Against a backdrop of business models being changed forever by artificial intelligence, and geopolitical conflict undermining economic growth, the Irish Institute of Directors has produced a new ‘competency framework’ to help boards reflect on the skillsets and knowledge they have at hand.
According to IoD president John Reynolds, the framework aims at improving governance standards ‘at a time when directors, senior executives and boards face ever evolving corporate challenges’. Trade and enterprise minister Simon Coveney says skills and good governance are the ‘bedrocks’ on which ‘healthy economic activity’ is built.
‘The macroeconomic environment and post-Covid events are things we haven’t experienced before’
‘By developing and enhancing the competence and expertise of those charged with governance, this new suite of supports will advance the quality and performance of organisation across Ireland, driving our competitiveness and strengthening our economy,’ Coveney adds.
Megatrends
Strengthening Ireland’s competitiveness would not go amiss after the economy contracted 1.9% in the third quarter of 2023. And scandals such as the secret payments crisis at RTE are reminders that governance inside organisations may not always function at optimum levels.
Yet it is megatrends that appear to be the main driver behind the IoD’s decision to create a competency framework that offers a window into the kind of skills required for boards to function in the current environment.
Margaret Cullen, an assistant professor at Smurfit Business School and chair of the IoD’s professional development advisory committee, says: ‘There’s a sense that for senior executives the environment keeps on changing. The macroeconomic environment and things that have hit organisations since Covid are things that we hadn’t experienced before Covid.’
Four skillsets
So what does the framework say? The published guide is brief and pointed, consisting of just 160 words listing four skillsets: governance framework, technical knowledge and skills, creative strategy formulation, and the psychology of the boardroom.
The governance framework competency is about understanding legal duties and the responsibilities of a director. Technical knowledge and skills is all about the specific capabilities required in an organisation for decision-making, such as technology, financial knowledge and sustainability-related expertise.
Strategy formulation is, obviously enough, about knowledge of the ‘methodologies and inputs’ required for ‘strategy formulation’. And psychology of the boardroom is about understanding the behaviour of board members and how to improve ‘board effectiveness’.
‘This is a way of allowing a board of directors to put a mirror up to itself’
Skills matrix
Cullen says the framework will allow boards to assess their own ‘skills matrix’ given the specific business context. ‘This is really a way of allowing a board of directors to put a mirror up to itself and ask, “Do we have the competencies across senior executive and board level? Do we have the right competence and skillsets we need given our context?”’
The framework should therefore allow boards to deduce whether they need training for existing board members or to recruit new knowledge and skills. Cullen says it should also allow current and aspiring directors to assess whether they are properly prepared for board membership.
At a more strategic level it should help the IoD compose training courses and target its response to regulatory initiatives. Cullen says the framework helped inform the IoD’s response to the Central Bank of Ireland’s recent consultation on an ‘individual accountability regime’. A third of IoD members work in financial services. ‘The framework gives us a good playbook by which we can engage in policy activity,’ she adds.
‘I applaud the intent but I’d like to get my hands on the detail’
Reception
There is a widespread welcome for the framework. Orla O’Gorman, a non-executive directive and board adviser, says: ‘It’s the right time. Directors need to understand what their responsibilities are; companies need to understand why you have a board and what a good board looks like.
‘People need to understand … this is a role that needs to be taken seriously, there are a lot of responsibilities and duties.’
Despite the praise, there is also concern about the amount of detail on offer publicly about the framework. Comparison with other frameworks reveals the UK IoD’s covers three core competencies with 15 subsections and 11 pages of graphics and text, while New Zealand’s runs to 26 pages for four competencies encapsulating 26 ‘essential’ and ‘desirable’ attributes.
Bob Semple, a veteran non-executive and board consultant, says: ‘I applaud the competency framework for its intent but I’d like to get my hands on the detail because I’d like to see what insights they use that I could use in my practice helping boards and indeed helping my own work as a chartered director.’
‘Soft skills are required to survive in the boardroom’
One of Semple’s concern is that the framework does not make explicit mention of the need for continually renewing skills and competencies, which might help counter the cognitive bias that builds up among long-serving directors about the state of their knowledge.
‘Nowadays, the half-life of knowledge is smaller than ever before. What we learned only four years ago, half of it is now completely irrelevant,’ he says.
Soft skills
David Duffy, chief executive of education provider the Corporate Governance Institute, also welcomes the framework, but sees value in expanding on the psychological skills needed on boards and on the detail in the framework.
‘A lot of recruitment companies, when they looking for a board director, seldom look for the soft skills that are required of somebody – the skills to survive in the boardroom,’ he says.
O’Gorman agrees that addressing boardroom psychology is important, especially for executives adapting to the needs of a non-executive role. ‘That’s very difficult,’ she says, ‘ because you’re used to getting stuck in and telling people what to do and doing it.’
With the business environment changing so rapidly, directors and their skills will have to change with it. The IoD’s framework, though brief, captures the essence of that transformation.
