Have you ever stopped to wonder why so many companies fail to realise the potential they aspire to?

When I speak with directors, the desire to operate at high levels of performance is palpable. In my experience, most say they aspire to have a great impact. But when one looks more closely, a great many boards struggle to break the shackles of average: they are constrained by confusion over the role of the board, impaired by dysfunction within the boardroom, and/or expectations are misaligned.

A recent survey (conducted by PwC) highlights the characteristics of high-performing boards:

This is quite a list! Yes, it is. But most of these characteristics are consistent with the findings from ground-breaking board research conducted over a decade ago. That research concluded that if the board is to have any impact beyond the boardroom (especially on firm performance), three things matter: 

Board structure and composition is relatively less important, to the point of being insignificant. This finding (now known as the Strategic Governance Framework, see this article for a summary) emerged from a peer-reviewed long-term observation study of boards going about their work—one of a small handful conducted to date. As with studies conducted by the late Jane Goodall, my study sought to get as close as possible to the subject of interest (the board) to observe them in their 'native' habitat. That meant direct observations, for the board only exists when the directors meet.

The truth, they say, is a good thing, for it will set you free. This seems reasonable, even self-evident to many. But what is truth? Is it a thing (a fact) or a process? Is it deterministic or does it emerge? Is it absolute or relative? And, in a social context, is truth even possible or desirable?

The pursuit of truth conjures the notion of a deterministic 'answer' to a question or problem, without worrying too much about (or even considering) the context within which the truth claim exists. Consider darkness. Does being unable to read a book on the patio at twilight mean it is dark? How might this expression of darkness compare with the darkness inside a sealed cavity into which light cannot penetrate? And what of degrees of truth? If just one instance is discovered to be false, does that mean the entire truth claim needs to be set aside? Complicating matters, something may be 'true' but unpalatable, such as, genocide or rotten eggs. 

Now, consider health. What does it mean to be healthy? For some, maintaining a balanced diet and sleep pattern is sufficient. For others, health involves strenuous exercise and physical fitness. Yet others pursue mental health, a sound mind and great relationships. Is the threshold one of having food, shelter and security; or is a higher order of fulfilment necessary to be healthy? 

Selecting between two tough options is never easy. The 'least bad' option doesn't sit well in many cases. But as in life, decisions in organisations need to be made, more so in boardrooms. If boards are to provide effective steerage and guidance in pursuit of an agreed outcome, they need to roll their sleeves up, understand the options and make a decision. But with what reference point to the fore? Should boards prioritise being 'right' (legalistic, truth), or should they select options more likely to lead to sustainable outcomes (organisational health)?  ​If  boards are to govern with impact, the high road is, in most cases, the better option.

Since time immemorial, man has sought to explore: natural curiosity has led to many discoveries, of previously unknown lands, flora and fauna, and more besides. Innovations and inventions too; discoveries enabling further exploration, and on it goes. Through the arc of history, exploration and discovery has been based upon empirical techniques—going and having a look.

About six decades ago, Jane Goodall put this approach to work as part of her research to learn more about chimpanzees. Her assessment was, straightforwardly, that if reliable understandings of how chimpanzees socialise were to be achieved, they needed to be watched, directly, over an extended period, as difficult as that might be. The extended period is necessary because behaviours change when a new actor arrives. Thus, Goodall’s study could not begin in earnest until the chimps became more familiar with her and reverted to behavioural patterns thought natural. When behaviours reverted, as Goodall thought they might, several new discoveries not previously known were made.

The approach Goodall used, and her discoveries, demonstrated the high value of longitudinal ethnographic techniques when studying social groups and their behaviours. And yet, while this has been understood for decades, centuries even, its application to my field—boards—is rare. Instead, since the dawn of board research, the dominant paradigm has been to collect data about directors, the composition of the board and other data, from outside the boardroom, typically from public databases, interviews and surveys. Such approaches have been deemed acceptable because researchers have found it very difficult to enter the boardroom. Given the only place the board and its work actually exists is in the boardroom, and that the board is a social group, surely the gold standard must be to conduct long-term studies of boards in session (through direct and non-participatory observation), as Goodall studied chimpanzees?

This issue, of using appropriate techniques that explore the subject of interest, not a proxy, was made plain by an ex-military colleague recently; his pertinent remark was, simply, “The map is not the terrain.” What seems to be the case (on the map) may not be the case (in reality). The underlying message was confronting: if you want to really understand, go there, gain first-hand knowledge. And so it is with board research. If we really want to understand how boards work, and how boards actually make decisions and influence performance, not how directors say they do when they are interviewed, watch them over an extended period. Then, possibly, you might be able discern what happens; how directors act and interact; and, even, spot associations between a strategic decision and some subsequent change in organisational performance. The findings will be contingent, of course, because the group is social, the situation complex, and external influences are many and varied.

