As baby boomers retire, the boardroom is ripe for a makeover and its composition is likely to change meaningfully over the coming years. This opens up opportunities for tech companies to disrupt board recruiting, an opaque process currently driven by insiders. What compelling offerings and viable business models could a technology platform provide?
Boardrooms today look like retired gentlemen's clubs.
Board members are typically hired by CEOs who's top criteria is that new board members get along with current board members, according to Light & Pushor, authors of reference book Into The Boardroom. Often, this means in-network hiring of people with prior board experience, which is a very limited pool and it shows in board composition, which is mostly retired men sitting on multiple boards:
- Only one in three board members is serving on their first public company board and most board members serve on multiple boards, according to leading board recruiting firm Spencer Stuart.
- Board members serve an average of nine years on a board, which means that some companies need to raise mandatory retirement ages to allow experienced board members to serve longer. The average age of a board member has risen to 63 from 60 10 years ago, and most of the newly elected board members are retired. The picture looks a little better in Europe where the average board member is 58 and serves for six years, according to board recruiting firm Egon Zehnder,
- Maybe not as dramatic as age, gender and ethnic diversity are also lacking with only 18 percent of women and 18 percent of minorities on U.S. corporate boards. Silicon Valley is surprisingly trailing with only 63 percent of boards with at least one woman, vs. 91 percent for S&P 500 companies.
Credible board recruiting platform requires qualified pool of board candidates.
A board recruiting platform caters to two types of constituents: board candidates, people interested in serving on boards, and companies looking to fill board seats. Our research shows that there are more candidates than seats so the platform needs to help surface the strongest candidates, and train the others to become more skilled board candidates.
There is lots of evidence that people interested in taking board seats are eager to signal it, so one of the first offering of a board recruiting platform would be to entice and reward board candidates for creating accounts and listing themselves as open to being considered for a board seat.
To increase their likelihood of being shortlisted by companies looked to fill a board seat, they could take some leadership training and certification that would prepare them for contributing to boards such as leading by influence, contributing effectively to audit committees, driving CEO succession planning, etc.
A solid pipeline of qualified board candidates will attract the attention of companies seeking to fill board seats. But to be compelling, the platform needs to assemble a short list of the most qualified candidates, or maybe even offer the high-touch service of sourcing a board member. These services would be especially valuable to public companies which need to comply with Sarbanes-Oxley regulations and are required to make board recruiting transparent. Pre-IPO companies, which often need to fill many board positions in a short amount of time, could also benefit from such service.
Viable board recruiting platform caters to CEOs. Pricing & partnership strategies are key.
Companies will typically seek no more than one to two board members per year, so board recruiting remains a niche market and it is fair to ask whether this niche is big enough for one, two, or possibly three technology platforms to survive and thrive. The following revenue streams need to be explored:
- Membership fee to all board candidates, priced at a few hundreds of dollars, maybe with some premium packages,
- Tuition for board preparation courses, ranging from a few thousands to tens of thousands of dollars for corporate-sponsored executive programs,
- Fee for creating a shortlist of pre-qualified board candidates for public companies required to comply with Sarbanes-Oxley regulations for transparent board recruiting, priced at tens of thousands of dollars,
- Success fee for filling a board seat, something which executive recruiting firms already do and which costs tens or sometimes even hundreds of thousands of dollars.
Knowing that there are tens of thousands of board seats to be filled in the U.S. every year, and probably a dozen qualified board candidates per board seat, we are looking at a handful of $100M businesses, which may not be attractive to venture capitalists, but are certainly very viable operations. And if combined with other CEO-level services such as fundraising, incubation and advisory board recruiting, it could make for a really attractive offering. Any taker?