The 'profession' of company director seems to be beset with an interesting challenge: how can or should young directors be introduced to boardrooms? In the eyes of the law, all directors are created equal. Young directors need to be competent and effective from the very minute they are appointed. Yet an important element of directing—experience and judgement—can only come from time spent in the boardroom. Do you see the Catch–22?
I have been exploring this challenge with directors in London, Leeds and Oxford this week. The prevailing view is that the profession has a problem. Many senior directors are reluctant to retire (the stated motivations are interesting in themselves, but that's another muse), and they don't seem to be interested in blooding new directors. Solid answers were few and far between. However, one option that did emerge was the notion of an 'apprentice director': one who is exposed to the full workings of boards and board practice, but without the demands of holding a formal appointment. The people I spoke with thought that apprentice director schemes may well have merit, but only if certain parameters are adhered to:
The notion of an apprentice scheme has considerable merit in my view. In-country directors institutes are ideally placed to take up the challenge of creating a scheme and of actively promoting its uptake amongst the boards of privately-held and publicly-listed companies. They should also consider 'accrediting' graduates (who would have to sit and pass an assessment), to provide a level of confidence to those recruiting directors.
If you have a view on this, as a director of a board that has considered or apprenticed a director, or as someone with an alternative suggestion to solving the inexperience problem, please share it here.
A couple of weeks ago I had the privilege and pleasure of working with 20 company directors on the strategy day of the Institute of Directors' Company Directors Course. Several delegates had a particular interest in how to keep strategy 'alive' in the boardroom. In their experience, boards start with good intentions but they quickly return to what they know best, monitoring and controlling. They agreed that boards are responsible for company performance (which means boards need to make decisions about the future of the business), so boards need to take strategy seriously. But many don't, which suggests that an important questions remains unanswered. How can boards keep the important matter of strategy alive?
I put the question to the group and we had a great discussion. After about 20 minutes of to-ing and fro-ing, the group seemed to settle on four main suggestions, as follows:
These are great suggestions, and they are consistent with my research and experience. They appear to have 'reach' as well, from smaller companies just starting out with boards, right up to publicly-list enterprises. What was most heartening though was the reality check that came at the end of the discussion: many of the delegates agreed that the 'urgent' can and often does get in the way of the 'important'. Consequently, business-as-usual (monitoring and compliance items) can supplant strategy. A strong and vibrant relationship between the chairman and chief executive was thought to be vital, to ensure that the agenda was appropriate; that the reporting was at the right level; and, that the chief executive had the resources to execute on that which they were expected to deliver upon. Notwithstanding such efforts, individual directors need to make a commitment—to themselves and each other—to keep the conversation focussed on strategy, for the sake of the future performance on the company.
Reports emerged today that the next chairman of troubled banker HSBC will be an outsider. If this is what "completely overhauled" means, then HSBC might have just made an inspired decision. However, it is not a slam-dunk. The decision is the first of many that will be required to get the organisation back on the rails and to re-establish much-needed credibility in the marketplace.
Another word of caution: an external chairman is no guarantee of success. Boards needs to be led well, and a high-performance culture and an effective strategy are also crucial elements. But to make the move away from appointing a chairman from amongst the executive team is a very big step in the right direction.
Well done for taking an important step HSBC.
Thoughts on corporate governance, strategy and effective board practice; our place in the world; and, other things that catch my attention.