Did you know that every living creature on Earth has approximately two billion heartbeats to spend over its lifetime (yes, 2,000,000,000)? I never knew that until I read this article recently. Brian Doyle writes so well. He brings science to life. Of heartbeats, he writes:
"You can spend them slowly, like a tortoise and live to be two hundred years old, or you can spend them fast, like a hummingbird, and live to be two years old".
This article set me thinking. How I should spend the rest of my two billion heartbeats? Part of my answer is to continue to help boards govern well. Another is to nurture important relationships.
As a leader, how will you spend the rest of your heartbeats? And what impact do you hope to have?
We live in a fast-paced world, where the only constant seems to be change itself. Nine months ago, messages promoting the latest and greatest scheme (or product or idea) bombarded our senses daily, imploring us to embrace something better. Hope prevailed. Now, with the outbreak and impact of coronavirus, the situation is quite different.
Despite the ebbing and flowing of seasons and circumstances, even the onset of crises, some things remain remarkably constant; stable despite great turbulence and the best intentions of enthusiastic advocates to move things along. The corporate boardroom is one such example.
Earlier this year, during the early days of the coronavirus, I re-read Making it Happen, Sir John Harvey-Jones' reflections on leadership. Harvey-Jones, a successful businessman and industrialist, was perhaps best known for leadership of British firm ICI, culminating in his chairmanship from 1982 to 1987. His insights are timeless; arguably still relevant today, 32 years after they were first written. To illustrate the point, here is a selection of salient comments Harvey-Jones made about boards in 1988:
Do any of these points sound familiar? They probably do, because, sadly, many of Harvey-Jones' observations are still prevalent today. Given the duties of directors, why are some boards still reluctant to embrace change when circumstances change, or a crisis strikes?
Is it time your board took stock, not only of the company's strategy and business model, but of itself?
The professionalisation (sorry, a horrible word) of governance has been a topic of discussion for many years. Some directors, when describing what they do, prepend the adjective form of the word, to indicate their full-time paid work is a [company] director, and to indicate their commitment to 'professional' standards (the implication being that some are not). Others abhor such usage.
Many directors are diligent and highly engaged in their work. So why the felt need to professionalise? Studies of company and board failures reveal a consistent pattern of contributory factors, including hubris and overconfidence among directors; low levels of board-management transparency; lack of a critical attitude, genuine independence, appropriate expertise and relevant knowledge in the boardroom; and, tellingly, low levels of commitment by directors. Consequently, public confidence is mixed.
If the practice of governance is to become highly regarded, standards need to be lifted and applied. But can or should governance (that is, the practice of directing) be elevated to the status of 'profession', as medicine, law and accountancy are? And what, exactly, is a professional director? How is one different from an 'ordinary' director (or any other type of director)? What difference might professionalism make? Are better outcomes any more likely? In considering these questions, let's first define some terms:
Individuals wanting to become a medical doctor, for example, must first successfully complete several years of university-level training, after which they become a trainee intern, are provisionally registered and start to practice. A commitment to the Hippocratic oath is necessary. Doctors are also required to formally register with an approved institution, pass professional member- and fellow-level exams and complete approved professional development (on-going). Usually, a formal disciplinary process is available if an individual is found to have flouted professional standards. Law is similar, and accountancy too. On this measure, it's clear that doctors (and lawyers and accountants) are professionals; stakeholders (patients, clients) can have confidence in their work.
But what of directors and governance? Two observations are relevant. First, almost anyone can become a director, and do so with no training! In most jurisdictions, any person over a specified age (18 years old in New Zealand), who is not an undischarged bankrupt nor is before the courts, may become a director. That's it! There is no mandatory training requirement, nor is membership of a professional body or ongoing professional development necessary. Second, many directors' institutions around the world have, over the past few decades, sought to promote governance as a profession. Their good work has resulted in charters being established, and members being invited to commit to ongoing professional development and to operate in accordance with a code of ethics. But these well-intended efforts have been met with mixed success to date. Optionality seems to be part of the problem. Variable quality training programmes, and ambiguity around the primary purpose of the institution appear to have been contributing factors too.
