Board Recruiting: An Expert Perspective

[00:00:00] Roy Notowitz: Hello and welcome to How I Hire, the podcast that taps directly into the best executive hiring advice and insights. I'm Roy Notowitz, founder and CEO of Noto Group Executive Search. You can learn more about us at NotoGroup.com. As a go-to firm for purpose-driven companies, we've been lucky to work with some of the world's most inspiring leaders as they've tackled the challenge of building high performance leadership teams.

[00:00:29] Roy Notowitz: Now I'm sitting down with some of these very people to spark a conversation about how to achieve success in hiring and create purposeful leadership for the next generation of companies. Kris Stred is a board recruiting advisor for Noto Group, and she joins me today to discuss the ins and outs of board recruiting.

[00:00:46] Roy Notowitz: Kris is an executive recruitment expert with a background in corporate finance and transaction law. She's worked closely with boards as an in-house business lawyer and has a deep understanding of what it takes to form a balanced and functional board of directors. Kris founded Stred executive search in 2012 where she recruits experienced leaders to serve on boards. Before starting her own firm.

[00:01:10] Roy Notowitz: Kris was a board and legal advisor at Houser Martin Morris. Together we talk about the role and impact of an effective board, how she hones in on the profile of a prospective board member and how mission, culture and values factor into board recruitment.

[00:01:27] Roy Notowitz: Kris, thanks for joining the podcast. I've been looking forward to having this conversation with you for quite some time. Appreciate you being here.

[00:01:34] Kris Stred: Nice to be here. Thanks, Roy.

[00:01:36] Roy Notowitz: Excellent. Excellent. So tell us about your career journey. What experiences forged your path to becoming a board recruiting expert?

[00:01:44] Kris Stred: It certainly was a twisting path that I never anticipated. I was a general counsel, meaning the in-house top lawyer for companies, both private and public. And in that role I came to love business. I was always in the boardroom for everything that's important to a company. Discussions about mergers and acquisitions, financings, strategy. And how the business is doing quarter after quarter.

[00:02:12] Kris Stred: It was part of my job to make sure the board members got the information that they needed to make those decisions, and I worked closely with boards for a long time. Then comes a health scare and I needed to change careers and not do something that took me 60 and 80 hours a week, and I ended up in legal recruiting first because that made sense given that I was a lawyer. But then actually a partner of mine said, "Hey, I've always wanted our firm to have board recruiting capability and I don't have anybody else with credibility. Would you be willing to take it on?" And not knowing, I said, sure, and it has turned out to be a great fit. I saw board members function for a good 15 years first, and knew what they needed to do, and it's been fun looking for great people to fill that role.

[00:03:04] Roy Notowitz: That's awesome. That's a great story. Never looked back, I assume, because you've been doing it for quite some time.

[00:03:10] Kris Stred: It's interesting. I learned new companies, I learned new industries. I get to talk to smart people. It's been great.

[00:03:17] Roy Notowitz: It's so fun. So what can you tell us about the impact that a well-balanced and well-functioning board can have?

[00:03:25] Kris Stred: I've worked with a lot of different kinds of companies and what they really value their board for and are looking for new board members with is they want somebody who has been down the road they're going down before, knows that it's not easy, knows that there's not a perfect solution, has to make those tough decisions where there's a risk on every side and bad things can happen and they function as a brain trust.

[00:03:50] Kris Stred: They're somebody a CEO can call and say, "Here's the decision I have to make. What have you seen before? What am I missing? What should I be thinking about?" So it's somebody you can bounce ideas off of and it won't go public in the newspaper. And hopefully they've got a different perspective on it and their experience is of use to you.

[00:04:12] Roy Notowitz: Yeah.

[00:04:13] Kris Stred: It can help the company avoid the groupthink that sometimes managements can get into of, "well, we've always done it this way, so we're always going to do it this way." And an outsider who has done it a different way successfully can be a great advisor.

