by Julie Hembrock Daum, Greg Sedlock and Dana Wade
Spencer Stuart

As digital technology continues to shape Americans’ daily lives, corporate boards have taken notice of the undeniable shift in how consumers interact with both businesses and one another.

To get a sense of the impact that digital and mobile technologies and social media are having on business, consider the following:

Digital Board Room_iStock_000002088079XSmall— Nine out of 10 U.S. Internet users now visit a social networking site each month.

— Online retail sales are growing at five times the pace of traditional retail and are projected to overtake traditional retail sales in less than 10 years. (Gridley & Company. “Billion Dollar Babies: Trends & Opportunities in the New E-Commerce World”)

— Global e-commerce sales are growing at 19.4 percent a year and are expected to reach nearly $1 trillion by 2013

The implications of these trends for business strategy, distribution, the competitive landscape, customer relationships and the type of talent and leadership companies need are profound, and the stakes are highest for consumer-driven businesses. Digital has become a priority at the very highest levels of corporate leadership. In fact, one study concludes that nearly 60 percent of final decisions on e-commerce technology spending are made by CEOs or e-commerce leaders, rather than operations, marketing or financial officers. (Internet Retailer, March 2011)

Boards of directors have an important role to play in ensuring that the management team is examining the threats and opportunities digital presents — and devoting appropriate resources to digital initiatives. Consequently, the demand for directors with an in-depth understanding of the trends and technologies shaping the digital landscape has risen substantially in the past 12 months. According to a survey of corporate secretaries conducted as part of the 2011 Spencer Stuart Board Index, demand for directors with digital or technology backgrounds increased by 21 percent from 2010.

While demand for directors with digital expertise is on the rise, the supply of qualified candidates is small, and those candidates are more likely to have nontraditional backgrounds. This can make recruiting directors with these profiles especially challenging and may require boards to reconsider their perceptions about what an ideal director looks like. While recruiting digital knowledge to the board is a worthwhile undertaking for any company, there are a number of realities boards of directors must consider before tapping into this increasingly in-demand talent pool. Spencer Stuart has developed the following model to help boards successfully recruit directors with digital expertise and think through the trade-offs that may be required to attract a director with the right set of experiences.

Define digital for the company

The first step in recruiting a director with digital expertise to the board is to clearly articulate the ways digital is affecting the business. To do this, the board and management team should understand how customers and employees interact with digital technologies and set a forward-looking digital strategy, which could involve improving worker productivity, enhancing the company’s e-commerce presence or better leveraging social media channels.

Once the company’s specific strategic digital opportunities and challenges are identified, directors can consider the type of digital expertise that would add the most value to the board. A director who brings the right digital expertise will help the board and CEO frame the strategic and organizational issues by asking detailed questions about the opportunities and risks, the company’s digital capabilities and whether the organization is being as aggressive as it should be in this area.

Understand the talent trade-offs

In addition to identifying the areas of digital expertise that would be most valuable to add, boards need to develop a comprehensive understanding of the digital talent landscape. Whether through independent research or partnering with a search firm, companies should know what the top talent in these fields looks like and how it differs from more traditional board candidate pools.

Recruiting board directors from the digital, consumer Internet or technology fields may mean compromising on conventional benchmarks, such as prior board experience or international expertise, in favor of more contemporary skill-sets, for example, experience with social media platforms or digital advertising. Additionally, boards should understand that directors with digital expertise may not have achieved the same stature as candidates from more traditional fields; many of these candidates have not reached the C-level, for example. These young, ambitious and, oftentimes, time-starved executives can be more transient than more established executives, and they may be less familiar with the customs of a corporate boardroom.

As part of the recruiting process, boards should consider the potential trade-offs and determine which ones they are willing to make. They can do this by exploring several questions:

— Is public or private company experience critical?

— Which areas of the consumer Internet are most critical to the future of the business?

— What are the expectations of director candidates with digital expertise about their role on the board?

— What are the core competencies the board requires?

— Is prior governance experience required?

— How important is experience with the hot technology of the day (i.e., social networking) versus a broad and seasoned perspective on digital issues?

Answering each of these questions will allow boards to focus their search on those candidates that will be most in line with the company’s immediate needs and long-term strategy.

Position the digital director for success

A critical next-step in recruiting digital directors is planning for their long-term success on the board.

As previously noted, many of these director candidates are likely to have little or no boardroom experience. Therefore, it is essential that the board carefully define the role that the new director is expected to play on the board. Is the new director expected to contribute in the same manner as other directors, or is there a digital-specific function he or she is expected to fill? Is the new director expected to chair a committee? Answering these questions is important when recruiting any new director, but especially so when dealing with a new director who lacks boardroom experience but may be expected to play a unique role in leading the board’s discussions around digital.

It also is important that the board identify gaps in the new director’s understanding of governance or the business, which can be addressed through board education or assimilation programs.

The digital difference

Successfully recruiting a digital director can seem as complicated as understanding the very technologies these individuals embrace, but doing so will reap substantial rewards for a board that is serious about its commitment to digital. While some industries, such as retail and hospitality, have enthusiastically embraced the digital age in their business strategies and board composition, others have been slower to move into digital. While digital is perhaps most applicable to consumer-facing businesses, other industries should not overlook the opportunities these technologies offer. If recent trends are any indication, digital e-commerce and social media will soon touch all aspects of Americans’ lives, and nearly every industry — even those that today seem well outside the scope of the consumer Internet — will have to respond or risk becoming obsolete.

The authors are consultants with Spencer Stuart, a leading executive search consulting firm.  This article is republished with permission.  Copyright © 2012 Spencer Stuart.