My intention is to pursue more meaningful exchanges of ideas elsewhere. Challenging problems (how boards influence company performance, for example) need devoted time and space for critical thought and analysis. They cannot be resolved in 140 characters.
If you are interested, my thoughts on a range of topical matters including inter alia corporate governance, board effectiveness, strategy, the board's role in company performance and the compliance–performance dilemma will continue to be shared online, on LinkedIn, this blog and in published articles. Please read and debate them with your colleagues, and share your thoughts (especially strong or opposing views!). If you have a question or a request, ask and I'll respond promptly.
If you have a preference for in-person discussions, as many directors do, I am available to explore topics of interest, either publicly at conferences or other forums, or privately at workshops or confidential briefings.
Over the last twenty years, I have spent countless hours serving on and advising boards, and thinking about governance and the characteristics of effective boards. To have been invited to work with boards around the world as they have sought to realise the full potential of the enterprises they govern has been a real privilege. But with such privilege comes responsibility—the importance of standing back from time-to-time to take stock and reflect on learnings cannot be overstated, which is exactly what I have been doing over the last few days.
Two things in particular stand out just now. First, boards are increasingly aware that ultimate responsibility for enterprise performance lies with the board itself (not the CEO); and second, social media is starting to get in the way of effective learning.
That awareness is trending upwards is great news. But the supplementary question of how high performance is achieved and sustained remains problematic. The market is awash with best practice recommendations and supposedly definitive guidance ("five ways to...."), many of which have been implemented diligently. But alas, company failures continue to be blots on the landscape.
Directors want reliable guidance, but many directors struggle to sort the wheat from the chaff. They say that the plethora of often discordant information is more a hindrance than it is helpful. Privately, some admit that they have become confused about the purpose of the board, what corporate governance is and how it should be practiced. Others have suggested that the question itself (of the board's role in achieving high enterprise performance) is 'wicked', meaning it is easy to describe, but really difficult if not impossible to solve due to incomplete or contradictory information and a highly contextual setting—a moving target camouflaged in a landscape that is far from static.
The other thing that has become relatively clear in recent times is the role and impact of social media: it seems to be getting in the way of meaningful debate on big questions and wicked problems. Yes, news feeds and the 'like' button can be additive, but self-proclaimed experts offering opinions disguised as 'solutions' generally add little except noise and clutter. If progress is to be made, more reliable guidance is needed to help boards focus on what actually matters—enterprise performance. For this, researchers need to go to the source (the boardroom), to discover, analyse and report what really happens when the board is in session, including what boards do; how decisions are made; and how power is wielded and influence is exerted. Interviews, surveys and the quantitive analysis of large datasets all have their place, but the direct (and ideally, long-term) observation of boards in action is the gold standard. Researchers, advisors and directors need to continue to pursue meaningful dialogue—not sound bites—both with each other and at conferences and other interactive forums (workshops and masterclasses, for example) to explore situations, discover what works (and what doesn't) and, crucially, understand the contextual limitations and nuances of various options. A commitment to read widely and critically is also important.
Press on we must; the question of how boards influence enterprise performance is far too important to ignore. Tough problems need time and space for critical thought and analysis. Thus my decisions to step away from Twitter and to change my use of LinkedIn—to create more space for critical thinking and analysis. My hope is that what emerges will be of some use to helping boards address something that has remained constant: responsibility for enterprise performance starts—and ends—with the board.
I'm in London for the weekend, an interlude between inter alia commitments hosted by the Institute of Public Administration (a masterclass for board chairs, in Dublin); Lagercrantz Associates (a workshop, in Stockholm); and the Baltic Institute of Corporate Governance (a masterclass and the BICG conference keynote, in Vilnius).
To work with people across cultures, countries and contexts is a great privilege. Discussions reveal differences in perspective and approach. Yet, some things are consistent, transcending borders and cultures. One example is 'good governance'. Directors everywhere want to know how to achieve good governance.
This is a tough request. The problem is that 'good' is a moral qualifier, implying someone or something is morally excellent, virtuous or even righteous. But that is not all it means. A quick check in any dictionary reveals at least 39 other definitions! Which one does a person have in mind they ask for help to achieve 'good governance' or 'good corporate governance'? And what about other directors around the table. Do they have the same understanding or not?
