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    Come hither employee directors?

    Accountability Decision Making Governance Performance
     British Prime Minister, Theresa May caught the attention of many recently when she raised the possibility of requiring companies to reserve positions on company boards for employee directors. This proposal, which was suggested amongst other measures as a means of curbing perceived corporate excess in the UK, has received a mixed response, including support from the Institute of Directors and wonderment from others.  
    Increased diversity has been associated with improved decision quality, so including employee directors at the board table should be to the organisation's advantage, shouldn't it? On the surface, yes. However, experience tells us that one of the very real challenges of reserving places on boards, be it via a gender-based quota mechanism (e.g., Norway) or to provide a voice for an interest group (e.g., parent representatives on school boards), is that people bring baggage. Representation is a problem: candidates appointed because they meet the representation criteria often struggle to act in the best interests of the organisation when they take their position at the table.
    The conflict (of interest) that employee directors face is even tougher to manage because it is directly personal. On one hand, employee directors are paid to perform work and implement strategies, while on the other they are expected to make decisions in the best interest of the company. Decisions made in the boardroom may not be to the employees advantage (e.g., to close a loss-making division, resulting in job losses). To expect an employee director to subordinate their personal and collegial interests in favour of what might be best for the company is likely to be a tall order; it may not even be realistic.
    Yet the German experience (one of the most successful economies since World War II) suggests that the inclusion of employee directors can be made to work. But the German system of corporate governance is framed on the notion of two-tier boards, and employee directors sit on upper (supervisory) board not the executive board where the important strategic decisions are made. Also, supervisory boards normally only meet a few times each year, meaning the focus is more directly one of oversight, in a manner not dissimilar to an annual general meeting of shareholders in the unitary system. 
    If the corporate excess that May has called out is to be corralled (as it should be), the underlying basis of corporate governance (the means by which companies are directed and controlled) should be reviewed. A holistic review is needed to ensure the addition of specific measures (e.g., representative positions) does not inadvertently introduce other problems like suboptimal decision-making. Any review needs to extend beyond board structure and composition to the behaviour of directors and the activities of boards. Directors themselves also need to take responsibility for their actions; invest time understanding the business of the business; and, take their commitment to act in the best interests of the company seriously. I've written and spoken about this many times in the past. If directors embrace these suggestions, enforced structural provisions (e.g., representative groups) may no longer be required. But this relies on directors behaving well and doing 'the right thing', a reliance that has a chequered history.
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    Poor corporate governance or plain fraud? Where's the line?

    Accountability Decision Making Ethics Governance Performance
    South Africa's flag carrier, South African Airways, has hit turbulence. Severe turbulence. The airline, which is in financial trouble as a result, most probably, of some poor decisions in the past, has been negotiating a debt refinancing package. However, the package reportedly contains some unusual characteristics (read: extremely high fees). Now, a staff member has blown the whistle; the board has been called out; and, the matter is being investigated. 
    Even a cursory inspection suggests that something is amiss, and badly so. Problems that seem to stem from poor decision-making at the top of the organisation appear to be endemic. Whether the underlying driver is greed, hubris, corruption, ineptitude or something else remains to be seen. Regardless, South African Airways is in trouble. The board appears to be missing in action and the 'corruption' word has been mentioned making situation very messy, to say the least. 
    Sadly, SAA is not an isolated case. Recently, Sir Philip Green fell from grace; and, it was not that long ago that FIFA, Toshiba and Volkswagen suffered 'setbacks'. It's little wonder that hard working people have any time for boards of directors. The sources of governance failure are well-storied. However, the natural response—hard law—has done little to improve things (because people who want to generally find their way around things that inhibit them). Different measures are required, perhaps starting with culture, values and purpose. Board appointment processes also need to change. Unless and until 'bad eggs' are exorcised from boardrooms and held to account, the actions of a few will, no doubt, continue to make life hard for the rest of the director community.
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    On purpose, strategy, execution: Together is best

