Companies are changing tune on hiring policy

The recruitment process was seen to be open and fair, and yet somehow did not reflect society. To overcome this all auditions took place with the candidates playing behind the stage curtain.

The result was a much more varied and diverse orchestra with the best musical ability. The ‘blind tasting’ produced the best result.

It would be interesting to know what the corporate equivalent to this would be.

I’m at a loss to say what it is. It is necessary to have some form of application process in order to sift out people who obviously do not meet the selection criteria. And what should the selection criteria be?

Is it unconsciously biased towards some sort of background or qualification that automatically excludes a type of candidate?

A number of people have approached me recently to ask my advice on how to become a non-executive director of a smaller quoted company.

As CEO of the Quoted Companies Alliance, I meet very many chief executives, finance directors and chairs of quoted companies. Putting two and two together, innocent observers think that I can provide an entrée to companies who are looking for new directors.

They may think I can have a quiet word in a chairman’s ear and low and behold they will appear on a shortlist. Perhaps they still think that a game of golf and a drink afterwards will produce a compelling reason why they are fit to be a director.

But not now. Companies are wary of taking the informal route and appointing people who are from the same school, university or background as they are. Groupthink is not welcomed by investors.

The fall-out from the Tesco board appointments debacle is evidence of this.

Instead, I see a more formal approach being adopted by companies. To that end the QCA and one of our members, the headhunters Norman Broadbent, have developed a ‘governance package’ to support the hiring of NEDs while demonstrating a responsible approach to the process. Investors want to see and know that the most qualified candidate is being hired.

Perhaps people on the longlist should be interviewed by telephone first by someone who has not seen a CV? And similarly for people on the shortlist?

In any event, trying to hire and succeeding in hiring the most appropriate candidate is something that needs to inspire and retain the confidence of shareholders (and the rest of the board). Professional investors focused on smaller companies are generally very understanding about the challenges facing CEOs – they know that even their best-performing investments lack the time and resources available to bigger businesses.

But a high-risk approach to board hiring will be seen as poor governance. After recruitment there is the need to evaluate on a regular basis how the board is operating individually and as a team. This, again, should be more formal than a chat after a board meeting or drink at the clubhouse.

The QCA and Mazars, the accountants, have put together a Board Effectiveness Questionnaire to help boards go through the evaluation process. It is based on the 12 principles expounded in our own QCA Corporate Governance Code. It is designed, again, to inspire and retain trust with shareholders.

The right mix of talent, experience and background will help to ensure the orchestra can produce the best performance possible. Music to shareholders’ ears!