The board of directors plays a major role in setting a direction for organisational leadership. This makes it important for boards to have people with significant corporate and domain expertise. Experts say board compositions are undergoing a change.
In today’s dynamic and fast-paced startup landscape, the trend of younger individuals assuming positions on company boards is becoming common, says Manu Saigal, Director, General Staffing, Adecco India. This shift brings both advantages and challenges. On the positive side, younger board members often bring fresh perspectives, innovative ideas and a deep understanding of digital technologies and market trends. Their agility and adaptability can accelerate decision-making processes and drive innovation. However, there are potential drawbacks, too, as they typically have limited experience in governance, risk management and strategic planning.
The underlying reasons
Startups already have a younger board as compared with traditional companies. This is primarily because the founders are mostly young and have a seat on the board, says Madhur Nevatia, Partner, Longhouse Consulting.
In more developed markets like the US and the UK, startup founders are between 45 and 47 years old. This trend of more experienced professionals starting up is catching up in India as well.
Some startups have a higher inherent need to have younger board members. This is especially true in startups catering to younger target audiences. Industries such as health tech, fintech and consumer tech fall in this grouping.
Younger board members offer valuable insights into the behaviour, preferences and aspirations of the younger generation, enabling startups to make informed decisions and develop products or services that resonate with their target market. Startups with very young teams also need younger board members who can resonate with the issues on the ground and help in arriving at resolutions.
Ambrish Sinha, CEO, UNext Learning, says the startup landscape is witnessing a trend towards more diverse boards where experienced members provide guidance and the younger members offer innovative perspectives.
When it comes to scalability, young leaders often approach it with a bold and expansive thought-process. They envision rapid growth and disruption within the market. This contrasts with the approach of older professionals, who might prioritise more measured and controlled expansion.
Both viewpoints have merit, and a diverse board fosters a healthy balance, leading to more informed and adaptable strategies for long-term success. After all, running a business is about staying relevant perpetually.
Skills required by these young leaders
Nevatia says young leaders must possess crucial skills to thrive in today’s evolving landscape. Key among these skills is a deep understanding of new technologies such as artificial intelligence (AI), cybersecurity, sustainability, and environmental, social and governance practices.
AI is revolutionising sectors like healthcare and finance, and knowing its capabilities and limitations allows leaders to leverage its potential effectively. Cybersecurity is crucial in our interconnected world, and leaders must stay updated on trends and strategies to protect their organisations. Leaders who understand the environmental and social impact of their decisions and integrate sustainable practices can create long-term value for the organisation.
“Key skills required for younger board members include strong communication abilities, strategic vision, and a keen understanding of emerging technologies and market dynamics,” Saigal adds.
Backgrounds these young leaders are chosen from
Young leaders are chosen from specific backgrounds to bring diverse expertise and perspectives to the board, says Nevatia. In today’s fast-paced digital world, a tech background is crucial. Additionally, leaders with an investing background are sought after. Startups often have PE/VC firms on their boards, and young partners with in-depth knowledge of the target market, competition and funding landscape can provide valuable insights. Furthermore, young founders as board members bring to the table entrepreneurial experience and a unique understanding of building and scaling up businesses.
Nevatia clarifies that in traditional companies, board structures tend to be more mature and older. In listed companies, the age of board members ranges from 58 to 67. While there is now a greater representation of board members around 40, most well-established companies have mature board members with extensive experience across diverse businesses in the traditional ecosystem.
Sinha says domain-specific knowledge alone does not equip one to meet the managerial challenges a leadership position presents; it is only with experience that one learns to navigate complicated situations and crises. But this gap is bridged by fostering mentorship within the board. Open communication and a culture of learning ensure their voices are heard and their decisions valued.
“In my experience, young members bring an undeniable energy to the boardroom. They’re passionate about the company’s mission and excited to disrupt the status quo. This translates into faster action and a willingness to take calculated risks, crucial traits in today’s competitive startup landscape,” Sinha adds.
Businesses that leverage and complement the strengths of both generations of leaders are usually the ones that pass the test of time.
“We recognise the importance of diversity in boardrooms, including age diversity. While youthful energy can inject vitality into a company’s leadership, it must be balanced with seasoned expertise to ensure effective governance and long-term success,” adds Saigal.