This is the second update of several to summarise observations from the 33rd Governance Institute of Australia National Conference being held in Sydney this week. You can read the first update (opening session) here. This update includes observations from the late morning and early afternoon sessions. The question explored by the panel in the late morning session was "Creating a safe harbour: Beyond the business judgement rule". Judith Fox (GIA Policy Director), Prof. Pamela Hanrahan (UNSW Business School) and John Stanhope (Chairman, Australia Post) discussed proposed changes to company law (safe harbour provisions). The panel noted that the establishment of a 'safe harbour' clause might lead to inappropriate incentives for directors and executives. Whether this possibility is any better or worse than the current situation (of boards providing little if any guidance in their forward looking statements) was discussed at length. The question was not resolved explicitly. However, the panel did agree that it is reasonable to expect boards to provide shareholders with 'fair' and 'reasonable' guidance' to indicate strategic intent, so that shareholders could make informed decisions about their ongoing interest in holding shares and director selections. The early afternoon session spoke to emerging trends that directors and boards need to be aware of if they are to contribute meaningfully to the future performance of the company. Specifically, the topics were the Internet of Things and Innovation. Mike Briers grabbed the audience's attention by demonstrating how pervasive the IoT phenomenon is becoming: the level of connectedness and quantity of data generated as a result of millions of connected devices is expected to dwarf every other sector of commerce and life except, perhaps, astronomy. The challenge that IoT presents for boards relates entirely to strategy. How can or should boards respond to the ever advancing wave of technological innovations? What impact might any of these innovations have on current business models and markets? Boards need to create space in their meetings (and perhaps add meetings to the calendar) to grapple with these questions directly. Briers suggested that the rate of innovation is occurring at such a pace and complexity that boards and executives will struggle to understand, let alone respond well. Therefore, boards need to seek symbiotic relationships with other companies and experts. Collaboration is no longer an option. Companies should also prioritise investments in 'complex integration solutions' over behemoth systems. Amongst the turmoil, one thing was clear: if companies are not actively investigating emerging trends and technologies including the Internet of Things (amongst others) they risk becoming irrelevant to their current and future customers.
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Earlier this year (September), I had the privilege of attending the Organisations with Purpose conference, an event that sought to address questions about why organisations exist—their reason for being. The two-day event, which was jointly organised by London Business School and Blueprint for Better Business, was well-attended by some leading academic thinkers and, significantly, a few influential business leaders as well. An overriding theme pervaded the conference: Companies with a single, clearly defined and communicated purpose tend to perform better than those that do not. To hear others summarising evidence-based research and case studies on a topic that I've been interested in for some years was great. It filled in several gaps in my understanding. A summary of the conference proceedings is now available. I commend them to you. The high point of the conference was the Blueprint for Better Business framework, a model to guide decision-making in purpose-driven businesses. It was compelling, to the extent that I've registered to attend a two-day immersion workshop, ahead of introducing the framework to companies in Australasia from early 2017.
The 13th edition of the Corporate Governance Workshop convened by the European Institute of Advanced Studies in Management (EIASM) was hosted by SDA Bocconi in Milano, Italy. Approximately 50 leading thinkers and researchers from over 20 countries gathered to explore emerging trends in the fields of board practice and corporate governance. Nearly 50 presentations were accepted onto the two-day programme. Highlights from the second day follow, together with some overall reflections (highlights from the first day are posted in a separate summary):
Overall, the conference provided a wonderful forum for leading board and corporate governance researchers from around the world (especially Europe, but also North America and Asia) to get together to share ideas and discuss emerging trends. The collaboration produced some wonderful debates; strong agreement that less is known about corporate governance than what most researchers and consultants (especially) claim to know; and, an invitation to return in 2017 (which I will probably accept). However, there was one notable disappointment: mine was the only presentation informed by observations of what boards actually do. Researchers and consultants need to get off their backsides and get inside boardrooms if they are to truly understand corporate governance and provide credible recommendations of what boards should do in practice. More personally, I was approached by three different people to collaborate on a few different projects, which was gratifying. Two approaches in particular led to further exchanges over lunch and dinner: one to synthesise the learning from my board observation studies (the board's influence on firm performance) with research into psychological factors and group decision-making, and the other to dig into the performance of local government councils (this second project is of special relevance given an independent assessment project I'm currently involved with). Where these will lead remains to be determined. However the fact that people around the world are starting to realise that we need to understand how boards can be a source of value creation (because this relationship is simply not understood now, despite what most consultants claim) was heartening. I look forward to the journey in the coming months, including return visits to UK, Finland, The Netherlands and Italy in early 2017. If you wish to know more about the conference; receive papers on topics of interest; or, pose a question or commission some applied research, please get in touch. I'd be delighted to hear from you and to serve you.