It's little wonder that directors have become confused about the role and purpose of the board.
Pragmatically, corporate governance is the means by which companies are directed and controlled (Cadbury, 1992), that is, it describes the work of the board. The objective is to produce an agreed level of performance (however measured). 'Effectiveness' is a more appropriate qualifier than goodness. If something is effective it is adequate to accomplish a purpose; producing an intended result.
Returning to the question of how to achieve good governance. After reminding the enquirer that so-called best practices offer little guarantee of success (which one is best anyway), I usually steer the discussion away from goodness towards effectiveness (performance), and suggest that Bob Garratt's Learning Board matrix, and the Strategic Governance Framework are useful starting points for a lively discussion at the board table.
Once directors acknowledge that high company performance is the appropriate goal, and that success is a function of effectiveness more so than goodness, they start to ask more relevant questions, such as, "What actually matters?" and, "How do I as a director and we as a board become more effective?"
The company secretary, a role defined in law in most jurisdictions, is an important actor in company boardrooms; a servant of the board with a mandate to ensure the smooth running of the board and its activities. Specific tasks include supporting the chair and chief executive in assembling board documentation; ensuring effective communications between key actors and external parties; recording and publishing minutes of meetings; and providing process support to the board as and when needed. Such a role seems clear.
But in recent times, company secretaries have assumed greater roles including speaking at meetings; exerting influence over decision-making processes, even to the point of presenting papers; and speaking for the board in the market square. This has been encouraged by associations representing company secretaries with the term 'governance professional'. Times are changing, for sure, but are these developments sound? Most of the contributions listed here come dangerously close to the secretary acting, or being seen to act, as a director.
But the company secretary is not a director.
Rightly understood, the role of board secretary should—indeed must—remain one of servant to the board, not part of the board. If governance is a profession (a debatable point, given almost anyone can be a director and professional standards are not enforced), then it is directors not secretaries who are the rightful claimants of the title 'governance professional'. Some other questions boards may wish to consider are:
I have just returned home from a busy but most invigorating week on the East Coast of the United States. The purpose of the trip was two-fold. First, to invest in myself by attending a course; and second, to participate in a series of meetings and discussions to explore matters relating to boards, board effectiveness and how high performance might be achieved.
The following paragraphs summarise some of my learnings. If you want to know more, please get in touch.
If you would like to discuss any aspect of this summary, challenge my observations, or explore implications for your board, please get in touch, I'd be delighted to hear from you..
With 2018 consigned to history and holiday season break all but over, most business leaders and boards of directors are turning their attention to what the year ahead (and beyond) holds. Even a cursory glance reveals a plethora of issues that may have an impact on business continuity and, potentially, continuance.
Consider these indicators:
And that's just the start.
As is usual at this time of the year, business and governance commentators have stuck their collective necks out, promulgating a variety of predictions given the indicators (as real or imagined as each indicator may be); each behaving as if they possess levels of predictive insight beyond what a reasonably educated person might be able determine by tossing a coin. But do they? They cannot all be correct—in fact, none may be.
The challenge for boards, of course, is working out how to respond.
What is becoming increasingly clear is that boards have become confused by what's going on around them. Increasing numbers have grown quite tired of 'conventional wisdoms' and so-called 'best practices' (plurals intentional). Some have responded by taking defensive positions, and others are boldly trying things without first understanding the contextual relevance.
My response to enquiries from boards is straightforward: open your eyes to the possibilities, think and act strategically, but don't be impetuous.
Helping boards respond well typically involves sharing insights from research and practice; facilitating discussions; and providing contextually-relevant and evidence-based guidance. To this end, I will be travelling extensively again in 2019: the following international trips are confirmed in my diary, and more are pending:
If you would like to discuss options to lift the effectiveness of your board in 2019, please get in touch. I look forward to hearing from you.
