- How to resolve the challenge of exerting influence and adding value from the boardroom
- What effective boards do and how effective directors behave
- Practical suggestions to move the board's focus from compliance to performance
I'm thrilled to announce that the Madinah Institute for Leadership and Entrepreneurship (MILE) has invited me to present a webinar entitled Influencing company performance, from the boardroom. The webinar will start at 3:00pm Saudi time on Sunday 2 October—to suit American, UK/European, Middle Eastern, African and Asian company directors and board members in particular.
For more information, click here. You'll need to register (free).
The following topics will be discussed during the 45-minute webinar (with an open Q&A session afterwards):
Reserve your place today!
Subject to two pending confirmations, the schedule for my upcoming visit to London (14–20 September) is full. During this short visit, I will be participating in the Organizations with Purpose conference (16–17 September) at London Business School (in conjunction with the Blueprint Trust); attending a non-executive director forum; meeting (separately) with ICSA and ICGN executives; discussing my involvement in a significant event in 2017; fulfilling requests for confidential meetings; advising several clients; and, delivering a presentation. While the visit will be fleeting (and busy!), I am hopeful of realising a long-time ambition: to climb the dome of St. Paul's Cathedral on Sunday 18th, my day off.
The high level of interest in my work has been both humbling and gratifying. Thank you for your support!
Looking ahead, I'll be returning to the UK and Europe is in October (19–28th), culminating with the 13th EIASM Corporate Governance workshop in Milan (I will be presenting a paper there). If you would like to learn more about my governance research (especially implications for practice); have a confidential discussion about a sensitive topic; or, discuss the possibility of me addressing your board or a public event, please get in touch. Recent experience suggests that the diary is likely to fill up quickly, so it would be wise to act promptly.
One of the great challenges all business leaders face is the question of how to make an impact on the overall performance of the firm they lead. Boards are no exception. Effective boards are comprised of capable people who assess situations, make strategic decisions, and oversee management to ensure goals are achieved.
The challenge of leading well and making an impact on business performance is very real, especially in today's environment of fluid work patterns and declining levels of employee loyalty. Boards are responsible for company performance, yet they do not run companies directly (that is the job of the chief executive). How might boards respond to ensure firm performance goals are actually achieved?
Here are some considerations:
The importance of this last consideration should not be underestimated: if employees cannot collaborate effectively because crucial information is missing or hard to access, overall performance will suffer—period. The impact on employee morale, productivity and the bottom line is likely to be very significant.
The board needs to know how the business is performing relative to the agreed strategy, and the whether expected outcomes and associated benefits are being achieved (or not). Financial reports only tell part of the story. Employee engagement is an important though often overlooked indicator. If your board isn't sure whether employees are fully engaged, it needs ask the chief executive some probing questions; request a staff engagement survey; seek regular updates from senior managers (in addition to the chief executive); or, pursue some combination of these and other options (*). If employee engagement is low or any inconsistencies are discovered, weak information flows or ineffective collaboration within the company and/or with customers are likely to be contributing factors—a starting point for further investigation and subsequent decision-making.
(*) Boards that lack direct expertise to actively pursue these suggestions themselves should seek independent advice from a seasoned expert, to help them understand what might be possible, establish benchmarks and inform future board decisions. A long-time colleague of mine, Michael Sampson, is one such person. He is an expert in the fields of workforce collaboration, teamwork and new approaches to work. Michael also speaks at conferences around the world and has written several books. I commend him to you.
When Theresa May went on record recently, the key message for boards was that they needed to pull their socks up lest additional structural measures including employee directors become a requirement for UK companies. Much of the commentary was aimed at the boards of publicly-listed companies, in an attempt to curb (perceived and real) corporate excess in the form of excessive remuneration; hubris; and, a flagrant disregard of some stakeholders.
Today, ICSA: The Governance Institute announced that it had written to the Prime Minister calling for the boards of privately-held companies to be held to the same levels of accountability and disclosure as publicly-listed firms. This request seems perfectly reasonable, especially as the UK Companies Act 2006 applies to all companies.
The UK statute is clear: directors (actually, boards because it is boards that make decisions) are required to consider the long-term consequences of their decisions and the impact on employees and the community. Good practice suggests that boards should, amongst the things, keep shareholders informed (through the board's annual report to shareholders) of its activities.
ICSA is right to raise the issue, but will enforced compliance with codes of practice fix the problem?
If boards act within the law and in accordance with codes of practice as they pursue business objectives, then letters such as the one written by ICSA should not be necessary. But they don't. Some directors and boards take liberties. Enough examples have come to light in recent years (e.g., HSBC, FIFA, Volkswagen, Fonterra, Solid Energy, Toshiba and, most recently, BHS) to suggest that some boards knowingly run close to or beyond boundaries defined in law. But where does the real problem lie? Is it with the law, the principles-based codes of practice; the directors themselves; or, something else entirely?
