Reports are starting to emerge that the euphoria that was Google Glass might be over, before it started. I'm not that surprised, actually. Try as I might, I simply could not get past the possibility that Glass was just a gimmick, a "solution" in search of a problem.
Glass could be a metaphor for a lot of what goes on in Silicon Valley. The Valley is full of well-intentioned and well-funded engineers who spend their day drinking coffee, standing around white boards, generating ideas (lots of ideas) and writing code—because that it what they are paid to do. While many good ideas have emerged through this process (just imagine what economic productivity might be like if the personal computer and its various descendants had not been created), a reality check is probably needed.
We have become dependent on smart devices and uber-connectedness. Everything has the appearance of being urgent, even if it is not. But what of conversations with people, of long walks along the beach or some quiet walking trail, or of time out to relax and reflect on life? Silicon Valley has brought us to the brink of losing sight of these things that probably matter more than whether we've checked our Facebook account in the last thirty second, or viewed the latest (trivial) Snapchat picture. When I was sitting on the train in London last week, reading a book, I noticed that about 80% of the passengers around me were using their smartphones. One or two others were sleeping. One older man was also reading a book. When he looked up, he smiled at me. No one else did that.
I'm no Luddite, but I do wonder where this Silicon Valley-led journey might be taking us.
Te Papa, the Museum of New Zealand, is front-page news today. This time, the museum has "lifted the lid on Michael Houlihan's disastrous tenure as its chief executive"—a strong opening statement by the newspaper. Houlihan has presided over several years of poor business and financial performance since his arrival in 2010. However, two big loss-making exhibitions and the Chief Executive not coming "anywhere near meeting any of the targets we gave" led the board to its decision to agree to Houlihan's departure.
The newspaper suggests that the problem lay with the Chief Executive, by implying that he was ineffective. Indeed he may have been, but is that where the enquiry should stop? The Chief Executive is accountable to the board, so the board should not be beyond scrutiny. The board's job is to govern (to steer and to pilot). This is (or should be) an active role. Why did it take two years to act? Was it asleep at the wheel? Some further enquiry is likely to be beneficial—not as a witch hunt, but to reveal insights and provide guidance for other boards.
Thankfully, the Te Papa board has now acted. A new Chief Executive has been appointed, and the museum is looking to the future. The Minister of Culture and Heritage seems to have had her confidence restored as well, now "[new] Chief Executive Rick Ellis and Chair Evan Williams are now steering the ship in the right direction".
Research is a funny thing. On one hand, experience can be greatly helpful: knowing what one is looking for or expect to see is a boon. On the other hand, it can be a hinderance: a little knowledge can lead to biases and preconceptions, and the possibility of missing vital clues. This is one of the huge challenges of board research: the experience of the researcher. Some forty years have now gone by since researchers started investigating boards in earnest. That the answer to the question of how boards influence business performance remains elusive is an indictment on the research community, in my opinion.
If medical research is conducted by medics; cultural research is conducted by anthropologists; and, engineering research is conducted by engineers, why is it that board research is often conducted by full-time academics with little if any experience as directors? Consider these questions: how might an inexperienced observer hope to know what the normative practices of board meetings might be? Or that a subtle interaction between two directors might actually be material to a pending decision? That many board researchers have no experience as directors strikes me as an alarming anomaly. It's little wonder that much of the research has been restricted to counting things and to desktop analysis.
I would have thought that, if we are to get to the bottom of the problem of explaining how boards can influence business performance, we need to do two things. First, we need to get inside boardrooms, observe what directors actually do and identify what might be material to performance. Second, we need to do so through the lens of experience. Or do you think I am being too harsh?
Sorry folks, but I have just seen red. Rich Fields, a correspondent at Tapestry Networks, has just proclaimed that board composition will be the big corporate governance story in 2015. I'm surprised, really surprised.