    Accountability Decision Making Governance Leadership Performance Strategy
    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:
    • All of the attendees had a comprehensive understanding of both the business of the business and the wider environmental context within which the practice operates. They had done their homework—and demonstrably so. Also, and unlike some boards that I have worked with, everyone wanted to be in the room and to make a contribution. These two factors were foundational to creating an environment which encouraged the informed, healthy debate that seemed to flow naturally throughout the day.
    • Directors (especially) were quick to latch on to the importance of the first question, "Why does the business exist?" It was as if they knew that if strategy is built without a clear and agreed purpose, the resultant output (i.e., the strategy) would be reduced to, simply, a collection of activities. 
    • The attendees recognised that many architectural projects take several years from initial ideation to completion, and some can take more than ten years. Consequently, a long-term view is necessary. This spilled over to the discussion of how far ahead the strategy should look. The group was happy to look more than ten years out, on the basis that goals would take time to realise and the proviso that the resultant strategy was not prescriptive (it was not) and that it was reviewed regularly. 
    • During the afternoon, a couple of the attendees (one director and one manager that I noticed, there may have been more) voiced a desire to build action plans and get underway. They said liked what they saw at the high-level but were concerned that the good work could be for nought unless clear action plans were developed and a commitment to execution ensued. Others agreed this was vital.
    • Despite some of the managers operating at fine levels of detail in their day-to-day work, the group as a whole agreed that "less is actually more helpful". Why write 20 or 30 pages of detail when 3–5 pages can actually provide a more holistic understanding? This demonstrated a clear awareness that strategy is a 'big picture' activity, and that detailed action plans and operating budgets are supporting documents that are the responsibility of managers. 
    • Finally, together is best. Every the director and executive was 'present' in the room throughout the day. Also, there was no sense of 'us and them' nor any visible expression of 'power'. Rather, the attendees worked together collaboratively, functioning as a group of peers committed to achieving an outcome. Compare that with common practice, which suggests that distance and a clearly-defined separation between board and management is appropriate.
      (Note: The action of one manager who collected everyone's phone as the workshop started may have contributed to this. If nothing else, her action triggered a bit of light-hearted banter to kickstart the day!)
    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.
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    Guidance for coping with change

    Accountability Decision Making Diversity Governance Performance Societal Wellbeing
    In 1970, Alvin Toffler's book Future Shock was published. It quickly became a bestseller. Toffler died recently, triggering a series of articles and reflections (including this one published in the New York Times) about his life and 'the book'. Toffler had an amazing ability to look well ahead of almost all of us, to think critically, and to make some sense of it all. Consider these observations by Manjoo in his reflection:
    Alvin Toffler ... warned that the accelerating pace of technological change would soon make us all sick.
    Yet in rereading Mr. Toffler’s book, as I did last week, it seems clear that his diagnosis has largely panned out, with local and global crises arising daily from our collective inability to deal with ever-faster change.
    That societies are racing with great speed to embrace new ideas and innovations, yet without the ability to cope with the consequences of high rates of change, might be one of the great problems of our age. Perhaps those in influential positions in society have a responsibility to shift their gaze, from their own ambitions towards altruistic ideas that serve the greater good? This is by no means a call to embrace utopian principles nor uniformity because we are all different. Much pragmatism is needed if society is to continue to endure. 
    Leaders—of all types but especially business leaders, company directors, politicians and academics—could do well by (re)reading Future Shock. We need to talk about stuff, because we all have much to learn.
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    Governance evolution and trends: Brisbane, May 2016

    Accountability Decision Making Diversity Family Business Governance Performance Speaking Engagements Strategy
    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.
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    It's not working. But why is nobody talking about it?