Consider this: The road toll has not declined as a direct result of increased enforcement measures but rather a change of behaviour—drivers choosing to driver safer vehicles more carefully. Are boards any different? If boards are analogous to drivers, probably not. Unless and until boards make a conscious decision to embrace company performance as an important priority, and to do so in accordance with both established law and published codes of practice, I suspect the media will continue to be gainfully employed.
Finally, shareholders have an important and oft overlooked contribution to make. Recent experience suggests that greater care is needed in the appointment process, to ensure only suitably capable directors who are intent on acting in the best interests of the company are appointed to boards. In addition, shareholders should not overlook their right to hold directors to account including dismissing those who fail to discharge their legal duties or exercise requisite care and attention.
How time flies. In just two weeks' time (14–20 Sept), I will be back in London again—this time to attend the Organizations with Purpose conference at the London Business School (thank you for the invitation), and to continue discussions with ICSA: The Governance Institute and others intent on building board capability. To serve boards and directors in the UK is truly an honour—I am looking forward to sharing ideas with colleagues and clients, and to meeting new acquaintances as well.
While my diary is filling fast, I have room for a few more discussions. Please get in touch if you want to discuss emerging board practice trends, explore the possibility of me speaking at an event or with your board, or learn how to use my latest research findings to improve board practice and business performance. I'd be delighted to hear from you and look forward to scheduling a meeting (daytime or over dinner, whatever is best for you).
British Prime Minister, Theresa May caught the attention of many recently when she raised the possibility of requiring companies to reserve positions on company boards for employee directors. This proposal, which was suggested amongst other measures as a means of curbing perceived corporate excess in the UK, has received a mixed response, including support from the Institute of Directors and wonderment from others.
Increased diversity has been associated with improved decision quality, so including employee directors at the board table should be to the organisation's advantage, shouldn't it? On the surface, yes. However, experience tells us that one of the very real challenges of reserving places on boards, be it via a gender-based quota mechanism (e.g., Norway) or to provide a voice for an interest group (e.g., parent representatives on school boards), is that people bring baggage. Representation is a problem: candidates appointed because they meet the representation criteria often struggle to act in the best interests of the organisation when they take their position at the table.
The conflict (of interest) that employee directors face is even tougher to manage because it is directly personal. On one hand, employee directors are paid to perform work and implement strategies, while on the other they are expected to make decisions in the best interest of the company. Decisions made in the boardroom may not be to the employees advantage (e.g., to close a loss-making division, resulting in job losses). To expect an employee director to subordinate their personal and collegial interests in favour of what might be best for the company is likely to be a tall order; it may not even be realistic.
Yet the German experience (one of the most successful economies since World War II) suggests that the inclusion of employee directors can be made to work. But the German system of corporate governance is framed on the notion of two-tier boards, and employee directors sit on upper (supervisory) board not the executive board where the important strategic decisions are made. Also, supervisory boards normally only meet a few times each year, meaning the focus is more directly one of oversight, in a manner not dissimilar to an annual general meeting of shareholders in the unitary system.
If the corporate excess that May has called out is to be corralled (as it should be), the underlying basis of corporate governance (the means by which companies are directed and controlled) should be reviewed. A holistic review is needed to ensure the addition of specific measures (e.g., representative positions) does not inadvertently introduce other problems like suboptimal decision-making. Any review needs to extend beyond board structure and composition to the behaviour of directors and the activities of boards. Directors themselves also need to take responsibility for their actions; invest time understanding the business of the business; and, take their commitment to act in the best interests of the company seriously. I've written and spoken about this many times in the past. If directors embrace these suggestions, enforced structural provisions (e.g., representative groups) may no longer be required. But this relies on directors behaving well and doing 'the right thing', a reliance that has a chequered history.
South Africa's flag carrier, South African Airways, has hit turbulence. Severe turbulence. The airline, which is in financial trouble as a result, most probably, of some poor decisions in the past, has been negotiating a debt refinancing package. However, the package reportedly contains some unusual characteristics (read: extremely high fees). Now, a staff member has blown the whistle; the board has been called out; and, the matter is being investigated.
Even a cursory inspection suggests that something is amiss, and badly so. Problems that seem to stem from poor decision-making at the top of the organisation appear to be endemic. Whether the underlying driver is greed, hubris, corruption, ineptitude or something else remains to be seen. Regardless, South African Airways is in trouble. The board appears to be missing in action and the 'corruption' word has been mentioned making situation very messy, to say the least.
Sadly, SAA is not an isolated case. Recently, Sir Philip Green fell from grace; and, it was not that long ago that FIFA, Toshiba and Volkswagen suffered 'setbacks'. It's little wonder that hard working people have any time for boards of directors. The sources of governance failure are well-storied. However, the natural response—hard law—has done little to improve things (because people who want to generally find their way around things that inhibit them). Different measures are required, perhaps starting with culture, values and purpose. Board appointment processes also need to change. Unless and until 'bad eggs' are exorcised from boardrooms and held to account, the actions of a few will, no doubt, continue to make life hard for the rest of the director community.