To date, fewer than a dozen longitudinal observation studies, of boards going about their work, have been published. And, somewhat awkwardly, the reported findings present a different perspective from that commonly asserted by others informed by research conducted away from the boardroom: The capability of directors (what they bring), the activity of the board (what it does), and behaviour (how directors act and interact), appears to be far more important than the structure or composition of the board.

Now, as I wait to board a flight, for yet another international trip to work with boards, my colleague’s comment is ringing in my ear. And with it, a question, “What guidance will you rely on, given the importance of governing with impact?”

In recent times, diversity, equity and inclusion (often, DEI) has become topical in many spheres of business, social, organisational and political life, and boardrooms are no exception. The moot is that increased in-group diversity directly enhances organisational (project, team) performance. While this remains unproven, expectations are running high, and there are no signs they are abating.

When working across cultures, seek first to understand. Breathe. Invest time and effort to learn how others think; what drives them; how they feel; how their mind works; how decisions are made; and whatever else seems relevant. And, what is more:

The group leader (board chair) has an incredibly important role in this, to draw everyone into the conversation; acknowledge difference, but harness it for the common good.

Finally, a note: The techniques listed here are simply suggestions. But, in my experience, they can be incredibly powerful catalysts upon which relationships can develop and trust can be built. Ultimately, if boards are to have any hope of governing with impact, a sound understanding of 'who' is in the room, and 'how' they think, act and contribute is necessary. Invest time and effort, it'll pay off.​

Several times in the past year, I have been asked for advice, even to intervene, in situations where relationships between board members have become strained, or shareholders have fallen out—with each other or with board members—over differing expectations around returns and/or succession. Each situation has been both complex and demanding, for they involve people and human emotion.

The following vignettes are illustrative of the types of things that can go wrong and the ensuing behaviours of various actors:

Of the directors you know, how many possess the wisdom and maturity to act diligently, in the best interests of the company?

Boards, and an oft-mentioned but mysterious concept—governance—are topical. Daily, it seems, these terms feature in our newspapers and on social media, usually because something has gone wrong. And when it does, ​the chattering class is not slow to react. Typically, the targets of their comments are the board and management of the organisation.  That seemingly strong organisations suffer significant missteps—or even, fail outright—on a fairly regular basis is worrisome; the societal and economic consequences are not insignificant. What can be done?

Recently, the inimitable Mark Banicevich invited me to discuss boardroom success and failure, and to offer guidance that boards wanting to lift their game may wish to consider. 

The end of 2023 is nigh; consequently, minds have turned to end-of-year celebrations, various secular and religious festivals, and, inevitably, reflections.

As I sit back, in these final hours of the 'business' year, I have found myself pondering 'reach'. This, a response to a question from a friend who, knowing of my recent trip to Kenya, wanted to know how many countries I had visited in 2023. When I checked back, this is what I discovered:

Superficially, this sounds like a busy year. And it has been. But, I hasten to add these data are neither targets nor badges of honour. They are, simply, footprints: evidence of my travels as I have sought to help boards govern with impact over the past year.

I have just arrived back in New Zealand, from ten days in the UK and Europe. My meetings with directors, advisors, academics, students and directors’ institutions had two primary objectives: to listen and to share. The listening aspect was to gain firsthand knowledge of issues and opportunities; the sharing aspect to provide updates on the craft of board work and my experiences as a practicing director.

 Learnings (a few immediate observations, in no particular order):

Amongst it all, there were some gems:

Several followup visits are now being planned, to advise, assess, educate and speak on topical board and organisational performance matters. If you want to discuss a matter of interest, or check my availability to assist, contact me for a confidential, obligation-free discussion.

And with little more than a blink, January 2023 is, nearly, done. January is, for me, a time to relax, reflect on the year past, spend time with family and friends, read and get ready for what lies ahead. 

After a good break, I not only feel ready for what lies ahead, but excited at the opportunity to help boards and directors, academics and regulators grapple with some complex issues. The first three trips for the year are scheduled, as below—and planning is already underway for several more in the months to come.

While events and engagements are being loaded into the diary daily, some gaps remain, mainly in Singapore and England. So, if you want to take advantage of me being in your neighbourhood, best to get in touch soon! If you want to talk or meet, but the timing doesn't suit, let me know anyway—there will be opportunities later in the year.

