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Dorothy McKee, University of Ulster, Northern Ireland, presented a fascinating paper that explored the extent to which executive development (read professional development for executives) that focusses on leadership, governance and business ethics has a positive impact on business performance. The research was insightful, for it bridges the oft-discussed chasm that exists between academia and practice. Courses bathed in research rigour and practical application are far less common than you'd expect. I have been critical of the way many academics happily resist any activities that might see them becoming tainted by 'the real world'. Yet McKee walked right into the centre of the issue, and intentionally so, to try to gain some understanding as to what is really going on and what needs to go on to ensure executives are appropriate equipped to to lead and direct well. She surveyed and interviewed a group of business executives who are also graduate business students (Masters level). The findings were very revealing:
While none of these insights were particularly revolutionary, they reinforce the "I think this is correct but can't put my finger on it" perceptions held by many working directors and business executives. The insights provide great guidance for professional bodies (including the Irish Institute of Directors) to inform the development of their professional development programme. They also speak volumes to academics, to get busy and to produce some meaningful theory-based models and frameworks to support the emerging perceptions of skilled and insightful executives. Given the overlap between our research interests and professional backgrounds, McKee and I plan to get together in a few months time, and advance these ideas, with a view to developing some new professional programmes for working directors. If you are interested in learning more, including the possibility of becoming an early adopter, please contact me.
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James Lockhart, of Massey University, presented the results of an investigation he undertook, to understand what the research community has added in terms of knowledge about corporate governance in the last two decades. He did this by re-reading every issue of the top corporate governance journal (entitled Corporate Governance: An International Review). Over the 22 years since the first issue, 782 papers have been published (totalling 11,063 pages!). Lockhart has reviewed all of them, categorised them and done some analysis. Sadly, his findings provide little comfort for the research community. They also challenge many of the commonly-held 'maxims' that have defined the commentary of belief system about the phenomenon:
Gosh, this is a real indictment. It's little wonder that boards are reluctant to admit researchers to boardrooms to undertake research. Researchers are producing outputs for sure, but the queue of companies and directors waiting to consume the findings because they are relevant is remarkably short. Lockhart's verbal summary was consistent with my own findings: that much of what business schools produce is of questionable value. If the research agenda is to be advanced in any meaningful way, then a whole new approach is not only warranted, it is crucial.
Syelia Md Zaini, a researcher from Waikato University, presented an interesting paper on voluntary disclosure in developing Asian nations. Voluntary disclosure has been associated with increased market capitalisation and with the expectations of investors, yet the understanding of how voluntary disclosure works and why it might be important is fairly limited. Zaini's paper is a work-in-progress, part of her doctoral research. So far, she has analysed prior research to identify why companies have adopted voluntary disclosure practices. These include corporate governance requirements; peer pressure; and, accounting and auditing regulations. All of these drivers are compliance orientations: which suggests that voluntary disclosure may not be that voluntary! Zaini hopes to build on her current work, to answer the important 'so what' question. If she can achieve that, the answers could have quite meaningful implications for businesses motivated by growth. I look forward to reading her findings.
The 3rd International Conference on Management, Leadership and Governance got underway in Auckland New Zealand this morning, with a keynote presentation by Phil O'Reilly, CEO of BusinessNZ. BusinessNZ is the apex organisation that speaks for businesses and those in the private sector in particular. O'Reilly is also the Chair of Business and Industry Advisory Committee to the OECD and of International Labour Organisation a United Nations agency, so he has a strong global perspective. O'Reilly's topic was The Research Agenda in Business. He spoke passionately about the need for high quality research to inform the business community to bring rigour to the 'educated guesses' of many business owners and leaders. O'Reilly suggested that if researchers are to deliver 'value', research needs to be relevant. More specifically, he argued that business needs research that is:
O'Reilly had some interesting ideas including that profit, business and capitalism are not ends in themselves. Rather, they are means: the actual end being successful communities. This was a refreshing comment, because it demonstrated that business has a vital place in the wider social fabric (the community). However, the value of the contribution of business is dependent on high quality research, to help leaders move from educated guesses to robust applicable knowledge. The keynote set a strong tone for the conference ahead: that the academic–practice divide must be bridged, through relevant research that can be used by business leaders to grow strong, high-performance businesses.
News of the HSBC scandal has been plastered over major daily newspapers and news websites for several days now. Twitter and other social media platforms have been abuzz as well. That the leaders of an esteemed bank could have allowed such practices to occur is a travesty of leadership and good business practice. In the years to come, the HSBC scandal will make a great case study for students of business and human behaviour. However, in the meantime, the compelling questions are of corporate governance and leadership. What has been going on at HSBC? Why has the group chairman at the time (Lord Green) now gone quiet? Was the board aware of the practices? If so, why did it allow them to occur? If not, why didn't the board know? Ignorance is an unacceptable defence. Nor is silence. When will shareholders and others in the marketplace call time on this type of behaviour? Thankfully, some commentators are looking to the future. Dina Medland's opinion piece hits the mark. It's all about accountability.
