Wanted: More Directors With Digital Savvy
Joann S. Lublin
Nearly every facet of corporate life has gone digital. But many public-company boards remain stuck in analog mode.
That has started to change. Boards worried about their scant digital expertise are scrambling to recruit newcomers who can advise management on strategies for mobile devices, social media and data analytics.
Mark Vadon chairs online-retailers Blue Nile and Zulily. As a
Home Depot director he has urged executives to tailor ad pitches
for mobile devices.
"The avalanche of digital activity is making directors conclude they are increasingly ill-equipped in the boardroom," observes Tuck Rickards, a managing director of recruiters Russell Reynolds Associates Inc.
Digital directors, who are sometimes decades younger than many of their colleagues, weigh in on marketing strategy, business alliances and even recruitment, several company leaders say.
The shift has made digital experts like Jeffrey F. Rayport hot commodities in U.S. boardrooms. Dr. Rayport, an operating partner of private-equity firm Castanea Partners, taught the first digital-strategy course at Harvard Business School in the 1990s and later ran the digital-strategy arm of consultants Monitor Group. He says he now fields more than a dozen feelers a year.
"It's a little overwhelming," says Dr. Rayport, who already holds directorships at Monster Worldwide Inc. and ValueClick Inc.
"I have never seen such an acceleration of demand for specific board expertise," says Clarke Murphy, the chief executive of Russell Reynolds Associates. The search firm handled 10 U.S. hunts for digitally savvy directors last year. Its first such assignment resulted in Facebook Inc. executive Sheryl Sandbergjoining Walt Disney Co.'s board in 2010.
Because boards at public companies want members with C-suite experience, the pool of digital candidates is small and usually doesn't include entrepreneurial startup veterans, recruiters say.
As a result, finding a digital director can take six to 12 months, which is twice as long as a typical board search, says Norbert Gottenberg, a solo high-tech recruiter. "Both sides are picky," he adds. Boards vet digital prospects more carefully than they do traditional ones, while qualified candidates "want to be on the right board."
Dr. Rayport, for example, is weighing three other directorship offers at publicly held businesses but says he wants to make sure that he's "not playing the role of window dressing."
Thirty-seven of the 100 biggest U.S. companies lack directors with digital expertise, and only 16 have at least three such members comprising 20% of the board, a Russell Reynolds analysis concludes. "Highly digital" boards include Cisco Systems Inc., CSCO -0.16% Coca-Cola Co. KO +1.06% and Allstate Corp. ALL +0.44%
Mark Vadon received his first public-company board invitation in 2006 but waited years before accepting one. The co-founder, chairman and former CEO of Blue Nile Inc., NILE -0.59% an online retailer of jewelry that went public in 2004, also co-launched and chairs Zulily Inc. The flash-sale site derives almost 40% of its revenue from smartphones and tablets.
For years, Mr. Vadon spurned feelers because they only came from Internet-related businesses. "It wasn't very different from what I was already doing," he says.
Then Home Depot Inc., HD +0.88% a home-improvement chain eager to expand online sales, approached Mr. Vadon in 2012 as part of a push to bolster its board's digital expertise. CEO Frank Blake even flew to Seattle to woo him.
Appointed last September, the 43-year-old entrepreneur is younger and wears his hair longer than the others who sit on Home Depot's board. "Whatever his appearance, he was an incredible addition," says Bonnie Hill, the independent lead director.
Among other things, Mr. Vadon says he has urged executives to tailor ad pitches for mobile devices and enlarge the ranks of mobile developers by training current staffers. A Home Depot spokeswoman agrees that "mobile is a priority" but declined to discuss specific strategies.
At Starbucks Corp., SBUX +0.96% digital director Clara Shih played a pivotal role in a mobile-payments deal forged with startup Square Inc. last August. Ms. Shih, named to the coffee chain's board at age 29 in December 2011, runs Hearsay Social, which helps companies use social media.
Though startup leaders are often less wedded to hierarchy and formal structure, Ms. Shih says she felt the Starbucks directorship offered an "extraordinary opportunity" to learn how big businesses operate.
Square will eventually process credit and debit transactions at about 7,000 U.S. Starbucks stores through Square's smartphone app. Starbucks invested $25 million in Square, and CEO Howard Schultz joined its board.
Craig Weatherup, another Starbucks director, says he supported the alliance partly because Ms. Shih knew Square co-founder Jack Dorsey and had expertise on its users and technology. And Ms. Shih and board colleague Kevin Johnson, a technologist who leads Juniper Networks Inc., JNPR 0.00% "were both at my side throughout all of this" negotiation, Mr. Schultz adds.
Some digital experts, such as Lorraine Twohill, demonstrate their chops in different ways. The head of global marketing for Google Inc. GOOG +2.19% became a Williams-Sonoma Inc. WSM -0.42% director in 2012. During a board meeting in March, she recalls proposing that the retailer's website "make a bigger deal" of the debut of 700 items for its furniture line. As a result, the site currently contains multiple pitches for the enlarged Home Collection. "There has been increased Web activity and sales," says Pat Connolly, the chief marketing officer.
Other digital directors screen executive candidates, a duty that risks blurring their roles as outside overseers. Ellen Siminoff, president of online-education firm Shmoop University Inc. and an early Yahoo Inc. YHOO +2.61% executive, says she avoids the problem by interviewing prospects solely at management's request.
Kevin Thompson, CEO of SolarWinds Inc., SWI +0.81% says fellow director Ms. Siminoff joined the interview team for the information-technology-management software company at least four times in the past two years when the firm needed executives with digital-marketing backgrounds like hers.
Ms. Siminoff will soon screen less, however. She is relinquishing two board seats by July. She'll remain a director of SolarWinds and social-gaming company Zynga Inc. ZNGA +4.65% "I do have a lot going on in my life," the executive says.
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In this WSJ Live video coverage, Joann Lublin references the above article when she talks about companies needing more directors with digital savvy.