December 2022
Chris Clark conducts interviews with leading corporate directors and subject matter experts for Stuart Levine & Associates, a global consulting and leadership development company. The Planet Governance™ interview series features the views of corporate directors, chief executives, and governance experts on timely issues from succession planning and board composition to cyber-resiliency to stakeholder activism.
I recently had an in-depth conversation with Theodore L. Dysart, Vice Chair in Heidrick & Struggles’ Chicago office where he is a leader in the global Board of Directors Practice and an active member of the CEO Practice. Ted is responsible for senior-level executive search assignments and is a functional specialist, working exclusively on board, CEO, and succession planning engagements. Ted has placed more than 600 executives on the boards of Fortune 500, mid-cap, and private companies.
Theodore L. Dysart
Chris: Ted, boards are looking for more agile ways of thinking about the bets they have placed on technology, the brand, and people. Regarding the people component, what have you observed in boards trying to be more dynamic in their thinking?
Ted: I think boards have recognized that the world has changed. I was at a conference recently and somebody said the war for talent is over… and talent has won. Boards have recognized that the most impactful thing they can manage is the human capital of the enterprise. They’re trying to go beyond the CEO and into the management team to understand how that human capital is being managed to create value for shareholders.
One, they are trying to understand the talent management strategy for the company and the results of that talent management strategy. The number one human capital issue today for directors is DE&I and how they bring diversity to the table so it creates shareholder value. Two, they are calibrating the effects of those programs because you start with inputs and then you look at results. I think it is striking to see today that some of the most diverse boards have no more diverse management teams than their counterparts. Overall, it’s about measuring the outputs of these initiatives and making sure that you’re getting the right talent for the enterprise each and every day.
Chris: Let’s dig a little deeper on your first point regarding DE&I. What does it really take to lead in DE&I? I understand the importance of measuring it, but what does it take to be a true leader?
Ted: It’s the inclusion part that can be the most impactful. If you look at organizations, they’ve had pretty good success at attracting diversity and recruiting into their management development programs. Where they break down is the inclusion piece, as well as having that diverse population succeed up into leadership roles, whether because of inherent selection biases or by self-selection. There are people who self-select out of an organization because they don’t feel fully included. If you go to work every day and feel like you don’t fit, it’s a very draining effort. Given the options that talent has today, you can probably find somewhere else that you can be yourself and be of value.
Chris: Ted, I know that your strength and Heidrick’s strong suit is with large caps, the Fortune 500, but do you see the same DE&I efforts (and challenges) when you work with boards of mid-cap and small cap companies?
Ted: Yes. Absolutely. The difference is just the availability of resources. You’re trying to do more with less in those enterprises, but the goals are still the same. You’re still trying to create shareholder value, you’re still trying to mitigate risk, and you’re still trying to create and develop a diverse pipeline. Unfortunately, you just have fewer resources. You can’t necessarily call on the best advisors because you can’t afford it. You must be inventive and figure out how you are going to get things done in an effective way. In some cases, smaller enterprises are more effective because they have less bureaucracy. In a smaller enterprise, you may have a little bit less at risk so you can incubate some things in a different way.
Chris: Boards are increasingly having to deal with sudden departures of executive leaders. Do you have any new views on emergency succession?
Ted: If you’re talking about the CEO, boards need a plan to address the short term, the medium term, and the long term. The real dilemma for organizations, and this came to light because of the return to work from COVID, is what you do when multiple people deeper in the organization leave. What we saw recently was a number of executives who were in their mid to late fifties whose retirement plans had done extraordinarily well in the stock market who suddenly looked at the prospect of coming back to work and said, “I am just not going to do that.”
Most boards have an approach for what the first, second, and third steps are going to be if something happens to the CEO, but what happens if you lose two or three core C-suite leaders in a short period of time? That, to me, is next-level risk management. Boards are at the point that they need to look holistically throughout the enterprise and at their key leadership roles and say, “What would we do if we had to fight a war on two fronts? What would we do if we had not just one departure, but numerous departures in key roles, and how would we handle that?”
The best boards take time at least once a year, if not once a quarter, to really dig into what they have in terms of management talent. Who are they keeping their eye on so that they can move up? In a crisis, you can’t necessarily go outside and do a search. A search is going to take 60 to 120 days to get going. In a crisis, you’re going to have to put somebody in those jobs so that the people know who to look towards for leadership. That’s likely going to be an internal solution or someone from the board. You need to have those deep conversations and tabletop exercises so that you’re ready when the crisis comes, as opposed to reacting when the crisis shows up.
