I get asked this question two or three times most months. Like any social institution, companies are complex and their success is subject to many variables. As far as I am aware, there are no cookie-cutter models that reliably deliver "point and shoot" type results. However, there are things company owners can do to increase the chance that their company will be successful. One of these is to establish a governance board. I'd like to suggest that a first board (or any board for that matter) can offer considerable value in three areas:
These comments are offered in the context of owners of smaller companies becoming comfortable to "let go"—to open the financial records, to reveal the inner workings of the company, and to invite others to contribute to the generation of ideas and strategic options. These are all big hurdles for many owners. Yet they are hurdles which, if vaulted, can have big payoffs, through increased performance and a more sustainable future.
How does one get started down this path? Talking to people with experience is the best option in my opinion. I am a strong advocate of professional bodies and organised networking groups. They are a good source of information, real-life stories, and, importantly, potential directors. Many of these groups schedule events where more experienced directors, researchers, business owners and CEOs to share case studies (good and bad), to help inform owners that might be considering an external board.
One final point. As an owner or shareholder you hold the control! You decide whether to establish a board or not, and you appoint the directors. And if things don't work as expected, you can (and should!) make changes.
How confident are you when it comes to grammar?
If you struggle with grammar, you may well be doing yourself a gross disservice. Kyle Wiens, lays it on the line in this article. He won't hire people with sloppy grammar. Whether you are looking for a job, working on a report, or simply tapping out an email communique, poor grammar may see your goal missed or your message overlooked.
How well to do contribute in your work environment? Most of us rate ourselves fairly highly, but we all have blind spots. Today, Jessica Hagy offered some simple truths to help us lift our game. She suggested we all need six people around us, to challenge and encourage us to perform well.
Thanks Jessica, your thoughts were a timely reminder for me as I continue to wrestle with my doctoral research.
The role the judicial system plays in the governance ecosystem—dealing with fraudulent directors, company failures and company liquidations—eats me up. So much value is lost through inappropriate boardroom behaviours and decisions. And shareholders are left to pick up the pieces (and in far too many cases, bury them). Commonsense tells us that it is far better to avoid danger than pick up the pieces afterwards. But how can and should boards improve their performance to avoid fraud or failure events?
Carly Fiorina, an experienced director and previously CEO of ICT giant HP, wrote an interesting piece today. You can read it here. She made some insightful observations:
Helpfully, she also offered five antidotes:
While Carly's comments reflect her US-centric experience, most of the observations and antidotes are equally applicable in other countries, including New Zealand. Notice most of Carly's antidotes relate to process and behaviour, and not to director competence (competence is addressed in antidote one only). Carly's call to hold boards accountable is on the money—because boards hold the ultimate responsibility for the performance of the organisation. In my experience, the challenge most boards face in this regard is one of implementation. How does one implement an effective governance framework that improves the prospect of good company performance and holds directors accountable? The recently updated The Four Pillars of Governance Best Practice (published by the Institute of Directors in New Zealand) provides a very useful starting point. This document provides useful best practice guidance and a clear code of practice—all aimed at helping directors and boards avoid the sort of carnage (and the expensive involvement of the judicial ecosystem) that we read about far too often in the newspapers. I commend it to all directors and CEOs.
Are you a reader? I used to be. But university intervened. Thirty years ago, after reading my way through university (text books, journals and articles—not novels or anything of general interest), I lost my appetite for reading. When asked "What are you reading?", I'd answer with "Nothing, university cured me." After plowing my way through heavy material for four years, I had reached the point where I simply did not want to pick up anything longer than an article. I still read a little, but my diet was based entirely on articles published in the popular press (Times, National Geographic, The Economist, HBR), and material I needed to read for work.
A few years ago, after a long hiatus, a switch flipped. I rediscovered reading again—reading for pleasure and relaxation, that is. I can't recall the time, the place or the exact trigger. Like earlier in my life, I still read to learn. But now I also read to relax. Here's a selection of titles I have read recently:
I tend to read about times, people and places—history and biography. I've discovered that, by reading this sort of material, I relax and learn at the same time. Articles like this motivate me. Reading about the past helps me understand today's world.
If you read, I'd be interested to hear your story.
Frank Partnoy posted a great article on the HBR Blog Network today.
I've heard it said many times in business circles that "velocity wins"—meaning the faster we move and the faster we make decisions, the better. Partnoy disagrees. He argues that speed is killing our decisions. If we get caught up in a fast decision cycle, where speed (of decision-making) is everything, we risk making poor decisions and suffering the consequences as a result. Partnoy commended the decision-making framework developed by John Boyd, fighter pilot and military strategist, as a means of improving decision quality. The framework is called OODA (Observe, Orient, Decide, Act).
In my opinion, OODA has considerable applicability in business. Boyd asserted that the ultimate goal is to act fast, but not necessarily first. I agree. Making smart decisions is more important than outright speed.
The debate surrounding the benefit of women on boards is starting to heat up. Eight days ago, NZX announced it's decision to require gender diversity reporting for all publicly listed boards. Yesterday, an article by Richard Baker asserted that "gender diversity is not essential to the good running of major companies". Today, Denis Mowbray challenged the NZX proposal. He said it is "intellectually lazy" to isolate a single characteristic (like gender).
Forty-five years ago, on 10 July 1967, New Zealand adopted decimal currency. The then Finance Minister, Robert Muldoon, championed the change from pounds, shillings and pence, to dollars and cents. Forty-five years on, we take decimal currency for granted. Yet at the time, many older people struggled to make the change. After all, they had had a lifetime of operating within a completely different paradigm. This set me wondering...
The New Zealand Stock Exchange has just decided to implement a gender diversity reporting rule for all publicly listed companies. The NZX announcement has been reported in several business papers today including NZHerald and DominionPost. The decision requires companies to report the gender composition of their board and senior executive and, subject to FMA approval, will become effective on 31 December 2012.
Thoughts on corporate governance, strategy and effective board practice; our place in the world; and, other things that catch my attention.