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    What does the Age of 'self(ie)' mean for business?

    Decision Making Governance Leadership Performance Strategy
    One Saturday morning, about fifteen years ago, my elderly father-in-law and I sat in the morning sun, sharing a few stories over a cup of tea. He was asking about my then burgeoning advisory business and family life. I was interested in hearing him reflect on his experiences in business, particularly his career-long journey with the same employer—from a junior staff member to, eventually, chief executive.
    As he spoke, Bill reminded me that he only ever had one employer, and that although he had been blessed to contribute at many levels he had only ever completed one job interview, that being when he first got a job. He went on to talk about the power of team over individual, and of loyalty to both your employer and your own principles. Much has changed since he retired in 1984, not the least of which has been the erosion of the values that served as Bill's North Star throughout his career.
    Today, most things are negotiable. For many, the motivation has changed, from providing service (to the employer) to self-service. Never has this been more apparent in the everyday behaviours of staff, particularly the younger generation. If we don't get want we want, or if we get a better offer elsewhere, we act. That staff and customers are more interested in self(ie) has huge implications for productivity and value creation in the longer-term. While team productivity is a matter for the chief executive, value creation is the responsibility of the board on behalf of the shareholder. How is your board wrestling with this? Does your board regularly allocate time to understand the changing environment, consider strategic options and make strategic decisions? Companies that expect to thrive in the future need to address the emergent challenge of 'self(ie)'. 
    The best place to start the discussion is in the boardroom.
  • Published on

    How can NEDs / board members stay strategic?

    Governance Leadership Performance Research
    Much has been written in recent years about the governance of organisations, boards and directors. Many different views have been expressed. With it, different understandings of the function of boards have emerged. In some quarters, 'governance' has become a panacea for all manner of organisational ills. Others speak and behave as if the board is a beating stick to 'keep the executive honest'. Relatively few have held true to the original concept (kybernetes: to steer, to guide to pilot). Consequently, it is little wonder that some new board members can be unclear about their role. 
    The task of governance includes decision-making that affects the long-term future of the organisation. In other words, strategy and strategic decision-making. While the plethora of understandings abound, the question of how NEDs and board members ensure they stay strategic remains.
    ​I had the honour and privilege of hosting an on-line forum recently to discuss this question. A large community of UK-based board members gather every week to discuss governance matters of interest.  A summary of the discussion that I was involved with has been posted here, on Storify. Enjoy!
    If you have any questions, or want to explore matters further, please get in touch.
  • Published on

    Making smart decisions in the boardroom, on less-than-complete information

    Decision Making Governance Leadership Research Strategy
    One of the enduring challenges that directors face every time they meet together as a board concerns decision-making. How do directors make smart decisions when 1). they often lack crucial information, and 2). the environment is fundamentally both complex and dynamic? The answer lies in the group of directors' (the board's) ability to make decisions, as one.
    Why so? Legally, the board is a collective of directors. Individual directors make contributions to discussions and debates, but not decisions. It is the board that makes decisions. This transition—from the singular (individual directors, contributions, inputs) to the collective (the board as one whole, decisions, outputs)—occurs when directors meet (i.e., in board meetings, when the board is in session). If the transition is to occur well, all of the directors must be actively engaged their work—working together towards the decision, as one. 
    Group decisions are much harder to make than individual decisions. Reaching agreement can be a minefield, especially if information is missing, trust is low or if directors are more interested (sometimes covertly) in pursuing multiple agendas or representing constituencies rather than acting the best interests of the company (as the law requires).
    How can boards get past this challenge, to make effective decisions on a reasonably consistent basis?
    Recently, CGMA (Chartered Global Management Accountant, a joint-venture between AICPA and CIMA) tackled this question head on. Their report has just been released. You can read a copy of the executive summary here, or the full report here.  ​The authors make eight key recommendations for effective group decision-making:
    • Build greater trust
    • Value the non-financial data
    • Extract relevant data
    • Promote collaboration
    • Incentivise the medium- and long-term, too
    • Engage external stakeholders
    • Review the outcomes
    • Be patient
    I commend this report to you, especially if effective decision-making has been a challenge for your board over the past year or so. Share it with your board colleagues and ask the chairman to schedule a discussion at an upcoming board meeting. If nothing else, you'll bring the expectation of effective decision-making out into the open. Or, the board may find that some behaviours or expectations need to be adjusted, and that a formal board review is appropriate. The discussion may also expose some larger but hitherto hidden issues including that the board may not be clear on the purpose or the strategy of the organisation. If this is discovered, some external advice and assistance may be in order. 
    Regardless of the discussion and the outcome,  I suspect it will time well spent.
  • Published on

    Can strategy and execution be usefully distinguished?

