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WHEN EVOLVING BUSINESS PRIORITIES PROMPT BOARD REFRESHMENT
Matt Mooney, partner at ON Partners, and Tom Stanton, Chairman and CEO of ADTRAN, discuss boardroom strategy
Adding a new director to a corporate board is both an important and delicate process. And sometimes, as companies face evolving strategic priorities and business expansion goals, it can be appropriate for multiple new directors to join the board, in what effectively becomes a board refreshment, targeting the company’s business future.
ON Partners spoke with Tom Stanton, Chairman and CEO of ADTRAN, the $600 million (revenue) networking and communications company, and Matthew Mooney, the ON Partners consultant who collaborated with Stanton to bring four new directors to the company board since 2014. The board currently has eight directors, and one emeritus director. Stanton and Mooney candidly shared details about undertaking a board refreshment process and the benefits for ADTRAN.
ON Partners: How did you initiate this board refreshment process?
Stanton: It actually began with one director announcing his retirement. We had a long-tenured board, so this led us to take a fresh look at our board strengths and weaknesses in terms of skillsets, especially as they related to future business needs. We approached that first director search saying, “We have strength on the board in these areas, so let’s not duplicate those strengths.” Then, as additional board seats became open, we grew more definitive, targeting particular skill areas to address potential weaknesses we identified for the future.
Along with the skill qualifications, we recognized that we had a diverse employee base and a diverse customer base, and we wanted to make sure that was reflected in our director selection. We also wanted a director with an appreciation for the ADTRAN culture and what makes the company unique.
As we initiated this process, we considered which search firm we might use. In earlier experiences with large search firms, I felt they tended to have more of a boilerplate process, which can make it difficult to have a direct impact in evolving that process. We would say, “Let’s go look in this area, or let’s look using this different method,” and they would come back with the same list. My feeling is that Matt has been very open to our ideas, so that if we say, “Let’s try this,” I would see output from that. At least for us, it was a better way to allow us to help steer the process, instead of just being on the train.
ON Partners: How did you define the business profiles that would be most desirable? Was it done with a look at the strategic goals of the company?
Mooney: That strategic direction came from Tom, as the Chairman. We had three to five business themes we were pursuing: the voice of the customer; appreciation for the complexity of international business and risk; a better understanding of the regulatory environment; the future of telecom and the digital evolution; and some technical competencies that we wanted to gain. We had alignment on those themes.
With the first search, we brought on board Kathy Walker, the former Chief Information and Chief Network Officer at Sprint Nextel, and she brought the voice of the customer to the boardroom. She also became the chairperson of the nominating and governance committee, so she joined this process as we moved forward.
In 2016, we brought in the former Chief Technology Officer of Verizon, Tony Melone, which along with Kathy, drew attention within the communications industry. People were saying, “Hey, they are picking up some pretty interesting board members.” Taking advantage of the fact that we had two great candidates available to us in 2016, we also brought on Jackie Rice, EVP and Chief Risk and Compliance Officer at Target. She understands risk on a scale and level of complexity that most businesses don’t normally encounter. Then early in 2017, we brought on Greg McCray, the CEO of Alphabet’s Access division, which includes the Google Fiber business.
So, four high-caliber executives joined the ADTRAN board, and three of those executives also brought additional diversity to the boardroom.
Stanton: With ADTRAN’s new and expanding services business, Greg offers expertise in an important area that was not present on our board. Greg also has previous experience as a CEO, and at the time of his hire, we had only one other director with that experience. Jackie is a great addition to help us address corporate governance and risk. You can argue whether our business has more inherent risks than four years ago, but without a doubt, the environment we operate in is more attuned to risk.
Shortly after she joined us, Kathy and I independently developed lists of what we thought were the most important and needed skills and attributes for our board. When we compared them, those two lists were very close. We shared this list with the rest of the board members for their input.
ON Partners: Are any desired skills and attributes still open on those lists?
Stanton: We are working through those lists again, as we speak. After each hire, we revisit the list, because you don’t know what someone will bring to the board until they are there and start contributing. And again, we share the list with the entire board, for their input.
ON Partners: When you are filling more than a seat or two, how does that impact the board search?
Stanton: The ability to effectively collaborate is always a concern, but when you are bringing on a number of new board members, it becomes a requirement.
Mooney: Tom truly emphasized culture. In every conversation he would ask, “Can we get someone who can bring new ideas and be impactful, and also be a constructive and collaborative board member?” Tom turned away some talented people in the process, people who could bring great expertise, but may not be able to effectively bring their ideas to light in a boardroom setting.
ON Partners: How do you gauge a person’s ability to be collaborative and connect with other board members?
Stanton: Everyone interviews well on the phone, so we did a lot of reference checking. The most telling time was while they were here. There were candidates who made it to the very end, and when they came here, they were just not the right fit.
ON Partners: What has been the outcome of this board refreshment? What, if anything, is different about the way the board functions?
Stanton: The boardroom has evolved. The types of questions that are asked are materially different, as the board brings greater expertise to a wider range of areas currently important to ADTRAN. Culturally, we are still a very collaborative board, which is what you are looking for, but I think the expertise has changed, raising the level of dialogue with the management team.
ON Partners: What factors made this process so successful?
Mooney: I think Tom is being a bit modest in terms of the level of time that Tom and Kathy put into this. We had the benefit of the great framework and strategy on the front-end from Tom and the team. Then we would go out and show them the market embodiment of that, and then reconvene to prioritize and rank it again. Having that collaborative give-and-take, that ability to go back-and-forth on ideas and profiles, I think that is a big part of the success that we have seen here over the last few years.
ON Partners: Will this board refreshment process continue?
Stanton: Yes. You kind of hope it is never finished. We will always want to keep abreast of desirable skill sets for ADTRAN. That assessment is something we want to continue. And one thing that really worked for us is that we were never in a hurry. It was going to take as long as it took for us to find the right person. That is one of the reasons we want to stay up-to-speed on knowing what we need next, to put ourselves in a position where we don’t have to hurry and rush the process in the future.
Says Stanton, “I certainly see the success of what we have done, and I could not be happier.”
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Since 2006, ON Partners is the only pure-play executive search firm building diverse C-level and board leadership teams. We rebuilt the institution of executive search for the way you work. Our approach includes present partners who engage with their clients from the first brief to the final decision, individually crafted solutions that are unique to each client, and an easier experience all around. Named by Forbes as one of America’s Best Executive Recruiting Firms and to the Inc. 500/5000 Lists eight times, ON Partners is consistently ranked among the top 20 retained executive search firms in the U.S.
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