Winning the Corporate Board Games

Anita Brick: Hi, this is Anita Brick, and welcome to CareerCast at Chicago Booth. To help you advance in your career. Today, we're delighted to be speaking with John Montford, who is president and CEO of GTM consulting, the state and federal government relations advisory firm he founded in 2010. He's also chancellor emeritus of the Texas Tech University System and author of Word Games, which is what we're going to talk about today.

John, thank you so much for being on our call, and thanks for writing the book. It was really a fun read. Thank you. And it's a pleasure to be interviewed by such a prestigious school of business just to get us started. So we're all sort of playing from the same game book as it were. What do you think are 2 or 3 of the most critical things to consider before building a path to a corporate board position?

John Montford: Anita, you know there are no easy buttons to get selected, but if I were looking to advise someone who was establishing a path towards board membership, the first thing I would do is identify what type of board one would want to aspire to. There are such a variety of sectors in the economy that boards perform valuable service for.

I would build a portfolio of those types of boards and I was certainly interested in them. I think you need to look at as a realistic plan what boards are within your reach, based on your career path and your credentials, and then what contributions you could make to a particular board? Probably the most important thing is you really have to emerge as a successful person in your own right and be noticed.

And if you're identified as a business and community leader, a business leader in a particular field, and you have measured success that people will notice, all of these things are critical to your ability to be selected to a board. We know the world has changed a lot, both in terms of the fiduciary responsibilities for being a board director, one of the questions, and this actually came from an old one. He said, I understand that board seats often require a C-suite experience, which I don't have yet.

Anita Brick: How can I build a platform that is attractive to people seeking board directorships, and how much of it is live, versus how much of it is social media?

John Montford: You can't be selected to a board based on blogs, on social media in terms of experience. Let's face it, when you're looking for board candidates, boards look for star leaders in their field, people who have attained success in their business or avocation. Boards look for diversity in boards. Look for people who can network and basically make a contribution. Fill a need that a company is looking for that will enhance the corporate goal. But as I mentioned, make no mistake, when you're looking for board candidates, you look for stars building that portfolio. As you grow in your business, you can emerge yourself with a level of success based on ethical and legal principles.

There's no magic formula. But again, I would reiterate that we look for people who are successful. It's sort of like a black box when you think about it. Success can mean a lot of different things.

Anita Brick: Where do you actually go to identify individuals that you would deem successful, and how would you even identify that in the first place?

John Montford: Let's talk about fundamentals. First of all, if you want to aspire to a board, you must have a demonstrated level of success in whatever field of endeavor you undertake. One bit of advice that I think is lasting is as you develop your career, as you're growing in your career, as you're looking at board opportunities, you need to avoid those personal entanglements that might, in some way, damage your career path.

You have to minimize entanglements that tend to drag you down or diminish your credibility as a board candidate. You do need to get yourself an advocate, whether it's a search firm, whether it's individual representatives. As you network through the process, those decisions and those engagements are hugely important to be able to land on a successful board search. The other thing I want to mention, though, is very important, and we point out in this book, if you are aspiring to be on a board, you really need to check out the company to which you aspire to to be on that board, because a lot of times are there hidden things that might not be apparent to an individual. You will be quite surprised to learn, won't you? Retain a seat on a board? You have to use due diligence as a part of this formula to make sure that the company you want to associate with as a board member is credible, ethical, and legal in its performance.

Anita Brick: Very, very good point. To go back to the first part of your answer. You talked about advocates, an MBA student said, I understand that having advocates is crucial, and I know how to build them for my career in general. I'm not as clear about how to build them to help me down the line, get on a board, just like you were saying. How do you build those advocates?

John Montford: Three things networking, networking, and networking. There are firms, by the way, that do specialize in advocating or promoting individuals to get on boards, but it goes back to networking. I am a strong proponent of networking throughout life. No one is unimportant in your career as you develop. As you grow in a business. Everyone is important in terms of networking. In my experience at least based on the boards that I've been a part of and the selection to boards that I've been a part of, I think an individual that is successful in business knows how to network through various segments of society to enable them to maneuver through the channels of trade and commerce. These days, I can't overemphasize the importance of networking in your career.

Anita Brick: I totally agree.

John Montford: I think, though, that people get confused by that and not by the idea of it, but what it means. I was chatting with someone earlier this week. I think he's on the same page as you. You need to build a relationship. It needs to be an exchange. You need to think of things, the genuine things that you can do for the other person and vice versa. A lot of people think of it as just going to meet as many people as you can, because if they have your name and they have an email from you, or they have your business card, that's a relationship. It's how many people that you have on LinkedIn. But clearly it's not how many people you have on LinkedIn.

Anita Brick: What are a couple of things that you would do to actually build a relationship, as opposed to having one more person on LinkedIn?

