Milking the X-Factor: Fonterra's School for Directors and Leaders: A Fast-Track Leadership Training Programme Initiated by Fonterra's Shareholders' Council Is Taking a Revolutionary Approach to Representation and Governance. How Are They Doing It and What's the End Game? (Corporate Governance)

Article excerpt

Criticism of the quality of Fonterra's board membership has dogged the dairy giant since the day its composition was announced.

Some drastic, or inspired, action was necessary to silence the critics. It was always going to be tricky. The company is, after all, a co-operative with a large shareholder base of frequently hard to muster dairy farmers. But where to find the talent for an increasingly difficult job?

Enter Fonterra's Shareholders' Council (FSC). It came up with a first of its kind.

Together with global consultancy Deloitte Human Capital and executive recruitment company Sheffield, FSC has embarked on a programme designed specifically to bring the cream of Fonterra's shareholder talent to the top. Having been screened, vetted and scrutinised, an elite seven are now being groomed for organisational leadership through individually tailored training programmes.

It's been difficult for shareholders to make informed decisions about individuals putting themselves forward for Fonterra directorship. This reality, combined with the historically political nature of former board appointments, meant the old selection process was flawed, concedes FSC chairman and one of the programme's architects, Tony O'Boyle.

With greater objectivity and transparency, the new selection process should eliminate favouritism. By inviting the entire shareholder base to participate in introductory training programmes the FSC believes it has created a level playing field.

Even if final board composition doesn't mirror the shareholder base geographically, O'Boyle thinks it's critical that all shareholders start off on an equal footing. "The FSC-initiated programme recognises that Fonterra is a complex international business. It's designed to spark interest in the co-operative and to improve selection intensity by creating a pool of available talented people."

O'Boyle doesn't see the FSC's new leadership training programme is an indictment of the existing board lineup. But it does recognise that the transition from a collection of smaller manufacturing cooperatives plus the Dairy Board, has left a void in the incubation of upcoming talent. "The aim is to mimic what happened within our former structure," he explains. "In the old days there were 40 regional directors, many of whom were filtered off to directorships within the manufacturing companies and to the marketing arm, which was the NZ Dairy Board."

All of Fonterra's 13,000 shareholders can still put themselves up for the nine (farmer) directorships on the co-op's board. Advanced training doesn't come with any guarantees. But O'Boyle expects those who have been through a personalised development programme to have the competencies required to "hit the board table running".

The selection

From a pool of 214 shareholders (and suppliers) who either chose to attend the FSC's "free-to-all" two-day introductory training programme last year or who were existing/former councillors/directors from the legacy companies, 62 put their names in the hat to attend the inaugural advanced training programme.

After that:

* Based on formal evaluation (against specially developed Fonterra leadership competencies) by Deloitte Human Capital, including written application, background, referees, relevant qualifications, evidence of external industry activity, and one-to-one phone discussions, the initial 62 were reduced to 35.

* Following structured interviews and psychometric testing, Deloitte chose two women and 10 men to proceed to an assessment centre.

* After a day testing competencies--seven men were invited to attend the advanced training programme.

"While we identified x-factor qualities, final assessment became a matter of intuitive judgement. The FSC was looking for six people to go forward, but we recommended seven," says Graham Hart, director with Deloitte Human Capital. …