    Accountability Governance Leadership Performance Strategy
    Image description
    Roger L Martin, a respected professor at Rotman School of Management and co-author of Playing to Win, has put the cat amongst the pigeons, with this commentary, itself a response to this widely circulated article. The authors of the original article reported findings from a study, which showed that only eight per cent of leaders are good at both strategy and execution. Martin contends that most leaders who are very effective at either strategy formulation are also very effective at execution. Quite a different view. Two different perspectives. Who is correct?
    As with any report involving statistics, context is crucial. If you consider all leaders (as Leinwand, Mainardi and Kleiner did), only eight per cent are "very effective" at both formulating strategy and executing strategy. However, if you only consider only those that are "very effective at strategy", fully two-thirds are also good at execution (Martin's point). Thus, both authors are 'correct'. But which commentary is more helpful to leaders and those intent on achieving business success?
    The shocking statistic is that just sixteen per cent of leaders are "very effective" at strategy formulation or execution or both. Turbulent times demand outstanding leadership, both to determine strategy and to ensure it is executed with excellence. Poor, neutral and even "effective" contributions have little chance of moving companies toward their goals if they are competing against "very effective" leaders. Consequently, 84 per cent of leaders will be found wanting (notice the Pareto Principle?). Rather than debate statistics, it may be more useful to move the discussion to discovering how to move more leaders into the "very effective" sector.
    Another perhaps more important question—for boards of directors in particular—centres on Martin's assertion that strategy and execution are the same thing. Can the two tasks can be distinguished? 
    Strategy formulation and execution are two of the four pillars of strategic management (development, approval, implementation and monitoring). My research suggests that business success is dependent on two things: having a clear sense of purpose and an effective strategy, and great execution. The former is an important task that boards and managers should work on together and the latter is the domain of management (only) once strategic decisions are made by the board. However, some flexibility is required because things change. Decisions and adjustments are required from time to time. If companies are to react and respond quickly, strong leadership is crucial to avoid mayhem. So where does that leave Martin's assertion, that formulation and execution cannot be usefully distinguished? What is your experience?
  • Published on

    Is it time to think about a Young People Board?

    Diversity Governance Guest Post Leadership Research
    Board rejuvenation is often considered and discussed, but statistics on boards member ages show little progress. The general public thinks a board of directors is a set of relatively old people. Common sense and corporate governance approaches lead one to think that the introduction of new ideas from younger generations would surely be a company asset.
    Age diversity within a board is unquestionably desirable, but will one or two younger directors be enough? Probably not. In fact, except in exceptional cases (mainly in new technology fields), board members will probably be least 35 years old—hardly 'young' any more—by the time they have acquired the experience needed to be a skilled board director. Also, younger leaders often have full-time jobs, so will there be sufficient candidates available anyway? Recruitment of younger directors may be difficult and generally will not be enough to ensure that potential contribution from truly young people will be brought to the boards. How then to proceed ?
    One approach to solving this problem might to be create a Young People Board, under the leadership of the official board—a 'shadow cabinet' of sorts. With slightly different goals, some municipalities use this approach. A Young People Board could be composed of 18 to 25 year old volunteers—a similar number of members as the official board. Recruitment could be for three-year terms (with renewal of one third every year). The aim would be to achieve multi-faceted diversity.
    Periodically (say three times per year), the company board would invite the Young People Board to consider a topic discussed by the official board. The Young People Board would meet to debate the topic and develop proposals. Many ideas would emerge as young people naturally consider new technologies; social networks; data protection; ecology; ethics; and, international perspectives. Each year, a half-day meeting would be scheduled with the official board, to receive presentations and debate the topics studies by the Young People Board .
    The Young People Board formula would be light, without any significant expenses or time commitment from the official board members. However, the process would enable official board members to be positively confronted with new ideas coming from truly young people. They may even retain some ideas for implementation!
    Members of the Young People Board and, indirectly, their friends and relatives, would derive benefits including learning about the company activities, its executives and, importantly, the 'corporate governance' world. Through the process, the company may identify young talents for later hiring. The company could use this approach to improve its image, especially among young people.
    Many speeches and writings advocate innovation. As one dwells on this, the realisation that innovation applies not only within technology areas, but also in organizational processes and the social domain. The Young People Board is a concrete example of this type of innovation. Is this something your board can support? If so, please contact Guy Lé Pechon at Gouvernance & Structures.
  • Published on

    On the DNA of high performing businesses

    Accountability Governance Leadership Performance
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    What makes a successful business successful? Can success be pursued, or are great outcomes largely a matter of luck? Success, it seems, is dependent on companies doing a rather small number of things consistently well. Jim Collins (Good to great), Colin Campbell-Hunt (World famous in New Zealand) and others have studied this question and produced some great insights.
    Recently, business advisory firm KPMG, added their view. The KPMG study revealed eight 'DNA traits' of high-performing enterprises, as follows (click image on right for a larger version):
    • Pivotal leadership
    • Attitude
    • Strategic anchor
    • Investment and resource allocation
    • Customer intimacy
    • Capable people
    • Connection and collaboration
    • Deployment discipline
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    This guidance is as applicable to smaller companies with big dreams as it is to more mature companies wanting to defend against competitors or push on to the next level. Did you notice that a having great product or a killer app—often lauded as being 'the crucial difference'—does not rate a mention? This point has interesting implications for strategic management, and strategy development in particular. While good products and services are important, leadership, people (customers and team), smart decisions and a sense of purpose are far more significant moderators of business success.
    If you'd like to discuss the implications of these observations for your board or your corporate strategy, please get in touch. I'd be more than happy to be a sounding board.