John Montford: Great come back. You have to emerge yourself as a leader predicated on these networking capabilities. You still have to emerge as a leader. You have to emerge as a leader in your field. You have to be involved in your community. You need to have as diverse a portfolio as possible, all culminating in the goal of attaining board membership and a recent search that I was a part of. We probably had nationwide 100 qualified candidates for a single board position. I was, as the expression goes, blown away by the number of qualified individuals who had not worked their way up to be considered, they were recommended.

When you sorted through and sifted all of the material from resumé qualifications, all of these things, I think the salient factor was probably two things. Two factors. Number one, was this person effective as a leader? And secondly, would they make a contribution to the goals and objectives of this company? And those two things are important. Sometimes it's hard to rise above the noise.

If 25 people reach out to you and you really only have time to chat with two of them, what makes them rise above the noise where they will have your attention. They have to be effective communicators. What separates the winning candidate is not only all of the fundamental qualified and successful career known leadership qualities. Ability to communicate really is a personal factor.

When it really gets down to it, is that person a good fit? Do you feel comfortable that this person will be effective whatever the void that you're trying to fill? Do you feel comfortable with that person and their ability to communicate and add to the mix of what you're trying to accomplish?

Anita Brick: There's a lot of different factors, and actually, this is a really good question. One of the weekend students had an idea, and I would love to get your take on this. He said, hi John, in the future I want to be a non executive on a corporate board. How important is it for me to have the experience of board memberships of nonprofit boards?

John Montford: I think that nonprofit charitable board service, first of all, is an important fabric of American life. Secondly, what you're on a nonprofit charitable board. There are going to be influential people on that board, and they're going to notice you if you do a good job. That is absolutely a firm and effective predicate to get noticed and to get observed on a functional board, you will be on there with opinion leaders and people who are influential and could recommend you ultimately to or for profit boards based upon your effective service on a chair of a nonprofit board. So I think it's very important in building your portfolio, building your credentials. Thank you for switching gears a little bit. One of the executive MBA students, as you said, in your experience of placing women board members, what characteristics have you found to be the most valued by incumbent board members? Diversity on boards these days is not a matter of discretion.

It is a matter of survival and business. And if your board is not diverse, you need to get it there. And I think as an example, women make a very valuable contribution to the boards and frankly, think on one board. The last three directors we've selected have been women because they bring a lot to the mix. And for some reason, at least in my opinion, women are more process and detail oriented as a rule, and men are on board service.

Some people would say, well, you can find lots of people who are detail oriented. What is it beyond their detail orientation, the process orientation that is valued by other board members? I guess I could sum it up as primarily common sense. Boards are basically oversight, or not tuned in on a micromanagement day to day basis. As a rule, although you have to be informed on a day to day basis. I think that women do make the ones that I have served with make an outstanding contribution. And I notice a lot of things that are going on and bring practical management to boards.

Anita Brick: That is quite valuable. Good. A couple of other things I thought were really interesting. So an executive MBA student said, I want to be prepared for any board opportunities, and I think I have a gap in my knowledge. What are two things that I should be aware of with regard to the role and potential risks of board committees?

John Montford: One of the predicates that we establish in our board, I mean, you've got to show up. You have to be active and participate on a board. One of our pet peeves is where directors are absent from board meetings. That's very irritating to me and other board members. You've got to show up. You've got to participate. You've got to be engaged. There are certain additional responsibilities that the big three committees have: the nominating and governance committees, the compensation committee, and perhaps most demanding the audit committee. There are additional responsibilities these committees have. So if you're going to go on a board of a major company or any company for that matter, you need to be sure relative to risk management in those things, you have to have significant oversight for financial proprieties and risk management financial controls.

You better make sure that your board as a whole has, effective, you know, coverage. That's directors and officers liability coverage. So there are certain risks attendant to board service and committee service. Fundamentally, if you're doing your job ethically, if you're on site, you show up in your stay informed, you're going to be okay. If you're engaged as a director, the worst thing you can do is not be engaged.

Well, it makes sense because how would you know what's going on? And you could make decisions based on either incomplete or if someone has a point that they want to make biased information. I mean, it seems like it's your responsibility. It was all the additional governance related to fiduciary responsibility. It's still your responsibility.

Anita Brick: Absolutely. Sometimes a way that people break in is to have a board position in an early stage company. And we had an evening student who said, I've been fortunate enough to be asked to be part of an early Stage Ventures board. They are opposed to Brown B funding. Before I turn my first board meeting, what are a few things that you would suggest I do?

John Montford: Well, first of all, the first thing I would do would be to get my hands on some type of financials that the company is either required to post, or you can access as a director just to get a handle on how the company is doing. As entrepreneurs, we are prone to take risks. That's a part of an entrepreneurial spirit. But I always say you have to take smart risks, particularly on a startup. So I would familiarize myself as much as I could with the goals, objectives, and strategic plan of a company. And I would certainly spend time looking at financials to see how it's going, what needs to be done to what contributions could be made.