Chris: When you look at the skill sets that are needed for the next generation of directors, what should they bring to their boards?
Ted: This is a perennial problem for boards because they need depth and breadth. Sarbanes-Oxley was a catalyst for boards to recruit audit committee financial experts, but you also need directors with a breadth of knowledge of the business, as well as a substantive understanding of the company’s strategy going forward. You need directors that are effective not just in the audit committee meeting but also in the full board meeting.
The very best directors are incredibly cognizant of not only their fiduciary duty, but also how they present their questions and how that affects their colleagues on the board and how discussions affect the management team. Board members show up for a moment in time and have an imprint on the management team, but then the management team goes back to running the enterprise each day. How do you ask questions in a way that makes someone want to behave differently when they go to work the following day?
As always, exceptional communication skills are the mark of an exceptional director.
Chris: What is your advice to aspiring chairs?
Ted: Fine tune your pattern-recognition abilities. The best directors learn continuously and purposefully move through various board leadership roles. If you work at it, then you’re going to come to the table with great skills. You did not get put on a board because you were not a great leader to begin with… you were put on the board because you brought particular skill to the table. Your mantra should be: How do I practice my craft, and how do I get to see enough cycles to get better over time?
Chris: Regarding the all-important chair position, is there some type of time limit that you think should be placed on their service?
Ted: I don’t think there is a hard and fast rule. On the other hand, there’s something to be said for building the muscle of succession. When boards get stuck or companies get stuck, they get fixated on a leader and the mindset that nobody else could do this as well. Developing the muscle of succession in the board and in the management team so the organization survives beyond any particular individual is paramount. If you get zeroed in on just one individual as chair or one individual as CEO, then the rest of the organization underneath them stagnates because there’s no ability to move people up.
Maybe because my father was in the Navy, I believe the U.S. military is probably the best organization in the world at succession. There’s no need to worry about where you’re going to get your next four-star general or admiral. The military has an “up or out” approach with some mitigating factors in crisis. In a time of war, you don’t necessarily change out your battlefield commander if you don’t have to, you follow a process that elevates people in a mindset of service to the organization that supersedes the individual. I think that’s got to be the approach when it comes to term limits or mandatory retirement ages. It’s not about the individual, it’s about the enterprise.
Chris: From your unique vantage point, do you agree that the CEO today is more coach than steward or vice versa? When I say steward, it’s steward of shareholder value.
Ted: It was common 30 years ago to have the CEO be the only management member in the board meeting for the entire time. Now it’s a rarity that the CEO doesn’t have their team (sans the executive session) sitting in board meetings. Chris, your coach metaphor really resonates with me. At the end of the day, a large enterprise CEO does not truly do anything in terms of servicing a customer. They help the team make decisions in terms of where resources and assets are going to go, but they are coach and mentor, helping their people get on the field and do their very best work every day. If you’re a CEO who thinks that you’re the smartest person in the room and must make each and every decision, then God prevent the day that CEO is sick or doesn’t show up, or something else… that’s not a sustainable enterprise.
Chris: Ted, who was the most positive influence in your career?
Ted: I’ve had a few great influences in my career. Part of what’s wonderful about my work is that my clients are often some of the best coaches. Their answers to my questions about what they do and why is invaluable. Within our firm, I’ve seen some incredible practitioners that I’ve learned from throughout the years. Probably most notable for me was Gerry Roche, our deceased senior chairman. Not only was he great at what he did, but he really connected on the human side with his clients and his candidates, and not just at the best times in their lives, but at some of the worst times of their lives, as well. Some of the greatest stories that I ever heard about Gerry were from CEOs that he had placed and his interactions with them after they were asked to move on.
We all want people in our lives to celebrate us when we’re doing our best work, but most importantly, we want people to pick us up when we fall. Incredible leaders are the ones that stand shoulder-to-shoulder with people at their most challenging moments and say, “What can we learn from that experience — you’re still a great leader, you’re still a great person, how do we go forward?”
Chris: Ted, thank you for your time, insights, and positive energy.
Theodore L. Dysart is a Vice Chair in Heidrick & Struggles’ Chicago office where he is a leader in the global Board of Directors Practice and an active member of the CEO Practice. Ted is a regular commentator on corporate governance issues, and his comments have appeared in The New York Times, USA Today, The Wall Street Journal, and on CNN.
Chris Clark joined Stuart Levine & Associates as a senior consultant after a distinguished career at the National Association of Corporate Directors. He has over 30 years of entrepreneurial and corporate business experience. His expertise ranges across a variety of disciplines including corporate governance with board assessments as a cornerstone, leadership development, strategic communications, and digital content creation.
