Director competencies for the 21st century: a guide for new members of the board.

• Author: Boudreaux, Greg

INTRODUCTION

New directors coming onto the board will soon discover that the job is not what they expected. Our industry, once stable and predictable, now faces a profound transformation. Since we are only at the beginning of the utility restructuring process, most consumers are unaware of the magnitude of the changes that are coming, and no one knows precisely how the industry will evolve. But in general it is clear that we face a new legal and regulatory environment, increasing competition, and growing demands for customer choice.

In this situation every director's job is more difficult. This can only be more so for the new director. The job is more difficult because boards must deal with a wider variety of issues, there will be less time to study issues, decisions must be made more quickly, and board decisions will involve a greater degree of uncertainty and risk. Increasingly, there will be situations where quick decisions must be made in response to a competitor's action, to a customer's request, or to a new business opportunity. Nothing will be certain in the new environment, and little will be easy.

The need is great then for new directors to quickly acquire the knowledge and skills they need to contribute productively. But what knowledge does a new director need and which skills are most critical? And how does he or she best acquire these?

This article is written to help answer these questions. Other articles in this issue of Management Quarterly discuss the historical background of the rural electric program, our changing industry, and current financial issues. This article will concentrate not on the industry issues themselves but on the underlying competencies and habits that enable directors to deal effectively with whatever issues arise.

THE STUDY OF DIRECTOR COMPETENCIES

Since the beginning of this decade, it had been clear that change was coming to our industry. New technologies offered new opportunities to consumers and utilities alike. At the same time, the increasing competition faced by every industry in the global economy has caused businesses to look more closely at their energy costs. Growing competition is not just a fact about our industry but about every industry in the world.

In response to these issues, NRECA joined with a committee of managers and an advisory group of directors to identify the changing competitive pressures in our industry and the competencies that would be required to effectively address those pressures. The committee was known as Education 2000. It hired Dr. Edward Powers, an expert in competency analysis, as a consultant. It then attempted to identify and study the competencies needed to achieve superior performance. After two years of hard work the committee identified specific rural electric competencies for directors and mangers of distribution systems, G&Ts and statewide organizations. The management competencies are discussed in other NRECA programs and presentations. This article will only discuss the director competencies.

Psychologists define "competency" as an underlying motive, trait or skill that leads to superior job performance. It is "underlying" in the sense that it is a motivator of behavior, and people who have the competency may not even be aware that it is why they are effective on the job. In discussing competencies, it is useful to distinguish three related concepts: knowledge, skills, and competencies.

* Knowledge entails understanding and being able to use basic information and concepts in some area. It is generally acquired by reading, by study, or by attending seminars. As we'll discuss below, rural electric directors are expected to have some knowledge about our industry.

* Skills are specific job-related abilities. For example, a director may have skill in using the Internet, or the skill to make a great speech. Skills are generally acquired by practice.

* Competencies are more fundamental than either knowledge or skills, and they are generally more difficult to acquire. A director may have knowledge about our industry and the skill to explain how the industry is changing. A competency is not the skill or the knowledge, it is the underlying desire by the director to want to understand and explain our industry. The competency explains why some directors work hard to understand the industry. That is an underlying motive. To give one more definition, which we'll expand on throughout this article, having a competency means having a habit of doing or saying the right things at the right time.

The Education 2000 Committee and Dr. Powers studied competencies using a recognized methodology known as "Behavioral Event Interviewing." A sample group of directors was identified, and they were asked to describe specific tough situations they faced on the board: situations such as hiring or firing a manager, dealing with a conflict in the boardroom, or making a decision that affected the nature of the corporation or the business (e.g., a decision to create a subsidiary, or to pursue a consolidation with a neighboring system). The directors weren't asked to talk about competencies in the abstract, but instead to talk about exactly what they did in the various tough situations they faced. How the directors described these critical situations, and their role in them, is indicative of the competencies. How the directors described the situations indicated the kinds of habits they had to do and say the right thing at the right time. The interviews were conducted by Dr. Powers. Each interview was tape recorded and then coded by a professional coder who had been trained to listen for underlying motives and traits. What were the results?

THE 21ST CENTURY DIRECTOR COMPETENCIES

The Education 2000 Committee identified eight major director competencies:

1. Cooperative Outlook 2. Organizational Well-Being 3. Self-Management and Growth 4. Collaboration 5. Decisiveness 6. Leadership 7. Initiative 8. Perseverance

   We will discuss each competency in terms of why it is important to the director's role.

1. Cooperative Outlook. All of the directors who were interviewed for the Education 2000 project consistently expressed the value of the cooperative form of business enterprise. This was most important when they talked about the co-op informally with members or the public. For these directors, co-ops are seen not as inferior organizations that exist only in places where it's not...