Today marks the beginning of a lull following a busy programme of international and domestic commitments since early February. Over a 110-day period, I have spent time in Australia (four times), England (twice), the US (twice), Germany (twice), Ireland, Sweden and Lithuania—and at home in New Zealand; interacting with over 520 directors, chairs and chief executives from 19 countries. Formal and informal discussions at conferences, seminars, masterclass sessions, education workshops, dinners, advisory engagements and board meetings were instructive to understanding what's currently top-of-mind for boards around the world. The following notes are a brief summation of my observations. I hope you find them useful.

Diversity and inclusion: These topics continue to dominate governance discussions in many countries. But, and noticeably, the discourse has matured somewhat over the last six months. The frequency with which the rather blunt (and often politically-motivated) instruments of gender and quota is mentioned is starting to subside, as directors and nomination committees start to realise the importance of diverse perspectives and options to inform strategic thinking and strategising. Long may this continue, as board effectiveness is dependent on what boards do, not what they look like.

Big data and AI: What a hot topic! Globally, boards are being encouraged by, inter alia, futurists, academics and consultants to get on board (if you'll excuse the pun) with the promise that developments in this area will change the face of decision-making and improve corporate governance. Some assert that these developments will obviate the need for board of directors in just a few years. The directors I spoke with agree that these tools can help managers make sense of complex data to produce information, even knowledge. But these same directors have significant reservations when it comes to strategic decision-making. Automated systems are poor substitutes for humans when it comes to making sense of (even recognising) contextual nuances, non-verbal cues and other subtleties. Unless and until this changes, the likelihood that boards will continue to be comprised of real people engaged in meaningful discussion remains high.

Corporate governance codes: The number of corporate governance codes introduced in markets has been steadily rising over the last decade. Most western nations, and a growing number of Asian and developing nations, have implemented codes to supplement statutory arrangements. Many directors and institutions around the world continue to look to proclamations that the UK is the vanguard when it comes to corporate governance thinking and related guidance: the recently-updated UK corporate governance and stewardship codes are held up as evidence of good practice. While the quality of board work in the UK has improved over the last decade, a strong compliance focus continues the pervade director thinking—across the business community in the UK and beyond. The reason is stark: codes are little more than rulebooks. Further, rules don't drive performance, they define boundaries. The more time boards spend either complying with the rules or finding ways to get around them, the less time is left for what actually matters, company performance. In many discussions over the past few months, I've pointed people to the ground-breaking work of contributors such as Bob Tricker, Sir Adrian Cadbury and Bob Garratt. These doyens provided much-needed impetus to help boards understand their responsibility for company performance. The emergent opportunity for regulators and directors' institutions is to consider alternative responses to ineptitude and malfeasance: instead of creating more rules all the time, why not hold boards to account to the existing statutes, most of which seem to be eminently suitable?

Best practice: Many individual directors (and boards collectively) are starting to move beyond 'best practice' as an aspirational goal. Further, directors and boards are demanding to hear educators and thinkers who are also practicing directors, not trainers delivering off-the-shelf courses. Context is everything. The evidence? When a director asks to explore the difference between theory and practice you know something in his prior experience has missed the mark. Practising directors know that the board is a complex and socially-dynamic entity, and that the operational environment is far from static. Directors' institutes, consulting firms and trainers need to stake stock and move beyond definitive 'best practice' claims, lest they be left behind and become monuments to irrelevance. Enough said.

Governance remains a fashionable topic: ​If I had a dollar every time I've heard 'governance' promoted as a career in recent months, or the term used in discussions (including, sadly, often inappropriately), I would be really well off. But the act of invoking a term during a discussion is no panacea to whatever situation is being discussed. More capable directors are needed to contribute to the effective governance of enterprises, of that I am sure. But the established pattern of selecting directors from a pool of seemingly successful executives—as if a reward—is folly. The findings from a growing number of failure studies from around the world attest to this. The role of a director is quite different from that of a manager or executive. Managers and executives have hierarchical authority and decisions are made by individuals. In contrast, directors lead by influence and decisions are always collective. The challenge for those aspiring to receive a board appointment is to set their managerial mindset aside, to enable a more strategic mindset and commitment to the tenet of collective responsibility to emerge. 

Standing back from these interactions, the board landscape seems troubled. But I remain hopeful. Progress is being made (albeit more slowly than many would wish) and a pattern is slowly emerging. Increasing numbers of directors are acknowledging that the board's primary role is to ensure performance goals are achieved, and that the appropriate motivation for effective boardroom contributions is service, not self.