Have you ever pondered the question of who actually controls your business on a day-to-day basis? Many chief executives have told me that they do. They say they have a large hand in the strategy; the culture; and, the policies and procedures, and that these things determine what the business is and what it does. But do they? Does this view match the reality? I've long held the view that businesses should be controlled by just two things. The first is strategy, the expression of how the overall objective of the business is to be achieved and against which all effort is aligned. In most businesses, strategy is expressed in commercial terms, based on whatever purpose the shareholders have laid out. The second controlling influence is the customer, or it should be. Customers are crucial because they "feed" the top line, without which the business has no future. The challenge for boards and chief executives is to ensure that all of the resources at their disposal (people, systems, product and service portfolio, finances) are aligned in pursuit of the agreed strategy. The benefits of doing so are almost self-evident, so much so that you would think all businesses would operate in this manner. But sadly, many don't. If you will allow me to relate an actual experience—one that probably happens more often than most chief executives and company directors realise. Recently, having opened a managed funds account with a large provider, my wife and I found ourselves with the frustrating problem of being forced to change the password to gain access to the on-line system. Here's the exchange with the financial services advisor: Me: We have discovered an annoying “feature” of the ABC programme: the “forced change” on user passwords. To be forced to change your password every few months is jolly annoying, to the point of arrogance on the part of ABC company. We are not forced to change our password with the bank. We can see no justification to impose such a regime on a look-only user account. Can you please talk to your people and get this setting changed. Advisor: This is a feature determined by the provider of the on-line platform; and it is across all client accounts. ABC company has been approached on this several times but their IT security people are unable to make exceptions at the individual customer level. M: Thank you for chasing our question through to an answer. It’s disappointing when “IT security people” get to drive the business and the customer experience eh! Your suggested work around is fine with us, on the proviso that it does not cause you any untoward extra work or hassle. One report per quarter will be fine. Is that OK? A: Hi, that sounds fine. The message is stark: that faceless people in back rooms often have more influence over business performance and perception than what executives and boards realise. They make decisions that seem reasonable. However, most of these decisions are made in isolation, without reference to customer or strategy. The consequences of decisions that detract from the customer experience and are inconsistent with the corporate strategy can be quite damaging. If customers start walking away, where does that leave the business?
Have shareholders worked out that the appointment of women to corporate boards per se is not a ticket to improved business performance? The challenge of lifting representation has been embraced by many groups across the Western World, including the 25 Percent Group. Yet the numbers are not stacking up in the way many had hoped. While some countries have implemented quota systems, conclusive evidence is yet to emerge to show that, by adding one or more women to a corporate board, business performance will increase. Diversity amongst directors makes sense, because a mix of backgrounds and experiences tends to produce a wider range of options for consideration. If the debate is healthy and vigorous, higher quality decisions can follow. However, women should not be appointed for political or social reasons. The conversation needs to move on, beyond simple numbers and the presence of absence of XX and XY chromosome pairs, or any other specialist technical skill for that matter. Physical attributes and technical skills are inputs (only), their presence does not produce results. Researchers and professional directors need to dug deeper, to discover the qualities and behaviours of directors that are likely to contribute to better outcomes. In other words, what directors do and how they think in boardrooms. If we can discover these qualities and the social interactions that flow from them(*), and nurture their expression in boardrooms, then increased business performance might not only be possible, but perhaps sustainable. The likelihood of a mix of male and female directors is pretty high as well, I would have thought. (*) This is the essence of my doctoral research. Details will emerge during 2015. Contact me if you want to be notified when papers and articles are available.
Are you interested in the latest developments in management, leadership and corporate governance? If so, you might like to check out the 3rd International Conference on Management, Leadership and Governance being held in Auckland, New Zealand on Thu 12 Feb and Fri 13 Feb. Details are available here. The keynote speakers are:
The two previous editions, in Bangkok and Boston, were great forums. Auckland will be no different: ideas will be shared, emergent research findings presented and new ways of improving business performance debated. In addition to the main conference topics, the following themes will be discussed during mini track sessions:
As usual, summaries of each session will be posted here throughout the conference. Please let me know if a particular paper or conference track interests you and I will do my best to attend and report on it.
My first scheduled trip to UK and Europe for 2015 is only a few weeks away now. The dates are 9 to 19 March. This trip includes speaking engagements, an annual conference and quite a few meetings; primarily on board and corporate governance topics. Here's a selection of the activities my programme:
The programme is nearly complete, but there is still some space for a few more meetings or a speaking engagement, in England or Europe. If you want to discuss some aspect of board practice or business strategy; learn about my latest research; or, if you would simply like to meet informally to discuss something else of interest to you, please contact me.
Boards need to get their heads around this development, and quickly, lest the companies they govern get overtaken as consumer preferences change. The pressing question is "how":
The desire to connect everything to everything else, via the Internet, appears to be alive and well amongst some sectors of society. The name that's been given to the emerging trend is the "Internet of Things". Essentially, the concept is one whereby everyday devices have embedded computers and two-way Internet connectivity, thus enabling them to send and receive data. If this proposal gathers sufficient steam—certainly the term seems to be entering the mainstream of business consciousness if these Forbes and Guardian articles are any indication—uber-connectedness is likely to have a significant impact on businesses and business models and, consequently, the strategic choices that boards need to make. My suggestion: Find a business strategist with expertise in this area (not just a populist consultant or local self-styled "expert"), and a respected academic, and invite them to lead a discussion at your next board strategy day. If you need an independent facilitator, I'd be happy to help. Ask a few of your customers, suppliers and staff to join the conversation as well—their comments may surprise you!
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SearchMusingsThoughts on corporate governance, strategy and boardcraft; our place in the world; and other topics that catch my attention. 
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Dr. Peter Crow, CMInstD
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