[00:04:27] Roy Notowitz: That makes a lot of sense. And what's the role of a board and how are they usually structured?

[00:04:34] Kris Stred: Board roles can be really different in different companies, both by ownership structure, but also stage of life. So in the large company, be it privately owned or publicly owned, one of the roles you hear a lot about is the audit committee. The audit committee has a very big role to play these days and it's make sure the financials are created in a way that will report to the investors what they need to know. It definitely thinks about risks, big systemic risks, climate risks, or political risks. So the audit committee is the most same in different companies.

[00:05:15] Kris Stred: Beyond that, next is usually a governance and nominations committee. Then there's often a third committee, and in different industries it's different. In some industries that are inherently dangerous, if you are running a hospital or flying an airplane, there's often a safety committee. If you are running a community bank where what you want to be doing is serving the community really well, unfortunately, you also have a very heavy regulatory oversight, and so there may be a committee that deals with compliance. Then there are ad hoc committees, things around mergers, things around initiatives, but those three are pretty common, let's say 80% of the time.

[00:05:59] Roy Notowitz: How are boards evolving? How does a board have the most impact in the current business environment and how is that different than maybe five or 10 years ago?

[00:06:07] Kris Stred: Yeah. When I started in this business, we were just beginning, I think, to professionalize boards. Prior to, let's say 15, 20 years ago, boards were the circle of the CEO's buddies, and they largely deferred to the CEO. As the last 10 to 15 years have gone on, there's much more professionalism around, "Hey, part of our job is hiring, firing, and evaluating the CEO, and we need to have some intellectual distance from the CEO in order to be able to do that." And so you definitely see things like executive committee meetings, meaning the board has their first meeting with the CEO present and often much of management. Then they do ask them to leave the room. And even if there's nothing that time, that discipline of having a conversation without management present has been very good for companies. And secondly, there's been a big increase in the professionalism around committees where there are now best practices that are known and publicized, and boards are much less rubber stamps than they were 20 years ago.

[00:07:20] Roy Notowitz: At what stage or size do most companies typically start developing a board?

[00:07:24] Kris Stred: There's a transition point where either a founder or a group of people who have been together for a long time look at the challenges they're facing and go, "Hey, wait a minute. What we have around our board table was perfect for five or 10 years ago, but they don't have experience in the twist in the road that we're about to go on either geographic expansion, we're going to sell overseas or distribution model change. Or just how products are manufactured and sold in today's economy versus the economy of 15 or 20 years ago." So it's a pretty mature stage for most companies, and it's fun when you see this management team look up and go, we need to bring in some new skill sets. We need to bring in some different thinking.

[00:08:13] Roy Notowitz: Who typically leads and sponsors this work in big companies or in smaller companies?

[00:08:18] Kris Stred: There's a variety. Very often it is the CEO. In a public company especially, it's usually the head of a nominations and governance committee, but it could also be the board chair. In a private company, it might be the major shareholder.

[00:08:35] Roy Notowitz: What about with privately held companies? Is there any difference with that or PE-backed companies?

[00:08:42] Kris Stred: I've done a lot of work for privately held companies and they come in different flavors too. The PE-backed companies I've worked with had a prior history as public companies, so they tended to work more like public companies, but the PE directors themselves are always deep financial experts, and the good ones know then that the CEO and the senior management team might benefit by having some more operational experience on the board and available to them in the brain trust. So I've not seen the PEs act differently. That's sort of the same question then, "how can we bring to this board somebody who can help the management team anticipate the future and not make obvious mistakes and do something successfully?"

[00:09:28] Roy Notowitz: That's great. A lot of companies do their own board recruiting or often find board members through their existing relationships via the founders or the CEOs or investors. At what point do they come to you versus trying to do it themselves, and what are the pros and cons of each approach?