Business leaders cite change management as their biggest challenge, both on a day-to-day basis as well as from a long-term internal culture perspective. This challenge is what sees change management consultancies make millions of dollars per year, from acting as an external driver and catalyst. What many executives fail to realise is that they actually fear change themselves.
Are your own fears a subconscious barrier to the change you know your business needs to make?
Coming to terms with human nature:
At the most basic level, the fear of change is hardwired into us. Those of us who like change are therefore the different ones. If we fear change, we’re normal, regular human beings. Some of us might even struggle to come to terms with the fact we find change difficult. If you fit into that particular category, it shouldn’t be something you worry about.
Embrace change or walk away?
Often we’re faced with this very simple question: do we embrace change, or do we walk away? When walking away is the option picked, there may not be an actual fear of change itself, but of the process that needs to be gone through before that change is implemented.
As business leaders, we may resist change because we’re not too excited about the process of self-analysis that we need to go through. Self-analysis usually raises some tough questions that need to be asked, and human nature dictates that we don’t necessarily want to have that internal conversation—or learn the answers.
Change carries risk:
With change comes risk. This is perhaps the biggest reason why so many executives, and by extension businesses, continue with the status quo. A business with six-figure profits could embrace change, and in a few years be approaching eight-figure profits. However, this business may be happy with what it is currently achieving. While the proposed change will put certain things in motion to help the business move forward, it may also trigger other events, more self-analysis, and drive demand for change in other areas as well.
Change can, therefore, be something of an unwelcome can of worms. The executives who deal with their own fear of change effectively and, therefore, manage change better within their businesses, are those skilled at focusing on the positive final result, even if this may be years down the line.
Beating your internal fears:
Beating any internally-held fear of change comes down to your approach. Many executives—even today when data and tangible insight is more readily available than ever before—still rely on gut feeling and “tradition” in terms of their business processes. Learning to embrace change may be as simple as learning to embrace the data and tools available to help you understand the impact change can have, and how you can manage that change yourself to a positive outcome.
Most importantly, it is crucial to recognise that change is not instant. When change is implemented and managed correctly, it is very much a soft evolution rather than an immediate, overnight change in culture that completely redefines how you operate. Change isn’t always the answer, but do not allow your internal fears to stop you assessing whether it might be what you need.
Guest blog: Gemma Walford is head of Sales and Account Management for Convene for the EU region. She has extensive experience in the Public sector and a particular interest in improving productivity and business change. Azeus Convene is a board portal, developed to serve the needs of boards and management teams around the world.
Last week, I had the privilege of spending an entire day with the directors and executives of a highly-regarded architectural practice. The large practice has developed a great reputation over several decades for creating 'meaningful' architecture—buildings and spaces that 'fit' the surrounding environment, and that people enjoy living and working in. The job at hand was to facilitate a strategy development workshop, working with eleven capable and motivated men and women to select a course to guide the further growth and development of the practice. In essence, the day was about looking up and looking out.
Using the StratCross framework and summaries of PESTEL and SWOT analyses completed prior to the workshop, we got stuck in. Before we knew it, the time was 4:30pm and the intense but enjoyable workshop was over. As we packed up, several directors indicated that the workshop had been "hugely valuable", "challenging" and "galvanising", and that they were looking forward to seeing the fruits of their labour. On the way home, my thoughts wandered, reflecting on the day and why it had been so much fun. Here's a few observations that came to mind. You may find useful for your next retreat or planning session:
So, overall it was a good day, with some observations to boot. While most attendees came away hopeful of an even brighter future for the practice, they also realised that, despite a coherent strategy (to be written up in the coming days) and a commitment to execution once approved, success is not automatic—unlike the arrows in the picture imply. A realistic way to end the day.
In 1970, Alvin Toffler's book Future Shock was published. It quickly became a bestseller. Toffler died recently, triggering a series of articles and reflections (including this one published in the New York Times) about his life and 'the book'. Toffler had an amazing ability to look well ahead of almost all of us, to think critically, and to make some sense of it all. Consider these observations by Manjoo in his reflection:
Alvin Toffler ... warned that the accelerating pace of technological change would soon make us all sick.
Yet in rereading Mr. Toffler’s book, as I did last week, it seems clear that his diagnosis has largely panned out, with local and global crises arising daily from our collective inability to deal with ever-faster change.
That societies are racing with great speed to embrace new ideas and innovations, yet without the ability to cope with the consequences of high rates of change, might be one of the great problems of our age. Perhaps those in influential positions in society have a responsibility to shift their gaze, from their own ambitions towards altruistic ideas that serve the greater good? This is by no means a call to embrace utopian principles nor uniformity because we are all different. Much pragmatism is needed if society is to continue to endure.
Leaders—of all types but especially business leaders, company directors, politicians and academics—could do well by (re)reading Future Shock. We need to talk about stuff, because we all have much to learn.
Thoughts on corporate purpose, strategy and governance; our place in the world; and, other things that catch my attention.