For well over a decade now, the academic and practitioner communities have been exploring a wide range of board structure and composition options, in search of a causal link with business performance. Many attributes of boards and directors have been investigated including gender; CEO duality; independent director; board size; and, diversity, amongst others. Positive, neutral and negative associations have been reported in the research. Earlier this week, I wrote a thought piece on independent directors, and offered the following conclusion:
A variety of conclusions are apparent in the research. Cause has not been established. It's a bit like saying that female directors cause companies to perform better. Increasingly, people are realising that board performance is more likely to be contingent on what directors do in certain situations than on who they are or any specific board structure or composition. Like gender, the independence attribute is likely to be a proxy for something else. We need to discover what that might be, so it can be used to qualify the suitability of director candidates and inform board performance assessments.
Respectfully, I suggest Mr Fields needs to think a little harder about what is known already and what is yet to be discovered. Aspects of composition may be topical, but to suggest that board composition will be the hot topic is rather myopic. We need to move on, and turn over some other rocks, elsewhere.
I see the Italians have updated their corporate governance code. The new code, most of which comes into effect on 1 January 2015, requires, amongst other things, publicly listed companies to have at least two independent directors. This sounds like a good move; one which is consistent with codes elsewhere, including New Zealand and Australia for example. The basis for requiring at least two independent directors (also called outside directors in some jurisdictions) on the boards of publicly-listed companies sounds robust: independence is said to be conducive to improved decision-making and to transparency, and two directors have more chance of exerting influence than one lone voice.
But what of the holy grail question? Do independent directors enhance business performance?
Many practitioners think that the approach to discussions, debate and decision-making by independent directors is more deliberate and objective (than executive/insider directors), primarily because independent directors are thought to be less emotionally involved in the day-to-day business and that they have less to gain or lose. Over the last three years, I have read upwards of 50 research papers on independent, non-executive and outsider directors. While the research is not unequivocal, the general tenor seems to bear practitioner perceptions out.
However, the impact of independent directors on business performance far less clear cut. A variety of conclusions are apparent in the research. Cause has not been established. It's a bit like saying that female directors cause companies to perform better. Increasingly, people are realising that board performance is more likely to be contingent on what directors do in certain situations than on who they are or any specific board structure or composition. Like gender, the independence attribute is likely to be a proxy for something else. We need to discover what that might be, so it can be used to qualify the suitability of director candidates and inform board performance assessments. Only then will the writers of codes be able to move beyond the reasonably blunt instrument currently in use: proxies.
I am sitting the United Lounge, in the new Queen's Terminal at Heathrow, awaiting the departure of my flight home after a very productive trip to England and Europe. In the last ten days, I have been fortunate enough to speak at the European Conference on Management, Leadership and Governance in Zagreb; refine aspects of the doctoral thesis; meet with executives from the US and UK to discuss board practice matters; discuss research opportunities with UK-based researchers; and, catch up with some research colleagues and make some new acquaintances. To top it off, I attended a Holy Communion Service at St. Paul's in London and was taken on a most wonderful tour of Winchester (the ancient capital of England), including the Cathedral where the da Vinci Code movie was filmed. While trips away can be physically and mentally demanding, and I am looking forward to returning home, my mind is thinking ahead to the next trip, such is the wealth of opportunity that presented itself over the last ten days. Here's a small selection:
As a result of these opportunities (and a couple of others that I'm not at liberty to mention), I plan to return to the UK and Europe in the early Spring (probably in mid-March), hopefully with my freshly minted doctorate in hand. I expect to be based in London, and may stop over on the East Coast of the USA en route.
If you would like to explore aspects of strategy in the boardroom, board practice or business performance; or to arrange a meeting or a presentation, please contact me directly. I can travel to any major centre in the UK, or in Western or Central Europe, if required. I look forward to hearing from you.
The OECD is partway through a process of updating its Principles of Corporate Governance document. The current document dates from 2004. In the decade since, much about the way boards could, should or actually do work seems to have changed (although whether business performance has improved as a result of these changes remains an open question!), so an update makes good sense. A public consultation process opened on 14 November. It remains open until 4 January 2015.