[00:09:45] Kris Stred: It's when a company recognizes that they've outgrown their circle of acquaintances, that they come to me. And many times I've had CEOs say, I didn't know there were people who did what you do. The lore is you put your friends from some walk of life on the board as CEOs come to understand that that may not help them get to where they want to go for the next 10 years because their friends don't have that expertise in digital marketing or that expertise in going international or that supply chain expertise they're looking for. As they start talking to people, my name or your name will come up as a recruiter who is good at this and we will talk for a long time about what that company particularly needs and whether that's something I can help them find. And usually it is.

[00:10:36] Roy Notowitz: So how do you work with them to help hone in on that profile to spec?

[00:10:40] Kris Stred: I spend time with each member of the senior team upfront, always asking questions like, what are the big challenges you see for the next 10 years? What's going on in your industry now that wasn't five years ago? So I meet personally and face-to-face, one-on-one with every member of the board, with the CEO, and as many members of senior management as they will give me access to.

[00:11:07] Kris Stred: And if it's a family owned company or a private equity owned company, with as many representatives of ownership as I can. Then I feed back to them what I heard as a consensus and say, is this the direction you want to go? Is this what you want me to find? And every now and then there are other opinions that I do reflect that I heard, but that don't rise to the consensus level. And that's been helpful too, to build a consensus around one, outline of the types of personalities, diplomacy, experience, as well as professional skills that a company's looking for. And then after I feed it back to them and say, "this is what I heard," I give them a chance to say, "yeah, you heard us right," or, "no, we want to redirect you in some way." And then we go out to market and I try to find them what I heard.

[00:11:56] Roy Notowitz: And from your perspective, what flaws exist within the traditional board recruiting process, and what do you do to mitigate the risks or the pitfalls to make sure that the outcome is as good as it can be with each recruit?

[00:12:12] Kris Stred: I've often said to board members who say, "you know, well, we know who all the smart people are in our industry." They have no visibility to people in different geographies, people in different industries. So the first thing I can do is broaden where I'm looking for the talent they want, and that is huge. I broaden it geographically. I broaden it by industry, I broaden it by all the other diversity criteria you can think of.

[00:12:41] Kris Stred: The second is just the amount of time. I spend full time, 30 to 40 hours a week upfront on the first six-ish weeks of a search. And no CEO I know has 30 to 40 hours a week for six weeks to spend on this. So that's why they default to, "who do I know?" All the people one person can know is a smaller circle.

[00:13:03] Roy Notowitz: What stakeholders and decision makers are typically involved in the process after you have those initial requirements and calibration conversations?

[00:13:14] Kris Stred: Most often a nominating committee, but usually it's a committee of let's say, three to five directors. It includes the CEO, and they are the people who I come back to and say, "here are the three best people I found who fit the criteria you asked me to find," and let them make the final decision of who to interview.

[00:13:36] Roy Notowitz: And who's involved in the interviewing usually?

[00:13:38] Kris Stred: I try to get my clients to decide that upfront because there is no ironclad answer to that.

[00:13:45] Roy Notowitz: It must be hard to get a lot of board members' availability for that kind of stuff.

[00:13:49] Kris Stred: Right, right. And companies don't know who they want to have interviewed because they haven't done this in a long time. Very often, you know, the company's bouncing along, having the same board members for 10 years, and then a need comes up to find new ones, they haven't interviewed in 14 years, 10 years, whatever.

[00:14:06] Roy Notowitz: Right.

[00:14:07] Kris Stred: So again, it usually comes back to whoever this nomination committee is, be it formal or informal. So three to five people first. And then there is often a kind of a social meet and greet after that with all the other board members and senior execs.

[00:14:24] Roy Notowitz: Is there a standard board recruiting process or do you customize it for each project based on size and scope and who's involved?

[00:14:33] Kris Stred: Every board search is definitely a custom project, but the process turns out to be pretty similar, and I put together a schedule with the client of when I think I'm going to need their availability and try to help them line up their people for that availability. I come back to them with the profiles of the candidates I think are good. I want them to read them on paper. I want them to talk to me about them and think about whether they want to interview them. Then we do the in-person interview. I give them the background on those people, and then they try to come to a consensus afterwards and we go forward to a vote. It's a shareholder vote to elect a new director.