The challenge of influencing business performance from the boardroom is one that should not be taken lightly. Recently, I was invited by MILE (Medinah Institute of Leadership and Entrepreneurship) to discuss this topic with an international audience, in a webinar format. While the audience was primarily from the Gulf States, the comments have widespread applicability. Though biassed(!), I commend the webinar recording to you. If, having watched it, you would like to discuss any aspect of the presentation including implications for your board; challenge any claims; or, arrange an similar presentation to your colleagues, please get in touch. I am at your service. Last week, I had the privilege of spending an entire day with the directors and executives of a highly-regarded architectural practice. The large practice has developed a great reputation over several decades for creating 'meaningful' architecture—buildings and spaces that 'fit' the surrounding environment, and that people enjoy living and working in. The job at hand was to facilitate a strategy development workshop, working with eleven capable and motivated men and women to select a course to guide the further growth and development of the practice. In essence, the day was about looking up and looking out. Using the StratCross framework and summaries of PESTEL and SWOT analyses completed prior to the workshop, we got stuck in. Before we knew it, the time was 4:30pm and the intense but enjoyable workshop was over. As we packed up, several directors indicated that the workshop had been "hugely valuable", "challenging" and "galvanising", and that they were looking forward to seeing the fruits of their labour. On the way home, my thoughts wandered, reflecting on the day and why it had been so much fun. Here's a few observations that came to mind. You may find useful for your next retreat or planning session:
So, overall it was a good day, with some observations to boot. While most attendees came away hopeful of an even brighter future for the practice, they also realised that, despite a coherent strategy (to be written up in the coming days) and a commitment to execution once approved, success is not automatic—unlike the arrows in the picture imply. A realistic way to end the day.
Recently, I had the privilege of addressing several groups of directors and executives in Brisbane, Australia on the topic of emerging governance trends. Over 200 directors of family and privately-held companies attended breakfast and dinner events hosted by TCB Solutions, Hanrick Curran and AMPLiFi Governance. The talks and the panel discussion that followed provided a candid summary of some of the challenges boards face and offered suggestions to guide boards intent on achieving high performance and good returns to shareholders. The dinner event was recorded. Clips of my talk (in two parts) and the panel discussion (in three parts) that followed are now available: If you have a question or a comment arising from these clips, or want to discuss the possibility of me speaking at an event or sharing ideas directly with your board, please get in touch. I'd be delighted to hear from you.
Several months ago, the editors of Ethical Boardroom contacted me to write another article for their magazine. Previously, I'd written articles on governance issues in New Zealand and Australia and accountability; and, provided a commentary piece on internships. Given a free reign (within the bounds of editorial deadlines), I agreed to share some observations about the boards of social enterprises and, in particular, explore board effectiveness—all based on recent experiences in boardrooms and with members of social enterprise boards. The article is now available here. The commentary, which has generated considerable interest and feedback—including amongst directors and boards of profit-seeking companies—suggests that the 'secret' of effective board contributions lies in board members looking ahead and working together towards an agreed goal. My doctoral research bears this out: the board's ability to exert influence from and beyond the boardroom (including over firm performance) seems to be contingent on the board maintaining a close involvement in strategic management, and a few (I found five) characteristics of directors and social interactions being expressed as the board does so. If the large number of people that have already seen the article and asked questions is any indication, the topics of board effectiveness and sustainable business performance are of great interest. The feedback has been gratifying. Thank you. If you want to learn more about board effectiveness; the underlying 'performance' characteristics of boards; or, how to embrace a high performance board environment, please get in touch.