If governance is to become recognised as a profession, as many have argued is needed, minimum standards need to be instituted, and optionality withdrawn. Prospective directors should be required to complete approved (formal) training and pass exams; serve as an intern; gain (and maintain) formal membership of an approved institution; and commit to continuing professional development. Flawed understandings of the role of the director and what corporate governance is and how it should be practiced need to be corrected too, and the power games, hubris and ineptitude apparent in some boardrooms rectified.
But, in the end, the question of professionalising governance remains contentious. Some experienced directors don't see the need, believing they are competent. Others don't want to be scrutinised. And some directors and observers continue to argue fervently in favour, because they think the likelihood of better outcomes should be much higher.
What do you think?
As a devotee of life-long learning and a student of history, I keep an eye out for ideas and examples to share with boards and directors—in the hope that some might prove useful to help boards lead more effectively, from the boardroom. Amongst the news feeds and magazines that cross my desk (actually, computer screen), this journal often contains thought provoking articles. Recently, I was looking through some older issues and stumbled across this item, which explores effective leadership. The author offers seven 'keys' to effective leadership, as follows (I've taken the liberty of attaching a comment to each—a consideration for boards and directors):
I returned today from two overnight trips (both were to attend board meetings, meet shareholders and discuss various company matters with management). It was great to get out and about again—to sit together around a board table, meet staff and see the businesses operating following the constraints imposed by the Covid-19 lockdown.
While I was away, a Netherlands-based colleague sent a note saying she'd just started reading through Musings, from the beginning. Why someone would go back and read all of my writings since March 2012 is beyond me, but she has chosen to do so. She said that while many writings resonated, one piece in particular stood out as being as relevant today as when it was first written, in 2012.
Amongst other things waiting for my attention [having arrived overnight] was this article, originally posted by Tony Schwartz on the HBR Blog Network. The article set me thinking. Why are we, in this so-called modern age of productivity, so busy trying to fit so much in to our lives? We use electronic diaries to keep track and save time, but they've come to rule our lives. We seem to be constantly running; going faster, but getting nowhere.
Chantal's comment, and my subsequent re-reading of this piece, set me thinking once again about the impact of speed and busyness on decision quality.
How can any director make effective contributions in the boardroom if they are so busy, or moving so quickly, that they do not have time to consider the wider context? The prospect of an electronically-enabled world sounds enticing to many. But is it built on a solid foundation? Are board decisions any better than before?
Directors owe a duty of care to ensure the enduring success of the company governed. For that, they need to create space to think deeply and critically about longer-term options. They ignore this maxim at their peril.
Earlier this week, I had the privilege of framing a discussion on board decision-making with a group of board directors and Digoshen Impact Partners. (Digoshen is a global learning platform to empower experienced and aspiring directors.) The following comments summarise the key points mentioned during this week's session.
At the core, the board of director's main job is to ensure the performance of the enterprise it governs. For that, the board needs to consider information, ask questions and make decisions, strategic decisions. This sounds straightforward. But many boards struggle; and more so in a highly-dynamic environment. For example:
Given these research findings, it's little wonder effectiveness is low. The seemingly unending trail of missteps and company failures tells a sorry story. But boards have options; they hold the ultimate decision-making power and, therefore, are by no means powerless. Boards intent on achieving high levels of decision effectiveness may wish to embrace the following suggestions (discussed during the session):
One final point. Boards are social groups that operate within a stratified social setting, the company and more broadly the wider marketplace. Thus, the actions and outcomes that follow are contingent on many external factors. Things can (and do) change quickly. Therefore, boards need to keep their eyes open, to ensure they have contextually relevant information to hand to make an informed decision; and to remain diligent after the decision, to ensure the expected benefits of the decision are in fact realised.
This musing is based on a session summary I co-authored (original posted on the Digoshen website).
Last week, Scott Arrol, CEO of NZHIT (New Zealand's peak body for those involved the digital health sector), got in touch to ask a few questions about the contribution of boards during times of crisis—a topical subject! The primary challenge for boards in such times is working out how to respond. The playbook that may have served well in the past is, probably, of little use now that the operating context has been flipped on its head. Despite this, the board remains responsible for business performance, so respond it must.
