Specialists, Generalists, and Private Company Board Composition
Generalists deliver more value on private company boards than specialists. While subject matter expertise in relevant areas is table stakes in considering any board candidate, a specialist with a single focused area of expertise is insufficient to merit a board seat, in this author's view, for three core reasons.
Effective boards are small, and each board member should bring much to the table. Being able to act nimbly and decisively is imperative for private companies. The goal of board architecture is to assemble the smallest number of qualified individuals who bring relevant subject matter expertise to the board so that the collective wisdom meets the company's needs currently. Board seats are precious, and each should be filled with someone who brings senior-level business experience, expertise in one or more relevant subject matters, as well as the ability to contribute to full-board discussions on strategy, capital markets, mergers and acquisitions, CEO succession, etc.
Understanding where the company is in its lifecycle is critical to developing and refreshing a board. While skillsets and board matrices are helpful in determining which skills are present in the board makeup and which are ones to seek in new directors, having specialists who can only contribute to limited areas of board conversation could result in adding too many board members to cover the desired skillsets. Alternatively, to keep the board size small, it would lack the areas of expertise covered with its few specialists.
Excellent private company boards are clear about refreshing board composition to keep the board size reasonable, while adding expertise based on the company's future strategic direction; not on where it has been. This is a hard, but necessary step, for any private company and its board. The most effective boards have the smallest number of directors who understand that board service is a team sport.
Furthermore, when boards need subject-matter expertise, the board can bring that expertise into the room by inviting an expert guest speaker, without devoting a precious seat for that purpose. Seeking and seating generalist board members, who are more like swiss army knives than screwdrivers, with the ability and tools to contribute across multiple areas, can be most effective in assembling the private company board.
Generalists have experience in handling uncertainty—a critical board skill. COVID-19 has reinforced to companies that boards need to govern during periods of uncertainty, with limited information, often shrouded in fear. Specialists with a single area of expertise often possess less broad-based career backgrounds. And, it is these broader backgrounds that are sorely needed in times of turbulence and crisis.
Board generalists added critical input to private companies during their pandemic pivots to transform digitally and assess the physical, technical, and mental needs of staff suddenly working remotely. For example, Boston-based J. W. Lopes, a private restaurant supply company, whose business plummeted during the stay-at-home order closing restaurants, pivoted successfully to launch New England Country Mart, a brand-new digital division focused on home delivery. Management and the board averted insolvency and worse. In times like these, private companies recognize how important good leadership and broad board experience can be.
CEOs have told this author that the board should be a "team of superstars" who do not act like superstars. Acting as a team, it is the collective wisdom around the table that matters most to the CEO and the senior leadership team.
Generalists make for excellent communicators, a necessary attribute in any board room. Generalists typically have broad communication experience with their own boards, investors, business peers, direct reports, and employees.
By nature of their prior business and board career, generalists with C-Suite or senior management experience bring their broad communications expertise into the boardroom, having done so during positive and challenging times. While specialists are often great communicators, their communication experience can sometimes be on content with a narrower focus and with more limited types of audiences.
Dealing with social equity, employee safety, and the economic impacts of COVID-19, private companies have experienced many challenges in communicating with their senior leaders, investors, and employees. Generalists at the board table who can communicate with candor and help management connect the dots are extremely helpful.
Generalists help management think through how to help senior leaders and employees accommodate and adapt while launching new protocols and work methods while safeguarding data with staff working from home on less secure networks.
Generalists with broad communication skills can also help management think and provide guidance on messaging to all stakeholders and constituencies, whether it is about preserving liquidity to survive the downturn, reductions in force, pivoting products or services to accommodate or take advantage of the new customer demands, or about equity, diversity, and inclusion.
How can private companies use specialists?
Beyond serving as boardroom guest experts, specialists may be exceedingly well suited to private company scientific or technical boards. These are key areas where subject-matter specialists with a deep scientific, medical, or technical network can add value to the development of a company's products and services.
Generalists—rather than specialists—make for great board directors in private companies to keep board size small, be better prepared to govern in times of uncertainty, and communicate effectively with one another and the management team. While subject-matter experts are always needed on private company boards, generalists who possess subject-matter expertise along with broad business experience and acumen can punch above their weight and contribute in various ways beyond their subject-matter expertise.
Roberta Sydney, NACD.DC, is a seasoned board director and former CEO serving as board chair of HEI Civil, a private, multistate, civil construction company.