot about this, you will understand how much wealth the 5 million people in Norway are creating. It takes me back to what the Norwegians are doing and we do not do. The night I left Norway, the temperature was about -20 degrees and during the day it was about -3 degrees centigrade. This is their country, they can’t trade it for anything else. They live there and they will continue to live there. What they have done beautifully is tame the environment. I was told that in there are people who live somewhere in the North of Norway, there job is to herd reindeers. And there temperature goes to -46 and are quite happy to live there. My host narrated to me the Norway of 1000 years old and I was impressed. That Norway is not a young country but has been growing though in a controlled manner.  Norwegians do not regret being Norwegians. They actually love it but there work culture has enabled them take control of the hostile environment that they are in. It is interesting to learn that some of the roads are heated during the winter. Interesting to learn that the difference between the professor and the lowest person to be paid in Norway may not be more than 100%.  What is interesting that they have a strong work culture and generate enough production to feed themselves and also give away some to the poor countries. I was in Norway submitting a proposal to NORHED for finding, our proposal was one of the 80 or so proposals from universities that were seeking the generous funds from the Norwegian governments. Besides education, they fund many other things. As a country they are committed to supporting development worldwide. Back to the hostile environment, most of Norway is full of snow for about 6 months of the year that means there is nothing that you can produce out in the fields. But that aside they are able to harness that hostile environment and make money out of it. Norway exports electricity to Europe. They harness the hostile environment to be able to make money out of it. They exploit the opportunity that other people need electricity and they are able to supply it. Looking back at Uganda and indeed many developing countries, the reason why we are poor is because we are unable to produce something to sell especially in the export market. There is a theory that because we live in an easy environment we therefore do not work because it’s easy to live even without working. I do not buy this argument, yes we do not work but it’s not about our work environment. It is something else which we must think about and be able to put a stop to. What is true is that the 5 million Norwegians produce in hundreds of times what the 30 million Ugandans produce. Norway is wealthy, Uganda is poor. To be able to get out of this situation, we must increase our production and our productivity, which is the challenge on our house.