Much has been written about the notion of value creation since the phrase became 'hot' in business circles several years ago. Today, one does not have to listen for long to hear questions such as "Does XYZ add value?' or "What's our value proposition?"The term is dropped into sentences hither and thither, flowing from the tongue freely, as if it were an old friend. This implies that 'value creation' is front-of-mind; something that is not only topical but also to be striven for.
But what is 'value creation', and how is value created? Here's one view:
Value creation is the primary aim of any business entity. Creating value for customers helps sell products and services, while creating value for shareholders, in the form of increases in stock price, insures the future availability of investment capital to fund operations. From a financial perspective, value is said to be created when a business earns revenue (or a return on capital) that exceeds expenses (or the cost of capital). But some analysts insist on a broader definition of "value creation" that can be considered separate from traditional financial measures. "Traditional methods of assessing organizational performance are no longer adequate in today's economy," according to ValueBasedManagement.net. "Stock price is less and less determined by earnings or asset base. Value creation in today's companies is increasingly represented in the intangible drivers like innovation, people, ideas, and brand."
This description, from Reference for Business, reveals that 'value' can mean different things to different people. As with many concepts within the social sciences and liberal arts (of which management and governance are expressions), context is crucial. Clarity of language is needed if leaders are to be effective and businesses are to prosper. Listeners and readers must be able to comprehend messages readily. The following questions provide a useful starting point for such an enquiry:
Rather than make assumptions or assertions (think how often have you heard people claim a 'unique value proposition'), put these questions to the beneficiaries (because, rightly understood, the 'value' of anything is determined by the recipient not the creator).
Start your enquiry at the 'top' of a company. Boards should sit with shareholders and ask (or propose, if the shareholder is unclear) what 'value' looks like to them. This is the 'core purpose' question. Responses might include increased share price; a long-term market position or business model; increased market share; a social priority; or some combination of these, or even something completely different. Senior managers and staff should meet with customers (or prospective customers) and ask the same question. Ask staff themselves as well: the motivations of employees are likely to be different from those of shareholders and customers. 'Great solutions' that 'add value' to are highly unlikely to hold any sway at all if the intended beneficiary does not recognise, or is not interested in, the 'value' that is supposedly being offered. As with strategy, boards need to take the high ground, by ensuring that value created for one recipient does not erode value elsewhere. Boards need to work with management and together become crystal clear about value in a holistic sense: what it is, who the recipient is, and how it is created.
Once the value matrix (what, to whom, how and why) is understood and agreed, the answers need to be communicated in a clear and concise manner, so that effort and expectations can be aligned accordingly.
Finally, a note to boards: You have an ongoing responsibility to ensure that purpose, strategy and managerial and operational activity are not only aligned, but also the desired value (outcome, strategic goal) is actually being achieved and that it is recognised by the intended recipients. The importance of ask probing questions cannot be overstated.
An earlier version of this article first appeared in 2015.
Ten days ago, I was in Vienna to attend the Global Peter Drucker Forum, as an observer and participant. However, at the last minute—actually, three days before the Forum—the organisers asked me to 'jump in' to cover for a panelist who was a withdrawal. The session, which was recorded, was entitled "Managing like you have skin in the game". I was asked to provide a boardroom perspective. My comments start at 41m 35s:
The 2018 edition of the Global Peter Drucker Forum was convened in Vienna, Austria this week. This post summarises insights from the second day (click here for insights from Day 1). I didn't take as many notes on the second day, preferring instead to sit, listen and dwell on what was said. (I also missed a couple of sessions, one to finalise my own preparations to speak; another to spend time privately with a two inspirational thinkers.) However, there were, for me, two speakers that really stamped their mark on the day, as follows:
Hermann Hauser, director of Amadeus Capital Partners and chair of the European Innovation Council, delivered a strong message, arguing that humanity is on the cusp of an inflection point (moving beyond evolution to design thinking) that has the potential to 'change everything' in the reasonably near future. He identified four significant disrupters:
The implications of these disrupters are, frankly, rather daunting. Synthetic biology offers the prospect of defeating disease, but at what cost? Quantum computing has the potential to render electronic security systems useless. One doesn't have to be a rocket scientist to realise the massive implications for commerce, banking and warfare. Researchers and technologists are committed to bringing these capabilities to market. But at what cost to humanity? The ethical implications are not insignificant. Recognising this, Hauser suggested that the state has an important role to play, to ensure appropriate regulatory boundaries and safeguards are established. But it must act quickly, before the genie gets out.