You cannot learn too much about a company, particularly a startup, when you're up and going. If you're going to be on those boards, it goes back to what you said earlier. It's being present. It's really being committed. And what is it that you can add to that board? Because otherwise they don't need you there. These days, directors have to take their fiduciary responsibilities to shareholders very, very seriously.

Anita Brick: There was an interesting question related to that. And this was clearly looking at a public company. And evening students said, what are the two most important things I can do to be an advocate for shareholders? As a board member? And clearly one is to be present and really informed. Is there anything else that you would recommend?

John Montford: I wrote extensively on what could be done relative to your obligation to your shareholders. A lot of times these days, as you get in depth and looking at company financials, cash flow, balance sheets is the money that a corporation is making as profit your free cash flow. All these things that you look at. I think it's important to remember that in spite of all of the importance of all of your employee compensation issues, all of these things, I still think you have to spend time and focus on your return to shareholders, whether it is return on invested capital, whether it is dividends, whether it is increasing in shareholder value.

The first thing I like to do is look and say, are we paying a dividend that we can afford, and are we paying a dividend that adequately compensates our shareholders for their investment in this company? Now, I know that that's super important. Obviously you can't be profitable. You can't have investors unless you do that. When you think about boards today and this seems to be a growing interest, I would say with students and alumni from those, where does social impact fit into that equation and what social impact a company has?

Whether we talk about sustainability, whether we talk about the give back in terms of corporate foundations, whether we talk about being across the board, a responsible corporate citizen. I think the reputation of corporations nationally in terms of their social impact is huge. And these days I think investors look at the social responsibility of companies as a part of their decision process, particularly your institutional investors, or whether they want to invest in a company or not.

Anita Brick: Yeah, it seems like the whole role of board director is getting more and more complex. How do you manage that complexity today?

John Montford: Well, as chairman of an audit committee post Sarbanes-Oxley legislation in 2002, it has virtually turned into a full time job. You have to resist the temptation of wanting to micromanage as a director. But when you look at the responsibilities placed, particularly on an audit committee and audit committee chair these days, relative to risk management and financial controls, it requires continuing vigilance of corporate operations and an oversight capacity.

So you have to resist stepping over the line, maybe too much micromanagement because you had to be present, you had to be engaged. And it's gone from like a monthly basis now to a daily basis relative to these responsibilities. Well, I think that some people have this picture of being on a corporate board means that you're going to have a lot of really extensive lunches and maybe jet around in the corporate jet.

I don't know that it was ever that way, but certainly it's not that way today. Not at all. In fact, I wrote the chapter in our book on the audit committee. We borrowed a line from a Wall Street Journal article that was a very fine article. It was written to call the audit committee, the board's fire department. And you're always running around putting out fires.

It is a full time job that's not just unique to the audit committee. Think about the compensation committee and the many, many challenges there and think about nominating and corporate governance. It's really that committee has a responsibility, basically, of finding director candidates and presenting them to the board. It is becoming more and more of a full time job. It's very interesting. And for many people it is a big prize.

Anita Brick: Do you have time for one more question?

John Montford: Absolutely.

Anita Brick: Great. Despite all the new responsibilities and how it can be a full time job, there still are a lot of people who have a great deal of interest in positioning themselves and ultimately succeeding on the corporate board. If you are building a path or you are advising someone on how to build a path to a corporate board seat, what are three things that you would advise that person to do well first, as you develop your career?

John Montford: As I mentioned, avoid those entanglements that are going to get you bad raps or bad publicity. I have seen more people go down in terms of building their credentials on problems with alcohol or drugs.

These entanglements that give you problems along your career building, they will haunt you forever. So stay away from me. You just have to have the discipline to build a resumé that basically is free from those entanglements. Secondly, you've got to excel as a leader. You've got to have demonstrated a successful pattern of leadership in your business or profession, whatever it is.

As we look at candidates, we're not going to select people who are not leaders, who are not stars, who are not people who have demonstrated success. And then I again reiterate, get yourself an advocate for a board service, whether it be a search firm or individuals. You have network wells. You've got to make it known that you want to go on a particular board after you've checked out that company, make it known and get advocates working in your interest and convey that interest.

I want to be on your board, and here's why I think I can make a contribution to your company. Don't be bashful. Great advice, John, and thank you for taking the time and sharing your insights and wisdom with Booth students and alumni. Look, I'm sort of an average guy. I came up the hard way. I probably did a lot of you. If you really set your sights on a goal and you follow good advice, you can do it. If I can do it, you can do it. And being on a board really is a responsibility. It makes our system work. It is a crowning achievement in your career. So good luck and I hope to see a lot of the names and the Booth school wind up helping serve all the companies in the future.

Anita Brick: Great, John. Thank you. Thanks for that encouragement and again, thanks for taking the time to be with us today.

John Montford: My pleasure, Anita.

Anita Brick: Thank you so much and thank you all for listening. This is Anita Brick with CareerCast at Chicago Booth. Keep advancing.