[00:15:12] Roy Notowitz: What's your approach to incorporating the different perspectives or motivations or expectations with the number of people who are involved in that committee to hire another board member? How do you get alignment and trust and support for the process?

[00:15:27] Kris Stred: Yeah, the one thing that is very different for a board search from an executive search is there is no hiring manager. There's no one person who gets to say, "this is what I'm looking for, and yes, this person is who I want to hire." So that consensus building up front is critical, and I've had a number of clients come back to me and say, "Oh, I get it now. I know why you wanted to talk to us upfront." Just doing the process allowed everybody to feel heard and then if they were not in the consensus, they have seen the feedback that says, "Wait a minute, six of my fellow directors wanted that and I was the only one who wanted this. I've got to roll with that."

[00:16:08] Kris Stred: And frankly, that's part of being a board member. It's a team sport and you don't always get your way. So that upfront consensus building process is important. And I've learned over the years not to gloss over if there are important differences upfront. If there are important differences upfront, I come back to the committee and say, "hey, I'm hearing two different things. Do you want me to bring you two directors or do you want to decide now which one's more important?" I discourage them from that because it just kicks the can down the road, and they have come to understand that, and we just sit around as governance committees do until they come to a consensus on what they're looking for.

[00:16:52] Roy Notowitz: So how does having investors involved inform or alter the process or dynamics of a search in comparison to one where investors aren't involved and maybe there's different scenarios like, maybe the company's doing really well and the investors are happy or maybe there's a fatigue around the investment and less than optimal results, and maybe the board is feeling less excited about what's happening there. So have you noticed any of those dynamics and how does that play into all this?

[00:17:22] Kris Stred: I honestly haven't seen the investors add dysfunction. The clients I've worked with, the investors are very aligned with management, long-term goals. They've hashed that out. They're driving toward a result that is good for the investors, the community, and the company. We're just trying to find talent to get them there.

[00:17:42] Roy Notowitz: So what do you look for when you're evaluating or considering a candidate for different board opportunities?

[00:17:49] Kris Stred: Yeah. I'm looking for wisdom and diplomacy above all else, and it's experience driven wisdom and diplomacy. Somebody who, when I ask them about their career, talks about the team they worked with, the challenges they faced because of the outside market. How they brought a group of people together and yes, it was hard, but they fashioned a strategy that helped them succeed in the market. Those are all good indicators of a leader, and a leader who understands the team nature of accomplishing something in the business world, and those are critical characteristics to a board member.

[00:18:32] Kris Stred: The one thing that new board members often struggle with is it's a change in a role. And if you take an executive who has been a lone ranger and very successful at being a lone ranger and put him onto a board and expect him to become a team player. Guess what? It doesn't go so well. So looking for the team player who has been able to lead diverse teams to success over long periods of time is what I look for.

[00:19:02] Roy Notowitz: Do you usually look for people who have previous for-profit board experience or if not, what experience would be useful or helpful for somebody to land their first board role?

[00:19:13] Kris Stred: Yeah, it depends on the company. Some companies are very strong on saying we should not be somebody's first board because of the size we are. They would want a board member to get their first board experience at a smaller size. So at a smaller size. Some companies are looking at the operating kind of executive, the chief marketing officer, the chief financial officer. The head of a division and going, "wow, their division or their experience is larger than our whole company. We are very willing to take that person without board experience because we're at a different stage in our life."

[00:19:53] Roy Notowitz: And what about operators, like somebody who may have been a CMO or held a role of a chief revenue officer or something, somebody who is functionally a deep expert in digital marketing, for example. Are there certain roles that are geared specifically towards those competencies?