Guest blog: Lloyd Russell (TCB Solutions, Brisbane, Australia) Family-owned businesses constitute a special category of company—made different by the familial influence that often pervades decision-making and operations. Consequently, directing within this environment can be challenging, especially for external directors. The challenges associated with family influence can be mitigated somewhat if the family members know why they might want to recruit external directors, and the purpose of the family business is defined and agreed. Each director needs to understand the business of the business well if contributions are to be effective. This does not mean that directors need to be fonts of technical knowledge. Rather, they need to understand the business’ strategy, supply chain, business model, core competencies and operational mechanisms. The question of what family members want from the business and the board, and especially from external directors needs to be answered. In some cases, the family simply wants added expertise and independent contributions in pursuit of agreed performance goals. However, it is more common for expectations to ‘creep’ beyond this because of the inherent complexities of the three overlapping frames of family business: family, business and ownership. As a consequence, external directors can find themselves snared in all manner of (often unstated) expectations beyond the boardroom. Families considering adding one or more external directors need to become ‘board ready’. This is where sound rational discussion often meets emotional attachment and passion! As an accredited family business advisor I take significant time to understand the dynamics and prepare the family for this important step, which is often a massive leap of faith for many families. A good rule of thumb when writing director profiles is to think in terms of 40% IQ, 50% EQ and 10% SQ. Why? In addition to being technically competent, external directors need to be both aware of and sensitive to family and personal dynamics, and they need to understand the family legacy. Influential family members may or may not own shares; may or may not be directors; and, they may or may not work in the business on a day-to-day basis. These variations often lead to quite different expectations. Managing the family’s expectations is critical because directors have a legal obligation to the business first and foremost. The board’s main priority is to deliver on agreed strategic priorities. However, family members often expect more from external directors including (but not limited to):
As a result, the family and potential directors should conduct due diligence, to understand and clarify expectations in order to minimise the chance of unpleasant surprises at a later point. On the flip-side, the addition of external directors can be incredibly rewarding. While there is no ‘silver bullet’, the appointment of external directors can lead to a dynamic boardroom and, ultimately, a highly valuable family-owned business. About Lloyd Russell:
Lloyd is a fourth generation family business member and an accredited family business advisor. He is based in Brisbane while servicing clients throughout Australia and internationally. He is a specialist in family business strategy and governance with a particular focus on inter-generational transfer; has over 30 years’ experience in senior management; and, is an accredited neuroscience practitioner. Contact Lloyd by phone +61 413 549 748 or by email lloyd@tcbsolutions.com.au The prospect of achieving and sustaining high business performance is an on-going challenge for most company leaders. While, boards of directors are increasingly taking an interest in value creation, many well-resourced companies, some dominant in their sector, deliver mediocre performances year after year. In contrast, other less well resourced companies seem to do better. Why is this? What makes the difference? Simon Sinek, the guy behind the golden circles illustration, has an answer worth considering. Check this out: What can boards of directors, trustees and chief executives learn from this clip?
Ultimately, leadership becomes great (and high performance more likely) if and when these two feelings are played out in full: trust and co-operation.
A couple of weeks ago, I met with a recently appointed chief executive who wanted to test some ideas in his quest to identify the company's USP (unique sales proposition) and, therefore, its point of difference. Paul's concern was that the company was operating in a crowded and competitive marketplace without a coherent strategy, and that success was dependent on standing out. We had a fascinating conversation—the essence of which is repeated here because Paul's question seems to be topical (I have just come off a phone call with a chairman (different company) who posed a very similar question). I asked Paul to describe the company and summarise the present reality. He recounted the company's past successes, current capabilities, market position and strong product line. Then he said that market share had drifted downwards in recent years. After sipping my coffee, I asked Paul why the company existed. He looked blankly at me as if I had come down in the last rain shower. "To make a healthy profit, of course". "Of course", I said. "I expected to hear that. But doesn't every company have that goal? How does being different serve this goal, especially when barriers to entry are so low these days that difference is only temporary, at best? "Apart from serving our collective egos, that you have something different (or even unique) to offer is of little consequence to most busy people. It matters even less when a competitor offers something seemingly similar for a lower price. When this happens, it's a race to the bottom—and that's dumb. Shouldn't your motivation be to make a difference and help your clients achieve their goals? With this in mind, might a better objective be to identify your company's 'point of impact'? In my experience, people choose to embrace your ideas and buy your product because they believe in you and what you represent. Imagine the response if MLK had uttered "I have a plan"—that speech would have been a footnote, gathering dust in the annals of history. But he didn't." The conversation moved to other matters. Then, as we finished our coffees, Paul smiled knowing that he had some work to do. I wished him well and we parted ways. Do you know why your company exists? The next time your board and executive gathers to review strategy and set future goals, start by asking this question. I respectfully suggest that you don't move on until a lucid answer is both determined and agreed.
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