C-Suite Executives and External Boards - Benefits

5/2/14

Last blog I shared with you some of the results of a survey of HR Policy Association's Board regarding how their companies handle requests by C-suite executives to sit on external for-profit boards. That blog focused on the policies and considerations and generally concluded that the firms want to ensure that the experience will benefit the company without creating a conflict of interest. This blog focuses on the benefits.

At a general level, firms seek to use such board positions as individual development and retention tools. However, firms seek to gain a few specific outcomes for those executives that seem to consistently show up in the CHROs' answers:

  1. Governance. Most of the CHROs noted that board experience enables the executives to see a company from the board's perspective. This provides valuable insight regarding governance issues and challenges, and can make the executives more sensitive to their own board's concerns. In addition, they gain a fresh insight into board dynamics, particularly in terms of what happens when they are not in the room with their boards. Finally, they can learn what works and doesn't work in terms of presentation styles. In essence, being on a board will make them more effective when they interact with the board.
  2. Broader business perspective. The CHROs noted a number of ways that executives broaden their perspective as a result of board membership. First, they get exposed to different business models, strategies, and challenges. For instance sitting on a consumer products board might provide an executive a deeper insight into the importance of brand. In addition, they are exposed to different practices that might broaden how they think about certain processes.
  3. Expanded Network. Finally, CHROs agreed that exposing the executives to a broader network of senior executive acts as an important benefit. These networks can be an extremely valuable for an executive to seek out advice or best practices for handling a particular challenge.

The thing to keep in mind is that these benefits accrue to the individual executive, but also indirectly accrue to the company. Executives who become more sensitive to governance challenges should be better at interacting with the board. Those exposed to broader perspectives can share those in the internal decision making process. Finally, broad networks may enable the firm to gain access to insights that never would have sprouted internally. So, encouraging executive participation on an external board may be a perfect example of a win-win.