[00:20:11] Kris Stred: So your audit committee, your governance committee, your compliance committee, they do have operators on them, a lot of operators on them. What there isn't usually in established companies is a desire to have that function live at the board level. The company usually has an executive who's in charge of digital marketing. What they are often looking for, however, is an executive who has had profit and loss responsibility. So most often a chief operating officer or a CEO. But yes, sometimes divisional heads in an industry where something like digital marketing is mission critical and they've done it really well. So I look first for the companies that have been successful in the particular challenge that my client company is looking for, and then I've looked through their executive ranks for the people who would be the best fit culturally and experience wise for my client.

[00:21:14] Roy Notowitz: To what extent do mission and values play a role in the selection process? Do you have some examples of how that comes to life and how important that is?

[00:21:23] Kris Stred: It is huge. It's huge. Every company believes it's different and its culture is important to it. And boy, in co-op owned and mutual owned companies, that ownership structure is mission and values. And those companies want somebody who shares their values of community ownership, cooperative ownership, long-term success, not short-term financial success. I did a lot of work over the years for REI and REI obviously is very committed to the environment and to the outdoor world, and so getting somebody who was committed to the outdoor world and the environment was hugely important to them. Sometimes family owned companies say we are willing to accept less return in exchange for keeping this small town employed. That's their mission and values and a director coming in has to be aligned with those mission and values. So that's part of what I'm listening for in those upfront meetings. That's part of what I'm screening when I'm talking to other candidates. And I'm not going to bring somebody to my client who isn't aligned with their mission and values, because that's just prescription for disaster.

[00:22:40] Roy Notowitz: I'm interested in all this experience that you've had and what learnings or insights you've gained from board hiring successes or failures, whether they were your hires or your stories of that coming in. What are a few things that you can share that you wish you knew early on that you incorporate now into your process to take into consideration those successes and failures or what you know about them?

[00:23:04] Kris Stred: Well, I think I have learned to become a better listener over my 15 years of doing this. There is no substitute for it. I'm always learning a new industry, a new company, a new group of board members, and I have learned to listen deeply for both what they're saying and what they're not saying. Probing on what they're not saying, listening to their first reaction, but then asking them to think, okay, but what's different about the future? Or what do you want to see? And then listening to the candidates too, there are people who get referred to me or who I meet who on paper look wonderful. And then when sitting and talking to them, all you hear is "I'm proud of I, I, I." And there's no team in what they talk about. And when there's no team in what they talk about, they probably are not going to be a good board member.

[00:24:00] Roy Notowitz: So are there any risk factors that founders or investors can mitigate when thinking about this process or board hiring in general?

[00:24:10] Kris Stred: I think doing a disciplined search is the best risk mitigation. The risk otherwise is, "oh, well, we know so and so and he's the best person we know" --and he is a he always --"and so we put him on the board." And then it turns out that he does not have a team orientation. Or he has a scandal in his background and an SEC consent decree that they didn't know about or something like that. The discipline of making sure that everybody has thought about what talents and experiences would bring the most value to this company for its future and this board is important. The discipline of looking outside of the herd of horses that they already know is important.

[00:24:58] Kris Stred: The discipline then of having a yardstick to evaluate different people against instead of just. "Oh, Joe's a good guy. Sally's a good person. We like them." Well, right? But do they also bring the talents that will make this company successful for the next 10 or a hundred years? Those are all disciplines that avoid making a quick and easy decision that in the long run wasn't the right decision.

[00:25:27] Roy Notowitz: What advice do you have for incoming board directors for how they can accelerate their time to impact or have the ability to ramp up quickly and add value? How does an effective board member operate?

[00:25:38] Kris Stred: There's a challenge there, right? Where boards tend to meet four to five times a year. What you can learn in four to five day and a half meetings makes for a much slower learning curve than many good executives are used to, but front loading that learning is very important, so taking advantage of every onboarding opportunity the management team offers you, if they offer to let you come in and sit through meetings they're having, meeting with the executives, one-on-one, walking a factory floor, all of those things are really important to bringing the new board member up to speed on what the company is doing and what everybody else around the board table already thinks is table stakes knowledge.

