By Steven B. McKinney, McKinney Consulting Inc.

(A speech given by Mr. McKinney on December 14, 2006 at the Millennium Hilton Hotel, Seoul, Korea at the Roles and Responsibilities of Outside Directors Symposium.)

Companies the world over face the same problems of growth, governance, and competition. No one has a monopoly on pressure and stress. Michael Porter's five forces of competition sometimes feel like 500. Everyday the number of competitors seems to grow, the number of solutions seems to shrink, and the time limit for making decisions seems to shrink to 'yesterday.' But among all those time pressures, I want to draw particular attention to just one decision today - finding, empowering, and supporting the outside director. While I hope all companies can benefit from what I have to say today, I am particularly speaking to those companies who have a small minority of outside directors on their board. For these companies, the marginal effects of recruiting, empowering, and supporting non-executive director-leaders are potentially huge. They have much to gain by fully adopting this under-utilized resource.

I'm a people person, so of course you knew I would say this very important people-related decision was one of the most important decisions a company can make. But beyond that, this is one of the rare opportunities companies have to truly, intentionally, and powerfully create leaders in their midst. Bringing in an outside director is one of the few opportunities to bring someone in with no other purpose but that he or she lead. For this reason, focusing on leadership ability and willingness to lead is a key part of finding the right person.

When we think of outside directors, we may think of leaders and leadership. We often think of trusted advisors, givers of advice, givers of resources, and aid to those with direct stakes in the success or failure of the operation. When we think of outside directors we think of people recruited for their different perspective, connections, experience, resources, or special knowledge or standing in the industry. We may also think of leadership and it is right that we do. Precisely because of all those things we look for in outside directors, because they have those traits, and because of their special position in the company, they are uniquely placed to serve as immensely powerful leaders. Non-executive directors are not just a mandate for better governance; they are a second-to-none opportunity to introduce real leadership into an organization in a non-threatening way. Completely objective, unencumbered, uninhibited, unafraid leadership is the promise of embracing, empowering, and supporting outside directors. This type of leadership is something no company should miss out on.

In the desired situation, in the model company we're aiming for, outside directors are both above and beyond the political infighting of daily execution. They don't have the legacy stakes in past investments that are today's current projects and products and they often weren't around for the past decisions-made, some now regretted, and therefore can be less emotional, and less attached to current directions and activities. All of this should allow outside directors to concentrate more purely on their mandate - leading the company. But even more than that, it means that outside directors can provide 'different' leadership - objective leadership. The color of their chip in the game is different. It also allows everyone else in the company to listen with different ears. Outside directors can serve as a reliable moral compass. They can freely discuss strategy, vision, mission, and lofty goals. They can likewise address and help others to face some of the more difficult decisions like discontinuing a business, cutting a product, or downsizing the company. So Outside directors can often supply the kind of leadership in short supply elsewhere.

So with these lofty goals in mind, how do we go about identifying the right Outside Director for our company? Should we look for leadership traits? Should that be just one of the traits we've mentioned that are usually looked at when considering an outside director? Or is leadership enough of the equation that we should put leadership abilities high on the priority list and above some of the things that traditionally are considered very valuable like experience, resources, and reputation?

I would say that we must do just that. If we expect our outside director to be effective, we're going to want him to be a leader. Leadership ability determines effectiveness. If our outside director is high on leadership ability he will be a better governor, a better mentor, advisor, strategist, and coach. Other leaders will give her more respect, more leeway, and more face time. Plans laid and strategies created will have more reach due to effective leadership. Leadership is like a force multiplier for our outside director, it makes all the other traits of the outside director more powerful and effective.

We will know our leaders by their influence. Real leaders can be found at every level of an organization, regardless of the rank, title, or job position they may hold. We know leaders when we see them because they influence us. A leader is someone who influences those around her, someone who has an affect on other people that increases (or decreases) their own abilities, motivation, and effectiveness. Some leaders are invited to influence us, given titles, and formal authority. Some leaders end up influencing us despite our desire not to be influenced by them - they change our minds not only about the subject of contention, but also our closely held beliefs. They challenge us. And some leaders start out with a great fanfare and slowly over time lose their power to influence us. With outside directors, we have a category of person we have invited to come to our organizations for no other reason than that we hope he will influence us. We hope he will influence us, guide us, and enlighten us.

At some point, on our search for the world's greatest outside director, we may inadvertently walk past a mirror. It will then dawn on us that if we want Gandhi to sit on our board, we're going to have to renounce violence. What I mean to say is, we're not going to attract the right leaders if we are not willing to be the right followers. Who we are is whom we attract and whom we like. An organization will be attractive only to those who feel the organization shares their ideals. Furthermore, current organizational leadership is likely to be on the lookout for and see as attractive only those who they feel share their own ideals. Basically, the company will only attract and only choose those who are a reflection of what it holds dear. We may want Gandhi on our board, but Gandhi may not want to be seen there. To attract the right leadership, companies must take a long look in that mirror and make tough decisions about what is sacred and what is on the table. This is not to say that organizations must have the highest shine. It simply means that for those parts that don't shine, they must be willing to accept the change that the right leader will bring.

Our companies are ships in the open ocean. Whether we like it or not, they are going to go somewhere. And some leader is going to take the ship that somewhere, whether there is corporate governance or not, whether there is a strategy or not, and whether the destination is the right one or not. The ship is always going to be steered by someone regardless of whether anyone has charted a course or not. When outside directors are appointed, they become the conscience of strategic imperative in the company. In our model company, they may become the force for intellectual integrity and rigor in demanding that companies face the truth.

Since we have invited our outside directors to lead, boards must focus on empowering them to do so. Empowering them to lead means listening to them, recognizing them, supporting them and trusting them. The organization has invited them to influence it, it must now listen. Listen or not, the director-leader will influence the organization. The rest of the board has the ability to determine whether that influence is as positive and beneficial as it could be by listening and trusting. Lack of trust can be felt, and it does not produce optimum results. As we all know, distrust breeds distrust. Outside directors invited to lead should be recognized as the leaders they are. The leader recognized as such becomes that much more effective because he is that much more confident.

Lastly, the outside directors need the rest of the board's support. Ultimately, a leader's potential is determined by those sitting on his left, right, and across the table. No leader, no matter how capable can overcome a hostile or uncooperative inner circle. It is these people he relies on most.

To sum up, Number one, when looking for outside directors, look for a leader. Having leadership skills enhances all the other things the outside director brings to the board table. The outside director brings many potential advantages, but the potential for powerful and objective outside leadership is one of the biggest ones we should hope for. Number 2, we will attract the leaders-directors who mirror who we are and what we stand for. If we don't like something about our outside directors, maybe we need to look within ourselves to fix it. Number 3, you will know your leader by his influence. He will influence the company in the most positive ways if he is empowered to lead, and has the support of the rest of the board, and the executive directors. Without support, there will still be influence, but it may not be positive.

Steven B. McKinney is the President of McKinney Consulting Inc., Korea's most trusted executive search firm.  McKinney Consulting offers a comprehensive range of personalized and professional resource services to a wide cross-section of companies operating in Korea and Asia. Mr. McKinney is a globally established commentator on international management. he can be reached at This email address is being protected from spam bots, you need Javascript enabled to view it