    Accountability Societal Wellbeing
    Guest blog: Tim Sillay (Wellington, New Zealand)
    I'm angry. It appears that as a society, we are hell bent on eliminating risk. There doesn't appear to be any sensible discussion on acceptable levels of risk, witness the current implementation of the health and safety legislation. When you see a site board on a building site list 'uneven ground' as a hazard, it is obvious that things have become seriously retarded.
    Now I'm not saying we should stand idly by and watch people bury depleted uranium, or leave boxes of dynamite laying around school playgrounds, but these futile attempts to wrap the world in cotton wool are breeding entire generations with no ability to assess or manage real world risk. What it is breeding is an entire generation of 'non-producers', paper shuffling bureaucrats whose job it is to police this whole mess.
    Let's face it, we've cut down all the trees in the playgrounds and removed all the really fun playground equipment, so little Johnny has no idea that walking on a slender branch will eventually result in hard contact with mother earth. You can't play bull rush or ball tag, so he also has no idea that fast moving people or things really hurt when they hit you... How are you going to figure practical application of geometry if you don't live the dream of 'tangent to the arc' on the witch’s hat? How do you figure out that some kids are better at sport, some are better at math and some are just plain stupid if everyone gets a certificate for participation.
    So by the time Johnny has completed his tertiary education and graduated with real world skills in something like coffee making, subsequently sued his employer for allowing him to come into contact with a hot cuppa and taken a nice safe office job as a health and safety inspector in an egalitarian agency where everyone has an opinion and everyone’s opinion matters, little Johnny, with no ability to judge what is and is not a real world risk, with no concept that someone may be smarter, more experienced or just plain crazy is the man who may eventually rise through the ranks and craft policy.
    With no one to argue the toss, the policy pendulum has swung firmly to the outer limit of 'no risk is acceptable' and 'all people are equals'.
    Which is patently ridiculous. This is just not the way the world works. This is what happens when as a country, you stop producing things. You lose the generational memory and experience of what it means to balance risk and reward. You forget that some people are good at thinking about stuff and some people just like to do stuff. The western world would not exist if it was settled under this legislation. When the thinkers start mandating to the doers, or the doers revolt against the thinkers, when you reach a point in the development of civilisation where no injury, code violation or upset feelings shall go unpunished, you are, quite frankly, fucked.
    But here I find a startling double standard. Let's start with a Saturday evening some three weeks ago when I received the unsettling news that a wonderful lady and long time acquaintance of ours had been murdered by her friend. Shock, disbelief, anger but most of all a sense of a grand imbalance in the fabric of the world. How can such a gentle girl have met such a violent end? What possible sequence of events led to this? How did we as a society so obsessed with the elimination of risk let this happen? 
    And there it was, that of which we shall never speak, our old bed fellow mental health. Over the last 30 years as we moved inexorably towards this sham world of universal acceptance, equality, tolerance and non-productivity we forgot that crazy people are actually crazy.
    Somewhere, in spite of all the signs to the contrary, we forgot all about unacceptable risk. I fail to see the chain of logic symbolised by these responses:
    • "It's not polite to incarcerate."
    • "This simply will not do."
    • "Let's tear down Kimberly, Kingseat and Lake Alice."
    • "You weren’t yourself when you did it."
    • "Be a good boy, take your drugs and hangout downtown shuffling through rubbish bins."
    • "What possible harm can you do."
    Somewhere, the policy wonks ran riot over the doers, those who lived the reality of day-to-day life with the insane.
    I can hear the sharp intake of breath. I can hear the agonised humanitarian wails of "You can't say that". I can even hear the bean counters rationalise it on a cost basis. I bet if you listened carefully, on a quiet day where the wind is blowing in just the right direction, you'll find an actuarial report that rationalises the occasional damaged child or other collateral damage about a crazy person gone off the rails.
    ​But you'd better be whispering. We NEVER discuss this kind of thing in polite society.
    So here's a brief history lesson. Teenage Suicide. It was a bloody epidemic in the 80's. I lost several from the circle and it hurt. It hurt a hell of a lot. Witnessing the grieving parents of a teenage girl will stay with me forever. It was more horrendous than the senseless killing of my friend by a crazy person, in as much as there is a scale for these things.
    It obviously was a problem, it obviously wasn't acceptable. So what did we do as a society? WE STARTED TALKING ABOUT IT.
    So I applaud the news that Coroner Michael Robb is conducting an enquiry into mental health related killings. Long may it make front page news. Maybe, just perhaps, this senseless, vile, unfathomable thing is the point where we all cry ‘enough’.
    Guest blog: Tim Sillay (Wellington, New Zealand)