During our conversation (which was recorded, see below), we touched on the following points:
If you'd like to explore any of these or related points further, please get in touch.
The global crisis brought about by COVID19 has precipitated a range of reactions and emotional responses. These have included fear (of catching the virus, becoming very sick or even losing life); frustration (that civil liberties have been withdrawn); anger (the prospect of high levels of state control after the immediate crisis has passed); praise (the selfless actions of first responders and healthcare professionals); disappointment (of not being able to spend time with loved ones); beatification (of some political leaders); confusion (about the conflicting official guidance); and more besides. Inherent biases are also on display, as people turn to social media to express themselves (or react to what others have written). Some have supported the government's actions and public health responses; others have been highly critical, even vitriolic.
It's perfectly natural for people to react to what they read and hear about the situation and the uncertainty foisted upon them—and to be curious about the motivations of leaders and what the future might hold.
In times of great crisis (when chaos tends to reign), the most important priority for a leader (board of directors, executive team, community leaders or the government) is to re-establish a sense of stability and order, noting the fine line between providing leadership and imposing one's will.
Effective leaders tend to roll their sleeves up, identify options, openly encourage alternative perspectives, make decisions based on best-available data and assumptions thought valid at the time of the decision, and explain why decisions have been taken. But as the situation develops—and it will, both naturally and in response to various interventions—progress and data need to be reviewed. Effective leaders display an openness to reverse or amend earlier decisions promptly if new data do not conform to a priori assumptions. Transparency and accountability are both crucial to maintain the confidence and support of stakeholders.
But effective leaders also look beyond the immediate crisis. They ask questions to discover what the future might hold, and whether the crisis presents an opportunity to do things differently. But they don't pursue change for change sake. Over the past two or three weeks, a bevy of visions of what a post-COVID19 world could or should look like have been published by think-tank groups; futurists; independent consultants; journalists; social media commentators; self-styled experts; company leaders and other pundits. Amongst those shared to date, 'digital transformation'; 'locking in new ways of working'; 'a post-office world'; 'the end of globalisation'; 'balanced capitalism'; 'a more inclusive society' and other similar phrases have featured prominently. Some of the proposals I have seen are coherent and merit further investigation; others are little more than bias-laden and thinly-veiled attempts to influence public opinion in favour the author's favoured ideology. Hopefully, political leaders have been considering options to rebuild the economy and social fabric too, but these are yet to be revealed.
With so many options (and many more to come, no doubt), business, political and community leaders face a daunting challenge: of threshing the wheat from the chaff, and making strategically-important decisions in the best interests of others, not self. To decide where and how to move next, in the midst of great ambiguity and uncertainty, is not for the faint-hearted. Wisdom and maturity are invaluable capabilities in this context.
Many tools and frameworks are now available to help leaders make sense of a multiplicity of options, and to respond well given the prevailing context. The Cynefin Framework is worthy of consideration. (Hat-tip to a Netherlands-based colleague who reminded me of it recently.)
Regardless of which approach or framework you use, high-level sense-making and systems thinking expertise is vital. Heterodox perspectives are to be encouraged too. Without these, leaders run the risk of becoming introspective, leaning in on natural biases or, worse, preferred ideologies. Also, great care must be exercised to ensure intended visions are made plain, strategies are coherent and decisions are evidence-based. If such care is not taken, those concerned by what they deem to be inappropriate experimentation or investigation might bite back. Curiosity killed the cat, after all.
The COVID19-induced crisis presents leaders (politicians, boards of directors, community leaders) with a golden opportunity to take stock and, having thought carefully, make decisions in the best interests of the constituency, company, community they serve. Effective decision-making in chaotic situations is far from straightforward, but our future prosperity depends on it.
The unexpected outbreak and spread of Covid-19 early this year has had a seismic effect on the lives and well being of people, around the world. Politicians and government officials have activated crisis response plans (some more quickly and effectively than others) and business leaders have reached for their continuity plans. Amongst the turbulence, little if anything is clear—except that SARS-CoV-2 has our attention.