Martin Wolf, chief economics editor of the Financial Times, spoke passionately about the role of the state; in his view, the single-most important institution in human history. I first heard Wolf speak a few years ago. He left a strong impression on me then, and did so again as he spoke. Addressing the question of how states can 'work better', Wolf named several important roles that the state 'must' fulfil par excellence:
Such roles need to be implemented with aplomb. Failure to do so will inevitably lead to anarchy, in Wolf's view.
The 2018 edition of the Global Peter Drucker Forum, the tenth annual gathering of leaders, philosophers and students of management was convened in Vienna, Austria this week, at the Hofburg, the Imperial Palace. The location was a wonderful, historical backdrop for two full days of discussions and debates on topical issues directly relevant to managers and leaders around the world.
Overall, the purpose of the Forum is to share expertise and build capability in line with Peter Drucker's philosophies. This year, the theme was management . the human dimension. It was the second time I have attended the Forum. The decision to do so was relatively straightforward; made soon after I had the opportunity to stand amongst giants in November 2017. As was the case then, the programme followed a reasonably conventional format dominated by panel-based discussions and plenaries. One major difference from last year though was the scale of the event. Some 500 people attended in 2017. The tenth anniversary edition took a step up, to enable 1000 people to join the conversation. This led to some quite different dynamics at a personal level (notably that it was much more difficult to find people or to access the speakers). As a consequence, some intimacy was lost. But this is a minor point, especially when viewed in the context of a very well-run event.
The following three summaries, presented in no particular order, provide a glimpse of the ideas shared and learnings from the first day. (If you would like to know more, please get in touch.)
Business and society: Four panelists including Jean-Dominique Senard, CEO of Michelin Group, and Yves Doz, Emeritus Professor of Strategic Management at INSEAD, shared their thoughts on the importance of holding business and society together (the implication being that business and society have, or are at risk of, drifting apart). Key takeaways:
Human questions, machine answers: Hal Gregersen kicked off this session with some stark predictions:
The insight from the first of these numbers is that predictions of cataclysmic job-loss and unemployment are little more than scaremongering. However, the second number demonstrates that the impact of technology on work will continue to be very significant into the future. But we need to get past the numbers for focus on what actually matters: it is people.
People everywhere need to become more adept at using computers, especially for menial and repetitive tasks, and, even more importantly, people need to be taught to be some computers can never be: humans; empathetic, curious, social beings. As humans, our ability to thrive in a world seemingly falling head-long into the embrace of AI is to ensure we ask the 'right questions', many of which will be social, ethical and spiritual.
Other speakers added that capabilities need to prevail over skills. This might sound like semantics, but the difference between the two is both significant and important. Curiosity, situational awareness, contextual understanding and creativity are far more important than operational or tactical skills, for example. Such capabilities need to be nurtured and exercised, lest they become like unused muscles—atrophied.
Re-engaging the humanities: The aim of this fascinating session was to argue the merit of re-connecting humans with the humanities. The starting point for the discussion was an assertion that humanity's adoption of technology has come at a great cost: mankind is rapidly losing touch with what makes him distinct from other species. Simply, the pursuit of technological 'solutions' has seen many lose sight of the meaning of life.
Humans are social beings, and meaning is revealed through interaction and insight. Unlike molecules that behave in a consistent manner when they are heated (cooled) or put under pressure, humans do not. As a consequence, if organisations are to thrive in the future, conceptions need to change. Rather than using deterministic and mechanistic models to understand and explain organisations and performance, a biological 'ecosystem' may provide a more instructive. In this context, the term 'ecosystem' means a community of organisms that interact contingently and their physical environment. While such communities have defining characteristics, 'success' is dependent on many factors, and it is neither predictable or guaranteed.
A summary of observations and insights from second day is available here.
Thoughts on corporate governance, strategy and effective board practice; our place in the world; and, other things that catch my attention.