[00:26:23] Kris Stred: However, I would say that accelerating your impact is maybe not the right thing to aim for because there is a very important onboarding that goes on the other way, which is the board members and the management team want to be heard by you, the new board member, and know that you're not just bringing in a playbook from somewhere else and applying it without knowing their situation.

[00:26:52] Kris Stred: So that first year, I. Is usually a lot of listening, which doesn't mean you don't ask questions, but it probably means in that first year you're not trying to drive a particular impact. You are an advisor and you're there to be the brain trust and it takes five meetings before you're up to speed on what everybody else around the table knows about this company and this industry.

[00:27:19] Roy Notowitz: That makes sense. Some board members say that they spend a lot of time on a board and other board members say it's not that much time. So what should people expect in terms of commitment and level of engagement?

[00:27:32] Kris Stred: The word board means different things to different people. And I had one guy I respected a lot who had been on a lot of different kinds of boards, and he said the amount of time was inversely related to the level of pay at the company. So he spent the most time on his nonprofit boards and the middle amount of time on his professional boards, and then he was on boards of private and then large public companies and the least time on large public companies. Why? Because the large public companies have people like I used to be: the general counsel whose job it was partly to tee up important business information into a summary package for the board members. So when they came in, they had in, let's say maybe 80 pages, all the information they really needed to make a decision. Well then a smaller company, that's much harder to do in a young company. That's much harder to do. You don't have the staff. It's not always apparent what the most important information is going to be, and so it can vary widely.

[00:28:37] Kris Stred: So one of the things, back to those upfront interviews I do, is I'm asking the sitting board members how much time they're spending preparing for the board meetings and whether the management team is giving them the information they need to make decisions. I try to find out what each board is going to require. I try to be very careful in talking with the candidates to make sure they understand that time commitment and that that time commitment can work with their day job if they're still working and not retired. And every now and then, I regret having hammered that point home and I lose a really good person because she's too busy in her day job, but it's the right thing to do.

[00:29:20] Roy Notowitz: As you think about the future, what are you excited about as it relates to this work?

[00:29:25] Kris Stred: Well, the cool thing about doing this for the past 15 years and that we haven't talked about directly yet is the demand for looking outside the known herd of horses to bring on the best talent, who will help this company be successful for the next 10 years or 20 years, or 100 years, has been really fun.

[00:29:47] Roy Notowitz: That's cool. I so appreciate all the years where we've gotten together and shared ideas and candidates and just the fact that we have the opportunity now after all these years to bring in your expertise as an advisor to our clients is just, you know, unbelievable. I feel very fortunate, very grateful, and very humbled to have your level of skill and expertise advising us as we get more and more of this experience, which I'm excited to do.

[00:30:15] Kris Stred: I'm excited to be working with you guys. I have not met another recruiter who I think works with the same diligence to listen to what the client wants and the same disciplined approach to bring them the best, and who has the same ethics about doing good work for their client and their community as you.

[00:30:36] Kris Stred: And, hey, I've been in this business for 15 years, and as I've talked to clients who aren't happy with their recruiters and then talk to your clients, I'm really thrilled that we're getting a chance to work together. You've already done some board search work and I've done a lot of it, and you're in a great position to stay current with some industries that you and I both care deeply about. So I look forward to it. I think it's going to be great.

[00:31:06] Roy Notowitz: My team is too, and our clients will certainly appreciate what you bring to the table. So thanks again for being on the podcast and look forward to talking to you again very soon.

[00:31:18] Kris Stred: And thank you.

[00:31:21] Roy Notowitz: Thanks for tuning in to How I Hire. Visit HowIHire.com for details about the show. How I Hire is created by Noto Group Executive Search. To find out more about us, visit NotoGroup.com. You can also sign up for our monthly Job Alert newsletter there and find additional job search strategy, resources, and content on hiring. This podcast is produced by Anna McClain. To learn more about her and her team's work, visit AOMcClain.com.

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