The 10th European Conference on Management, Leadership and Governance is over. The conference organiser, Academic Conferences International, and the host, VERN' University, did a great job hosting the event in Zagreb, Croatia. I now have returned to London, ahead of some meetings with researchers and business people before flying home later in the week. Some reflections on the conference:
Sharp-eyed readers will notice that I have not reflected on my own paper, or on the session that I chaired. The reason for this is straightforward. It's pretty hard to offer anything approaching an objective critique of one's own paper, and the prospect of making comprehensive notes (to inform the blog summary) when also chairing the session is 'too hard'. If you would like a report on the session or my paper, or would like any other information about the conference, please contact me.
Next year, the conference is being hosted by the Military Academy in Lisbon, Portugal. I met Luis and Carlos when they announced the location and the date (12–13 November 2015). They are great guys and, if the professionalism and commitment they demonstrated in Zagreb is any indication, the 11th edition of the conference promises to be a fantastic event.
Marco Halen (Aalto University, Finland) is an interesting character. Like me, he came to research after a successful business career—in his case via information technology. He was the CIO of a major company before he embarked on a PhD recently, and his subject expertise is enterprise architecture.
Marco's paper was enlightening. He said that enterprise architecture is not well understood, but that those that do have a view think it has or is something to do with the IT department. From my very basic understanding, enterprise architecture is something that is discussed amongst IT-types and that it lacks any real credibility beyond the technical departments of companies.
Halen asserted that enterprise architecture (EA) can be valuable to business, if it is reconceptualised as a bridge that spans between corporate purpose and strategy, and technology and information systems. However, any move towards effectiveness requires leadership. The CIO, who is commonly the 'owner' of EA, needs to work hard to reposition EA from an IT framework to a business framework; one that exists for the sole purpose of supporting and enabling strategy implementation.
The unanswered question is how? The board and the executive of most companies are busy people. Proposals to implement yet another framework are unlikely to gain any tangible traction or support unless they demonstrably advance the business towards the achievement of its goals and objectives. Halen implied that the CIO needs to take a deep breath, learn a new language (of business); begin speaking in terms of strategy and performance; release EA to business executives; and reposition the EA experts as service providers to business (cf. fiefdom builders and cost centres).
Halen's preliminary work is interesting, in that it provides a solid base from which to develop some alternative models; do some empirical research; test some ideas; and, potentially, improve business performance. If EA can be reconceptualised as a bridge as Halen proposes, then it stands a chance of becoming adopted more widely as a useful management tool. If not, the most likely outcome is that EA will be consigned to the scrap heap of esoteric ideas that have emerged from the IT department—solutions looking for a problem. I look forward to seeing how Halen develops his ideas.
Nina Evans, of University of South Australia, presented an interesting paper on the importance of information as an asset to business. In so doing, she commented on the difficulties that managers often have in justifying the effective management of information assets.
Information assets are intangible resources used in business including all tacit and explicit knowledge and information that is generated by, held by and used by the business. Information assets can be stored in a plethora of forms including in a person's mind; in hard or electronic format; and, on computers or in libraries. They are one of just four classes of asset (and therefore, levers) that managers have available to drive business performance (physical assets, information assets, human assets (people) and financial assets).
Evans suggested that if information assets are managed well, then operating costs can be significantly reduced, and business credibility can be increased. However, many managers treat information assets as being within the domain of the information technology department of businesses, and technical people often like to 'control' access. Further, while executive managers and boards often ask about the status of the other asset classes, they rarely enquire about the status of the information assets of the business. She went on to suggest that several barriers exist:
Evans closed by sharing the results of some preliminary quantitative analysis work. She said that companies that manage their information assets well stand to gain at least $20,000 per employee per year in direct operating benefit. This means that a 1000-person company can expect to add at least $20,000,000 per annum to its bottom line, if the information assets are managed well. If this is correct, this is huge! Nina Evans and I had a preliminary conversation after her talk. It would appear that a collaborative project, to combine Evan's work with my board performance research, may well generate some useful guidance for boards and executives in the future. Watch this space!
Thoughts on corporate governance, strategy and effective board practice; our place in the world; and, other things that catch my attention.