Horizons have shortened, and most if not all resources have been diverted to deal with the situation. This is reasonable, but it also exposes the company to a significant risk. Business leaders (especially boards) need to keep one eye on the future, because the crisis will eventually pass. When it does, companies need to be ready to 'go' in the post-crisis environment, lest they be outgunned by others.
The most pressing questions for boards as they look to the future relate to the wider operating context, the answers of which inform strategic choices.
As boards start to work through these and other related questions, careful judgement (wisdom and maturity) is needed, to both balance competing interests (resourcing the crisis v. strategising the future) and to avoid traps that have the potential to stymie the company's recovery. Here are three pitfalls that can entrap boards:
The temptations to look just ahead; embrace detail; mitigate all risks; confuse strategy and tactics; conflate the roles of governance and management; and be highly optimistic are very real—more than many would care to admit. But they are by no means insurmountable.
Boards intent on ensuring the company is well-positioned to emerge from a crisis intact know that high quality steerage and guidance is vital: a clear sense of purpose (reason for being), a coherent and appropriately resourced strategy that is relevant to the circumstances, a dedicated team and effective oversight. They also know that this principle holds regardless of the company's size, sector or span of operations.
A much brighter future awaits those companies that do not lose sight of the bigger picture as they work through the mire towards solid ground.
One of the perennial challenges boards of directors need to deal with concerns boundaries—the question of how to govern effectively without stepping over the 'line' into management, in particular.
The theory is easy: the board's governance role includes setting direction (purpose, strategy) and boundaries (policy), allocating resources and holding management to account for results in accordance with specified parameters. The role of the manager is to run the company within specified parameters and report progress. The board is also responsible for providing an overall account to shareholders and legitimate stakeholders. And there should be a clear separation between the parties. This seems remarkably straightforward.
But in practice, the going is often far from straightforward. Divisions of labour may be unclear or, worse, assumed. And, contrary to institutional 'best practice' guidance, the board and management actually need to be proximate if decisions are to be informed and management is to action them well. The challenge is greater again if individuals hold director and manager roles, as is often the case in smaller, privately-held companies. Inevitably, opportunities for confusion surface, pressure on resources mounts, and progress towards overall goals may stall (assuming a goal has been determined). Yet board duties remain, undiminished.
In times of crisis, the situation is complicated by matters well outside the board's control, and time is of the essence. Understandably, the board's attention moves from oversight and strategic opportunities, to the very short-term—stabilising the company and protecting assets. The decision cycle speeds up, necessarily, as new information comes to hand. Previous decisions may need to be retracted and changed. All of this is quite normal and appropriate in crisis situations. However, if the board goes further and gets directly involved company operations including instructing staff, specifying how things should be done and even doing them, then it is stepping well across the ‘line’ and into management. This is overreach, and it can be dangerous because it undermines the foundations that underpin strong board–management interaction. The casualties are many and varied, but three of more common ones are:
The resultant (negative) impact on company performance could be significant. Yet these casualties can be avoided, if the board chooses to work collegially with management to get through the crisis. For this, trust is crucial. The board should also ensure a well-defined division of labour is in place, and it must delegate well with clear lines of accountability, and maintain strong and open lines of communication.
The parallels for governments and citizens are stark. In times of crisis, governments often use powers such as declaring a state of emergency and suspending civil liberties while order is being restored. If these decisions are taken, as has happened in many countries following the COVID-19 outbreak, they need to be accompanied by self-evident measures such as 'no gatherings of greater than 100 people', or 'maintain a 2m separation from any other person'. If people are clear about what is required, and why, they can make adjustments to fit within the requirements. However, if petty and nonsensical procedural rules are also introduced (how far one may drive, alone, for example), the linkage of trust breaks and some undesirable consequences may follow. In extreme cases, the people may even revolt.
The temptation to overreach is great. Power is an enticing thing, after all. But politicians, like boards, must avoid the temptation to overreach if at all possible. If the board (government) focuses on 'what' is needed and 'why', and management (the people) concentrates on 'how', the likelihood of a great outcome is much higher.
Thoughts on corporate governance, strategy and effective board practice; our place in the world; and, other things that catch my attention.